How China Is Churning Out EVs Faster Than Everyone Else - WSJ 4/1/24, 6:09 AM
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BUSINESS AUTOS
How China Is Churning Out EVs Faster Than Everyone Else
Once laggards, Chinese carmakers are stirring envy—and fear—in the global auto industry
By Selina Cheng Follow in Hong Kong and Yoko Kubota Follow in Beijing
Updated March 4, 2024 12:03 am ET
NIO takes less than 36 months to roll out new car models, compared with roughly four years
for many traditional automakers. PHOTO: HECTOR RETAMAL/AGENCE FRANCE-PRESSE/GETTY
IMAGES
China is speeding ahead in the electric-vehicle race. Riding the nation’s EV boom, upstart
automakers have eclipsed foreign rivals to develop cars faster, push the boundaries of smart
tech and swamp consumers with choice.
Chinese automakers are around 30% quicker in development than legacy manufacturers,
industry executives say, largely because they have upended global practices built around
decades of making complex combustion-engine cars. They work on many stages of
development at once. They are willing to substitute traditional suppliers for smaller, faster
ones. They run more virtual tests instead of time-consuming mechanical ones. And they are
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redefining when a car is ready to sell on the market.
Foreign carmakers openly admit they are chasing the game, increasingly wary of Chinese
rivals they once considered also-rans. China’s prowess, combined with its global ambitions,
is also stoking fears it could flood the world with cheap cars as demand for EVs slows.
NIO, one of China’s leading, though cash-burning, electric-vehicle startups, takes less than
36 months from the start of a project to delivery to customers, compared with roughly four
years for many traditional carmakers. One reason: It puts out cars with latent technology
such as a spare chip that allows it to frequently add new features through software updates.
“The faster you can introduce a new technology to the market, provided that it’s a reliable
technology, then the chance for you to gain market share will be much bigger,” said Mark
Zhou, the head of NIO’s product committee.
New and updated EV releases in China
BYD
NIO
TOYOTA VOLKSWAGEN TESLA XPENG
2017 ’23 2017 ’23 2017 ’23 2017 ’23 2017 ’23 2017 ’23
Note: Excludes models with limited sales numbers. Data for 2023 are through September.
Tesla’s count includes made-in-China launches of existing vehicles in 2020 and 2021.
Source: Automobility
Zeekr, an EV venture from decades-old auto giant Geely, can develop vehicles from scratch
in as fast as 24 months. It rapidly releases different models ranging from SUVs,
multipurpose vehicles, and hatchbacks that all share manufacturing and digital architecture
with other Geely brands such as Polestar and Smart.
Backed by generous government stimulus policies, China now sells the most EVs in the
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world. Its carmakers are heavily customer focused, emphasizing software and digital
technology, from driver-assistance functions to in-car entertainment.
The slowdown in demand for EVs—even in China—is spurring Chinese carmakers to
constantly update and release new models. Cars launched last year contributed to 90% of
China’s passenger-car sales growth, according to the country’s passenger-car association.
Because Chinese buyers tend to prefer new or recently released cars, the cars have a short
shelf life. Domestic EV makers offer models for sale for an average of 1.3 years before they
are updated or refreshed, compared with 4.2 years for foreign brands, according to an
analysis by consulting firm AlixPartners.
China’s EV boom is so recent that it remains to be seen whether there are any trade-offs
between faster development and vehicle safety and quality. PHOTO: CHEN JIMIN/CHINA NEWS
SERVICE/GETTY IMAGES
In a reversal of industry convention, many global carmakers are now looking to learn from
Chinese rivals. Tesla’s Elon Musk and Ford chief executive Jim Farley have both said their
biggest future threats will be Chinese. Volkswagen and Nissan are adopting some Chinese
ways to be speedier.
Global automakers risk falling behind in the technology if they scale back investments as
Chinese rivals ramp up. Apple has scrapped its EV project and Tesla’s Elon Musk said the
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company will ship its updated Roadster starting next year, after years of delay. The share of
EVs among global car sales is expected to reach as high as 40% by 2027 despite the recent
slowdown.
Volkswagen is now partnering with Chinese companies as it looks to speed up its processes.
Its China business head noted it took the company nearly four years to get a new product to
the market, compared with little more than 2½ years for local manufacturers.
Global carmakers including Ford and Nissan are now moving to use their China factories to
make cars for export around the world. China surpassed Japan as the world’s top auto
exporter last year.
Concerns about China-made cars are increasing. On Thursday, the Biden administration
said it would investigate foreign car technologies, citing potential national security risks from
China. The European Union is conducting an antisubsidy probe into China’s EV makers.
Not all of the ways China is moving ahead are innovations. Automakers in the country are
adopting and pushing forward ideas from Tesla, such as focusing on upgrading car features
through software updates. Tesla has been ousted as the world’s top EV seller by China’s
BYD.
China’s EV boom is so recent that it remains to
be seen whether there are any trade-offs
between faster development and vehicle safety
and quality. Chinese carmakers insist they make
no compromises, but some in the industry say
their focus is on seeking growth first, whereas
legacy carmakers foster a robust system around
meeting safety and quality standards.
