US carmakers' interest in Chinese auto sector shifts up a gear

Overseas electric vehicle startups are targeting entry into China, the world's largest vehicle market that leads in all-electric innovations with rapid consumer adoption of EVs.

The United States EV maker Fisker announced earlier this month that it will open a delivery center in China this year and begin the delivery of the Fisker Ocean SUV in the first quarter of 2024 in the country, as it looks toward increasing the production of the recently delivered model.

The delivery of the SUV has commenced in Europe, and is set to begin this week in the US. The carmaker has reported having 65,000 orders for the Ocean, although its annual production target has been revised down to 32,000 units.

Fisker CEO Henrik Fisker said: "We expect China to be an important growth market for EVs in the future … I believe we can get production up and running in China as early as next year, potentially adding a capacity of 75,000 Oceans annually."

Three days prior to the announcement, the company's leadership team visited China and met with Shanghai officials and business leaders. During the visit, discussions were held to explore collaborations in auto supply chains, logistics, warehousing and future product development.

China accounts for one-third of global vehicle sales, with NEVs comprising around 25 percent of the market in 2022. In the first five months of 2023, Chinese sales of NEVs totaled 2.94 million units, an increased share of 27.7 percent.

With the huge market potential, faster growth in the premium segment and a rapid shift to electrification both from government policies and consumer behavior across China, Fisker will be on the list for consumer purchase decisions, said Fisker China board member Daniel Foa.

Another US luxury EV maker Lucid Group is also preparing to enter the Chinese market, its head of China operations Zhu Jiang said on Thursday. He previously worked in Chinese EV startup Nio, Ford and Jidu, the EV division of Baidu.

According to Reuters reports, citing an insider, Lucid initially wants to sell imported cars on the Chinese market, but is also considering production in China. No information has been given on the specific timetable.

At the end of 2021, Lucid started the delivery of its first mass-produced model, Lucid Air, which aims to compete with Tesla's Model S.

The company delivered 4,300 Lucid Airs in 2022 and has predicted an annual production of around 10,000 units for this year.

Similar to many other EV startups, Lucid is facing challenges such as increasing losses and limited cash reserves. The company adjusted their 2023 production forecast and reported lower-than-expected first-quarter revenue in May.

The positive news is that Lucid has raised about $3 billion through a stock offering earlier June, nearly two-thirds of which will come from Saudi Arabia's Public Investment Fund.

According to an industry insider, it is unsurprising that US EV carmakers are setting their sights on China, which is the world's largest NEV market, given Tesla's dominant position in the EV market in the US.

It is not easy for overseas newcomers like Fisker and Lucid to enter the Chinese market due to substantial changes that have taken place since Tesla's initial entry. The rise of many domestic brands has transformed the market, creating a demanding landscape where American carmakers struggle to establish a significant presence, the insider said.