Chinese carmakers step up challenge to Tesla with blitz of new models

China’s carmakers are stepping up their challenge to Tesla’s dominance in the country’s electric vehicle market, using this week’s Shanghai auto show to display an array of new models and technology designed to appeal to younger buyers.

The groups are launching more than a dozen models at the show, which opened on Monday, in their attempt to topple Tesla’s Model 3 saloon as the country’s best-selling electric car and capture market share in the prized premium sector.

Surveys suggest Chinese brands are becoming increasingly popular with younger customers who are more likely to buy domestic models, with leading groups such as Geely, Nio and Xpeng using technology to attract interest.

William Li, Nio’s chief executive, announced plans on Monday to expand its network of battery-swapping and charging stations into underserved regions of northern China. 

China’s leading domestic luxury electric car brand by sales is focusing on developing battery-swapping technology shunned by Tesla.

It has also has made a subscription model for battery use central to its business model. The company last week signed an agreement with Sinopec, the state-owned oil group, to put 5,000 swapping and charging stations across the country over the next few years.

Xpeng, a Nasdaq-listed start-up based in Guangzhou, last month showed off its lidar-powered autonomous-driving features, which work on the principle of radar but use light from a laser to measure distances. The reliance on lidar is another approach that Tesla has rejected.

Other Chinese automakers have similarly embraced the technology: Arcfox, a new luxury brand created by a subsidiary of state-run Baic Motor and technology group Huawei, for instance, launched its first model, the Alpha S, on Monday.

Meanwhile, Zeekr, a premium electric car brand launched this month by Geely Holdings, which owns Volvo, Lotus and has a minority stake in Daimler, is primarily targeting tech-savvy, mostly younger customers that value technology and new experience, according to Flynn Chen, its vice-president.

The company plans to roll out two models per year for the next three years using a network of more than 100 stores to be opened across China in 2021.

Carmakers offering “smart” features such as assisted driving or voice-activated entertainment systems are helping to drive interest in Chinese high-end brands over international competition, according to Zhang Xiang, an independent industry analyst.

The moves should help China in its ambition to make battery-powered or hybrid vehicles comprise a fifth of car purchases in the world’s largest market from the current 5 per cent of total sales, particularly as the industry has started to mature over the past year.

It is now more driven by consumer purchases of larger and more expensive cars rather than smaller vehicles supported by subsidies — a shift that has been propelled in part by Tesla’s success in winning over Chinese consumers and also accelerating interest in the country’s aspiring rival start-ups, such as Nio and Xpeng.

In addition, it may be the right moment to challenge the US electric car pioneer as it faces a string of controversies following the deaths of two men in a Tesla Model S in the US at the weekend. They crashed with evidence suggesting no one was driving the vehicle, although reports said it was unclear whether the autopilot was in use.

There was a protest at the Tesla stall of the motor show from a woman wearing a white T-shirt saying “brake malfunction” above a Tesla logo. Tesla responded to the incident on Weibo, the website for bloggers, saying the woman was a customer who had asked to return a car after a crash in February, but declined to allow a third-party investigation.

As well as Tesla, the Chinese groups will also have to deal with competition from the big German carmakers — Audi, Mercedes-Benz and BMW — that have long dominated its luxury auto market. In 2020, the three German brands together sold more than 700,000 cars in China, a record.

However, the switch from internal combustion engines to battery-powered cars may create openings to establish Chinese brands that appeal to the country’s under-35s, who make up a much higher proportion of luxury purchases than in other markets.

Nearly half of Chinese shoppers intending to buy a car in the next six months said they would buy a local brand, up from about a fifth in 2016, according to a survey by data provider JD Power, released last month.

Younger buyers are more likely to buy local models, with 60 per cent of those born after 1995 saying they would like to purchase a domestic brand.

German brands selling cars with traditional internal combustion engines built up their reputation over decades, but when it came to the new world of electric cars, “everyone is at the same start line”, said Leo Li, a partner at Oliver Wyman in Shanghai.

“No one really has an advantage in terms of history and many Chinese start-ups started out with global perspectives and built international teams,” he said. “They are not like the old generation of traditional Chinese brands.”

Additional reporting by Emma Zhou in Beijing