EVs and online marketplaces thrive despite slump in Chinese car sales

China’s massive auto market hit the brakes last year as trade tensions and a softening economy dampened consumer confidence, but one segment soared on account of increasing internet penetration — used car sales. New passenger car sales fell to 23.7 million last year, representing a 4.1 year-over-year drop according to a new report by China’s Association of […]

China’s massive auto market hit the brakes last year as trade tensions and a softening economy dampened consumer confidence, but one segment soared on account of increasing internet penetration — used car sales.

New passenger car sales fell to 23.7 million last year, representing a 4.1 year-over-year drop according to a new report by China’s Association of Automobile Manufacturers, the country’s top auto association. That marks the very first annual decline in the world’s biggest car market since the 1990s.

A few factors were at play. For one, the tit-for-tat U.S.-China trade war has led to a slew of tariffs on U.S. car imports and weighed on consumers. The standoff prompted Tesla to cut prices for Model 3 in China and Jaguar Land Rover to temporarily close a factory after sales plummeted in the country. Internally, China is coping with a cooling economy that has undermined consumer demand across a spectrum of sectors. Regulators have also rolled back a tax-cut scheme on smaller cars that began in 2017.

Despite the overall industry slowdown, electric and hybrid vehicles continued to enjoy a healthy growth rate at 61.7 percent to clock sales of 1.26 million new units. That comes as expected as China is aiming to cut carbon footprints and lead in the global alternative energy revolution by splurging on subsidies for both consumers and manufacturers. But stumbling blocks remain for the budding industry, such as a lack of charging stations. Beijing is also mulling subsidy cuts on EVs to temper overcapacity in the long term.

As consumers tighten their purse strings amid the economic downturn, cheaper secondhand cars become more appealing. China’s Automobile Dealers Association shows that secondhand car sales reached 12.6 million for the first 11 months of 2018, marking a 13 percent growth.

The sector is only half the size of new cars, but a string of e-commerce channels are fueling the industry in a country where in-person transactions were still the norm just a few years ago. For one thing, online marketplaces inject honesty to the car-buying process by claiming to provide more price transparency for customers. A major turning point came in 2017 when China lifted constraints on cross-provincial used car deals, which means customers in less developed regions — many of whom never owned a car before — now have access to a greater variety of models compared to what’s available in their hinterland homelands.

Some of the top players in the space include Didi Chuxing-backed Renrenche, Tencent-backed Guazi and Uxin, which floated on the Nasdaq last year and recently entered a strategic partnership with Alibaba. In 2017, e-commerce transactions accounted for 17.6 percent of overall car sales in the country, a study from Uxin’s research institute found.

“Over the past few years, consumers have become increasingly receptive to buying used cars as a cost-effective alternative to new vehicles. This is particularly the case for consumers in lower-tier cities,” said Kun Dai, founder and chief executive officer of Uxin . “With extremely limited used car selection in most cities, there is a rapidly growing demand for an online platform that expands access to used cars from across the country.”

Tesla breaks ground on Shanghai factory which will product Model 3 EVs for China

Tesla CEO Elon Musk has confirmed that the company’s first overseas factory in Shanghai will focus on producing Model 3 vehicles for the Chinese market only. Musk is currently in China to break ground on the new factory today, which is being developed in partnership with the Shanghai government — an ally that is likely to […]

Tesla CEO Elon Musk has confirmed that the company’s first overseas factory in Shanghai will focus on producing Model 3 vehicles for the Chinese market only.

Musk is currently in China to break ground on the new factory today, which is being developed in partnership with the Shanghai government — an ally that is likely to be incredibly useful. The deal was announced by Tesla in July and it was followed quickly by the opening of Model 3 pre-orders for China-based customers in November.

Initial construction of the Shanghai factory is set to be completed by the summer, according to Musk, who said that he expects production to begin before the end of this year. The facility is aimed at churning out 500,000 EVs a year when it reaches full production, which should happen during next year, all being well.

Musk clarified on Twitter — his go-to for public announcements — that Tesla’s U.S. facilities will continue to manufacture vehicles for the U.S. and other markets.

