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Electric cars in China

Xpeng remains bullish on China EV market despite Tesla's entry

Co-founder says foreign makers, AI and 5G will give growth a massive boost

A China-made Tesla Model 3 appears at a delivery ceremony at the Shanghai Gigafactory of U.S. electric car maker Tesla in Shanghai on Dec. 30.   © Reuters

GUANGZHOU -- China's market for electric vehicles, the world's largest, screeched to a halt in 2019 after several years of torrid expansion, as the government sharply reduced subsidies on EVs.

New energy vehicles, most of which are electric, declined 4% to 1.2 million units, marking the first-ever contraction in the year. The sharp deceleration runs counter to the predicted swift and massive shift to EVs in the world's biggest auto market.

Despite all the hype in the past several years, EVs and other alternative-fuel vehicles are far from mainstream in China, accounting for only about 5% of overall car sales in the country. 

But Henry Xia, co-founder and vice president of Xpeng Motors, a Guangzhou-based EV startup, remains bullish, predicting an era of renewed growth for the country's EV industry starting this year.

The market will be re-energized by foreign carmakers' efforts to ramp up EV sales, Xia predicted.

Henry Xia, co-founder and vice president of Chinese EV startup Xpeng. Xia led Guangzhou Automobile Group's EV joint development project with Toyota Motor before founding Xpeng with He Tao, another former Guangzhou Automobile executive, in 2014. (Photo by Takashi Kawakami)

Tesla is leading the rush of foreign carmakers to expand EV production in China. The scrappy U.S. EV manufacturer is building a plant in Shanghai that is expected to push up the company's sales and give a boost to the market as a whole.

Volkswagen and Japanese automakers are also taking steps to ramp up their EV production capacity in China. The combined effects of all these moves will provide fresh thrust to the market and generate a new wave of interest in EVs among Chinese consumers, Xia said in an interview with The Nikkei.

Foreign makers' expansion drives will "lure more Chinese consumers to EVs and create more business opportunities for us as well," he said.

"Currently, there is no (dog-eat-dog kind of) competition (for market share)," Xia added. "We feel all players can contribute to market growth and benefit from it."

Xpeng plans to launch its first sporty EV sedan this spring. The company's sales will surge to 30,000 to 50,000 units in 2020 from 15,000 in 2019, Xia said. 

A spurt of innovation will be another driving force of market growth, Xia said. Expanded use of fifth-generation wireless technology and artificial intelligence will trigger a powerful resurgence of EV market growth, he said.

Widespread 5G is vital for progress in self-driving technology, which requires instant data communications for AI's operational decisions. 

Without more sophisticated autonomous driving technology, EVs' appeal to consumers will remain limited. This has been made clear by the cuts in state subsidies putting a big damper on EV sales in China. 

With these facts in mind, Xia cited two key strategic goals for this year -- the development of new EV models integrated with 5G and self-driving technology, and the enhancement of its own AI technology.

He pledged to "accelerate the evolution of connected cars" and stressed that AI will be "the most important and decisive technology" for the future of the company and the EV market as a whole.

Traditionally, automakers pour energy into building supply chains to secure components and other hardware for their products. But this will shift to a supply chain of software, driven by AI technology, Xia said.

In response to this trend, Xpeng, valued at $3.6 billion, will expand cooperation with its leading shareholders, such as the Chinese e-commerce behemoth Alibaba Group and smartphone maker Xiaomi, to capitalize on 5G and AI to "accelerate the development of equipment and software for connected cars and self-driving vehicles." 

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