With K-ZE, Renault reaffirms China’s might in electric vehicles

It was not a tongue-in-cheek reply but just a statement of fact.

When Carlos Ghosn, Chairman and CEO of Renault, spoke of the obvious gap between India and China at an event in Paris this week, he drove home an important point.

The occasion was the launch of the all-electric K-ZE car for China and Ghosn was responding to a journalist’s query on the India potential. This was when hard reality came into play when he spoke of China producing 27 million cars annually, which is nearly seven times India’s output.

In this backdrop came the strong message that it was clearly inconceivable for Renault to contemplate a big bang entry into the subcontinent’s electric car segment. India is doubtless keen to push the envelope aggressively in this area, which explains why it initially targeted a 100 per cent electric automotive ecosystem by 2030.

However, this goalpost has been altered substantially simply because the supporting infrastructure to make this massive task a reality is just not there. This will call for availability of charging infrastructure across every nook and cranny of the country as well as generous fiscal sops that will motivate manufacturers to invest big time in this space.

In the driver’s seat

China, on the other hand, has been at the forefront in its electric mobility drive with over half a million cars produced last year and the number tipped to grow five times by the end of this decade. Going further, this could increase even more rapidly and there is just no way India can even hope to keep pace at least through a large part of the following decade.

This also puts in perspective why companies like Renault are betting big on China to drive their electric agenda. Hence, even Europe will have to wait till 2021 for models like the K-ZE where the overall market size will still be much smaller than China. It is logical to assume that India will also be part of this drive, going by what Renault has articulated in its five-year strategic plan ending 2022, but this will again be on a far lower scale.

By this time, India will have its hands full with the ambitious Bharat Stage VI era, which kicks off in April 2020. This by itself will mark a big improvement in cleaning up vehicular emissions and electric may not be top priority. Of course, manufacturers like Mahindra & Mahindra (the first to get into this space), Tata Motors, Hyundai and Toyota-Suzuki will make their presence felt but the overall impact will be minuscule compared to China.

Hence, the likes of Renault see enormous business prospects in China, which is not only the world’s largest for cars but has defined an aggressive roadmap for electric mobility too. A host of other manufacturers are also betting big here, a list that includes Volkswagen, Daimler, BMW and many more.

Apprehensions

The opportunities are just way too much to be ignored even while China is never going to be a walk in the park. There is constantly the overwhelming presence of the State, which is equally keen to get its own local brands spread their wings overseas. Hence, joint ventures are mandatory among a host of other conditions but multinationals don’t mind because of the huge market potential.

Small wonder then that there are some apprehensions about the country’s growing might in the electric mobility space. As a top executive of a US-based component-maker told this writer at the Delhi Auto Expo earlier this year, “I am admiring of China but I am also concerned because it may end up being the world’s producer of battery cells.”

If this were to happen, the world would have to cope with the reality of a single country being the supply source. “I think it is beholden for Europe, India (and other countries) to ensure flexibility and variety of suppliers around the world to do that,” added the executive.

The message was loud and clear: Even as China grows from strength to strength as the world’s largest automobile market, there are a host of important issues to be reckoned with. Can parity in the electric space be assured across the world? Sure, there are countries like Norway, which have shown the way in electric but standing up to China’s dizzy volumes is another challenge altogether.

Global acquisitions

Yet, there is no taking away the fact that China has gone the extra mile in defining a roadmap for itself as a global automotive giant. Beyond electric, companies like Geely have scripted huge success stories with acquisitions like Volvo Cars. Since then, it has bought out stakes in Daimler and Volvo AG, which reaffirm a serious intent to grow by leaps and bounds across geographies and vehicle segments.

Reports were also doing the rounds that Geely was keen on acquiring Fiat Chrysler Automobiles at some point in time though there were no serious talks. Likewise, Great Wall Motor of China was eyeing the possibility of buying the Jeep brand from FCA but again, this did not go beyond articulating an intent. Still, it does not take away the fact that Chinese auto-makers are constantly going to be on the prowl for opportunities to increase scale.

Some like Dongfeng have helped bail out a once struggling Peugeot Citroen through infusion of equity and this partnership may now grow beyond China to the ASEAN region. The now rechristened Group PSA is a stronger entity and it will be interesting to see how the alliance with Dongfeng pans out.

Likewise, General Motors got a lifeline from longtime Chinese ally, SAIC Motor, when it was nearly wiped out after the Lehman crisis, which flattened Detroit’s motor industry. SAIC is now preparing for a new innings in India after GM exited last year and the stage is set for a new tug-of-war with established Japanese and Korean players.

At the other end of the spectrum is the trade war playing out between the US and China which, according to some industry observers, has the latter on the back-foot. Perhaps, there is some truth to this but to suggest that China will wilt as a result could be wishful thinking.

By the end of the day, there is a new world order being played out where China is rapidly emerging the centre of gravity in the Asia-Pacific area. In the world of business, people head out to places that assure profitability and this explains why car manufacturers have put (almost) all their eggs into the Chinese basket. It makes perfect sense even as the world is turning upside down with new geopolitical realities.

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