Tesla isn’t the only one planting manufacturing roots down in the country. Byton, a U.S-China rival founded by former BMW and Infiniti executives, said this week it is on track to complete production of a plant in Nanjing by May. The outpost will have a capacity to produce 300,000 vehicles per year, the company said.

In June, Byton secured a $500 million Series B funding round from investors FAW Group, Tus-Holdings and CATL. The company has raised $850 million from investors in addition to loans and subsidies from China.

Despite optimism behind the Shanghai project, China has been the source of concerns for Tesla in recent times.

The country has reduced subsidies for green vehicles while its ongoing trade spat with the U.S. is raising concerns for U.S. businesses looking to reach consumers in the middle kingdom. Tesla’s share price dropped by nearly eight percent before the New Year after the company reduced the price of the Model 3 by seven percent in China. That followed reductions to the Model X and Model S in November, and it also coincided with Musk pledging to reimburse tax credits to U.S. customers who miss them because their pre-December order isn’t delivered before the end of the year.

Still, the Chinese market is the largest in the world for electric vehicles and hugely important for future growth.

The country is said to already account for 35 percent of global EV sales, according to Bloomberg intelligence, which reports that cumulative sales reach four million in August 2018. That’s just the start. Chinese city Shenzhen, known as the world’s mecca for hardware technology, has replaced all buses with electric versions and 99 percent of its taxis, and the government wants 20 percent of all car sales to be plug-in hybrids or battery-powered models by 2025 — that’s around seven million cars per day.

China’s Didi restructures key units to improve safety following passenger deaths

China’s largest ride-hailing operator Didi Chuxing announced on Wednesday a major restructuring, which trails a series of tweaks to its core businesses following two separate passenger murders that happened in May and September. The reshuffle will see Didi — which owns Uber’s China business — knit three key platforms into a new overarching Ride-hailing Business Group […]

China’s largest ride-hailing operator Didi Chuxing announced on Wednesday a major restructuring, which trails a series of tweaks to its core businesses following two separate passenger murders that happened in May and September.

The reshuffle will see Didi — which owns Uber’s China business — knit three key platforms into a new overarching Ride-hailing Business Group (RBG). The merger of Express, Premier, and Luxe, its car-hailing offerings in ascending order of quality and rates, comes just a few months after Didi rebranded and upgraded Premium, one of its fastest-growing segments.

Meanwhile, Didi is facing regulatory pressure to enhance safety measures and striving to regain trust from consumers.

“With safety as its top priority, RBG will invest resources to meet compliance standards, continuously create user value and strengthen our ride-hailing ecosystem,” Didi says in a statement.

The plan includes an upgrade in customer services, driver safety, and emergency responses. Defects in the last area have led to one of the passenger incidents, in which a female passenger failed to contact Didi for help.

As part of the change, Didi is appointing a new chief safety executive and chief security executive (in the sense of information security) who will directly report to the company’s chief executive officer Cheng Wei and chief technology officer Zhang Bo, respectively.

Chinese authorities have stepped up scrutiny on the country’s fledgling car-hailing industry following Didi’s passenger murders, including stricter verification processes for drivers and their vehicles. The controls have prompted a sharp decline in the number of rides available, urging Didi to help drivers attain new licenses.

Aside from addressing safety concerns, Didi is adding fresh growth engines through the reshuffle. The Automobile Solutions Platform will launch consisting of Didi’s Asset Management Center and Xiaoju Automobile Solutions. The newly minted group is set to explore retail opportunities and sells a flurry of existing services, including car sales, loans, car maintenance, and refueling, to Didi’s 31 million drivers.

“Didi automobile solutions will continue to develop customized for-share vehicles and incubate new auto-related businesses to become the new engine for Didi’s long-term growth,” the company says of its driver-centric platform.

Didi declined to comment when asked by TechCrunch about the potential impact its restructuring brings to revenues.

Lastly, Didi is upping the ante in cabs and bringing shared bicycles, electric bikes, and other public transportation solutions under one umbrella in a bid to serve China’s mass. The car-hailing titan will also smoothen internal coordination by forming two new units – the Finance and Operations department, and the Legal department.