Everything all at once
As Chinese carmakers have moved to produce
software-driven smart EVs, many development
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steps are taken in parallel, executives say.
Traditionally, making gas-powered cars was a
linear process—from design to engineering to
manufacturing, each step had to be completed
and validated before the next.
Chinese EV companies heavily use simulation software to create virtual prototypes and run
tests in more iterations and in faster time. Virtual parts and mock-ups can be worked on
between teams and 3D printed prototypes allow engineers to go through loops of trial and
error much quicker, executives at Zeekr and NIO said.
There is no need to wait for hardware parts to be completed to develop assisted driving and
powertrain control software, said Zhu Ling, a vice president of Zeekr.
JiYue, an EV brand created by Geely and Chinese tech giant Baidu, can finish product
design in six months, said CEO Joe Xia. He visits the design studio almost every week,
bringing employees from sales, marketing, manufacturing, product development and
software. Any design feature changes can be understood by all so they can make relevant
changes, he said.
German and Japanese carmakers have well-defined standards and guidelines for every step
in car manufacturing and development, but these are barriers to moving quickly, said
Christoph Weber, the China general manager for AutoForm, a Swiss company that makes
simulation software for car manufacturing.
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NIO’s ES7 carried more Nvidia chips when it was released than it used at the time. PHOTO:
QILAI SHEN/BLOOMBERG NEWS
Make now, update later
NIO, the EV-maker that was once dubbed China’s Tesla killer, has changed when a car is
deemed ready for market. It classifies its releases as “minimum viable products.” That
means they have more advanced chips, cameras or sensors than its software can support at
the time. Engineers continue to develop tech and later send over-the-air updates to drivers
that exploit unused capabilities.
NIO’s ES7 SUV carried four Nvidia Orin chips when it was released in June 2022, but only
three were in use. The fourth chip was activated last year to boost computing speed, so a
traffic light signal appears on the car screen with a real-time countdown. Another update
means the car sends a notification when a traffic signal turns green. NIO’s next update will
allow the vehicle to automatically start or stop the car depending on the traffic signal.
“If the minimum viable product will allow us to take the lead over other competitors, that’s
attractive enough for our users,” Zhou said.
NIO is churning out new models even as its losses mount and the company laid off 10% of
its staff late last year.
Speedy suppliers
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Global carmakers typically won’t approve new
suppliers without a lengthy vetting process,
industry executives say. Chinese ones will rope
suppliers in early when conceiving a car to avoid
back and forth later.
In the case of BYD, delivery time from a
Japanese mold supplier has been cut to around
six months from at least a year since it bought
the company more than a decade ago. BYD did
so by involving experts from the supplier to
advise on molding from the early stage and set
its design earlier in the development process.
When Zeekr was designing the Zeekr X, a
premium hatchback crossover with an in-car
fridge to keep drinks cool, it first sourced the appliance from a well-known manufacturer.
But the supplier’s quote was too expensive and delivery would be too slow, said Zhu. The
company picked a smaller manufacturer that specializes in outdoor fridges and was able to
deliver within a year instead of two.
“In the age of EVs, whether your car is launched six months earlier or later, the market
condition is totally different,” Zhu said.
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Zeekr electric vehicles await export to Europe. China now sells the most EVs in the world.
PHOTO: BLOOMBERG NEWS
One size fits all
China’s carmakers are increasingly standardizing their models to cut time. Beyond
traditional mechanical platforms, they standardize everything from important software to
the digital vehicle operating systems that executives liken to the nerve center of smartcars.
EV startup XPeng last year introduced the SEPA2.0 that combines features including the
operating system, driver-assistance software and battery pack design for use across all
models. XPeng says it shortens research-and-development cycles by around 20%.
Figuring out software on cars and making them gel well with hardware is one area where
traditional carmakers such as Volkswagen and Toyota have struggled.
XPeng’s approach is in part possible because the carmaker develops software in-house
alongside vehicle hardware, said Brian Gu, the carmaker’s co-president. For global
carmakers, the software-development job was traditionally done by external suppliers.
Volkswagen last year obtained a stake in XPeng to partner in vehicle development and
technology.
Startup spirit
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Many Chinese EV makers operate more like startups than legacy automakers. They have a
smaller number of employees who say they tend to work longer hours. Executives are more
willing to override standard processes to push new products to the market sooner, experts
in the industry say, even if it could be harder to fence in risks and costs when things go
wrong.
At NIO, the next model’s design emerges from various pitches sent in by its car designers
based in Munich and in China. CEO William Li attends weekly design meetings with the help
of identical clay mock-ups in both countries and calls the shots on the final design for all
future models. This is different from many Western carmakers, where design options are
sent through different departments for review, a much lengthier process, said NIO’s design
chief Kris Tomasson, who previously worked with Ford and BMW.
A car on display at the Xpeng company booth at the 20th Shanghai International Automobile
Industry Exhibition. PHOTO: ALEX PLAVEVSKI/SHUTTERSTOCK
Corrections & Amplifications
AlixPartners was incorrectly spelled AlixParnters in a chart in an earlier version of this article.
(Corrected on March 4)
Appeared in the March 4, 2024, print edition as 'China Races to Front in EV Output'.
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