European car companies, including those in Britain, have long prided themselves on being leaders in the automotive world. They have set the standards for technology, safety, style and efficiency. But this may all be set to change, with China now calling the shots for the global automotive industry.
Enormous economic growth in China, the global push for more environmentally-friendly cars and changing attitudes from younger generations all over the world are all combining to reshape how cars will look and drive – and who will own them. This was a key topic of discussion at the FT Future of the Car Summit earlier this month in London.
China comes first for new model planning
China is now the largest automotive market in the world, having eclipsed the US and Europe several years ago and continuing to grow. In fact, the Chinese car market is growing by the size of the entire UK market each year. And as the largest market in the world, China carries a lot of clout. Every major car manufacturer in the world now has to make decisions about their future product plans based on what the Chinese market is demanding – even if that contradicts demand in their home markets.
For example, hatchbacks might be the most popular style of vehicle in the UK and across Europe, but they don’t sell nearly as well as saloons in China (or America, for that matter). So nearly every major European car maker now offers saloon versions of their popular hatchback models if they are trying to succeed in China.
Ever wondered why Mercedes-Benz bas been replacing the traditional grille and bonnet mascot on its luxury saloons with the ‘sports’ grill with the huge star in the centre? It’s because Chinese buyers like the huge star, to make sure everyone in the street knows they drive a Mercedes-Benz…
China’s pollution problems are bad news for diesel
You have to have been living under a rock for the last year to not know that diesel fuel has been copping a bashing from all over the place, thanks to Volkswagen choosing to cheat its emissions tests and increasing evidence that diesel pollution is linked to serious health issues in urban environments. But diesel was already starting to struggle before the Volkswagen scandal ignited the issue in September 2015.
At the FT Future of the Car Summit, Volkswagen UK managing director Paul Willis admitted that diesel sales were already declining before the Dieselgate scandal became public news. Despite the push for diesel cars from European governments over the last couple of decades, the huge US car market was never interested in diesel technology (and the big German companies certainly tried). And the new market leader China isn’t interested either.
Major Chinese cities like Beijing and Shanghai have been battling crippling levels of pollution for years. That pollution is now driving the world’s largest push for the electrification of cars rather than incremental improvements to petrol or diesel engines.
Car companies you have probably never heard of, like NextEV and Faraday Future (below), are working hard on bringing advanced new electric vehicles to market. They are employing some of the brightest industry talent from Europe and America, in a race to be the “next Tesla”. Tesla, of course, has announced plans to be building 500,000 electric cars a year within three years, and is relying on China to buy a large number of those vehicles.
Richard Bruce, Head of Office for Low Emission Vehicles at the UK Department for Transport, said: “Chinese companies are not interested in diesel engines or turbocharging. They are investing in electric vehicles, battery packs and so on.
“There is a huge risk for European car companies if they don’t adapt.”
So if car companies want to compete in the world’s largest market, they will have to develop viable electric cars. This is a huge undertaking, with many billions of pounds being spent around the globe, and it means that electric cars have become a priority for every major car maker – regardless of whether buyers in Europe or elsewhere really want them. The knock-on effect of the investment in electric technology is inevitably going to be less money to spend on petrol and diesel technology.
With diesel also under pressure from environmental groups and Volkswagen’s own goal, it is quite possible that diesel development will trail off sooner than expected. Diesel engines are also not as suited to hybrid drivetrains, which is limiting for markets which are demanding more hybrid cars – like the US and China. Volkswagen has announced a massive investment in electric vehicles, and has also pulled nearly all of its diesel models from sale in America (where the Dieselgate cheating was first uncovered). Europe may still be diesel-centric, but industry figures expect this to reduce significantly in the next decade if governments start to increase taxes on diesel-engined cars.
China is leading the world away from car ownership
Only 10% of the adult population in China can drive, and this percentage is likely to fall further. Wealthier families in China employ drivers so they don’t have to do their own driving, which is leading to increased investment from car companies in vehicles with more rear legroom and infotainment technology for rear seat passengers to play with.
It is also accelerating the development of autonomous cars, as there will simply not be enough drivers to chauffeur millions of Chinese passengers around each day. Plus there are numerous other benefits to traffic management and pollution from autonomous cars, as we have discussed recently, which could significantly help ease traffic jams and air quality problems in major Chines cities.
Around the world but especially in China, millennials are collectively turning away from driving and owning cars. They are preferring to use taxis or services like Uber for short journeys and car-sharing services or rentals for longer trips.
The consensus among industry representative at the FT Summit was that car sharing will trump car ownership for a large percentage of the world’s population in the next couple of decades, so manufacturers have started investing heavily in providing car-sharing services like Daimler’s car2go (pictured above). Again, it will likely take off first in China before moving to more traditional markets like Europe and the US, where owning your own car has long been a natural part of society and will take longer to change.
So for many reasons, key aspects of your next car could be the way they are because that’s what they want in China. British and European car companies are relying on the huge Chinese market for an increasing percentage of their sales, and it is affecting every aspect of the automotive sector.