electric vehicles


2022-05-17

China’s Lockdowns Erode Car Production and Sales, May Reduce Global Car Sales by 80 million units in 2022

Due to the implementation of lockdowns and dynamic zero-COVID in Shanghai and other locations in China, a large number of automotive supply chain manufacturers have been idle since March and the implementation of passive measures in many locales has led to a decline in both production and sales. A large number of automotive companies are clustered in Shanghai and it is the hub of the entire Chinese automotive industry. Many foreign automotive companies, Tier 1 suppliers, important parts and components headquarters, production bases, and distribution centers are located here, such as Tesla’s Shanghai plant.

This also includes an important state-owned automotive company, SAIC Motor and all its subsidiary automotive factories and wide network of suppliers. The total production capacity of Shanghai and Jilin accounts for approximately 20% of the whole of China. The production volume of major automakers in Shanghai in April 2022 will drop by 75% compared with March, while the production volume of major joint venture automakers in Changchun (Jilin Province) will drop by 54%. The drops in these two regions were sharper than the 38% decline in China as a whole. Recently, several districts in Beijing have been locked down. The impact of this on sales depends on the duration of lockdown. BAIC Motor, Beijing Benz, and Beijing Hyundai are located in Beijing and these companies will bear the brunt of these lockdowns if they are required to suspend operations.

Further discussing the three major effects of this wave of lockdowns, first, the lockdowns will disrupt the pace of new car launches in spring. Second, the export plans of automotive companies will be impeded, which will slow the expansion of Chinese car companies into overseas markets. Third, there is a risk of stagnant demand. The stagnation of demand can be viewed from several perspectives.

First, is the closure of traditional distribution channel car dealerships due to the decrease in orders. According to China Automobile Dealers Association statistics, more than 20% of automobile dealers in China have closed down, which hinders the car purchase process. In addition, since automobile pricing continues to rise due to a number of environmental factors, if delivery is continuously delayed or the acceptance of car orders is suspended, there is a risk of consumption shrinking as time goes on. Third, the negative impact of lockdowns on economic activities, employment, and salary income, coupled with global inflation, will bring uncertainty to demand in China’s automotive market in the second half of 2022.

The global auto market is experiencing a very unstable period. The lingering impact of the COVID-19 pandemic, the persisting shortage of semiconductor chips, and the Ukrainian-Russian war has caused chaos in the supply chain in Europe and other regions and it seems the war will last longer than expected. Many automotive plants are still unable to operate smoothly.  Facing sustained production reduction or the transfer of production capacity, coupled with China’s lockdown and zero-COVID policies which began in March, global car sales in 1Q22 amounted to only 19.6 million units, down 7% from the same period in 2021.

Although the auto industry accounts for the majority of the work resumption whitelist announced by Shanghai in April, restoring production capacity is expected to take some time as manpower and transportation capacity are still limited and sales may still decline or remain low. Therefore, after taking into account the regional consideration of the Chinese market in 2Q22, sales volume is expected to be 17.7 million units and annual sales volume is revised downward to 80 million units, an annual decline of 1.3%. This forecast is based on the assumption of a supply turnaround leading to rebounding sales in the second half of 2022, so changes in various environmental factors will strongly affect the revision of future expectations.

(Image credit: Pixabay)

2022-04-21

Will Foxconn Pivot Away from China?

(AmCham Taiwan|Contributing Writer: Matthew Fulco) Aggressive local competition and rising geopolitical risk make the contract electronics manufacturing giant’s China dependency more precarious than ever.

Hon Hai Precision Manufacturing Co., better known as Foxconn, is the largest private employer in China and has long depended on the country as its manufacturing base. As recently as 2018, Foxconn assembled half of the world’s iPhones at a massive factory in Henan Province.

Yet in recent years, Chinese manufacturers have aggressively moved into the Apple supply chain long dominated by Taiwanese suppliers and Foxconn in particular. According to Nikkei Asia, in 2020 Chinese suppliers to Apple outnumbered Taiwanese firms for the first time: 51 and 48, respectively.

“In Apple’s supply chain, Chinese manufacturer Luxshare has been Foxconn’s strongest competitor, as the company’s share of the Apple supply chain for hardware products including iPhone and Apple Watch is expected to keep rising in the next few years,” says Rachel Liao, a senior industry analyst at the semi-governmental Market Intelligence & Consulting Institute. For example, Luxshare produces Apple’s AirPods. The Chinese company also obtained about 3% of iPhone 13 Pro assembly orders in 2021, a share that is expected to increase to 5% in 2022, Liao adds.

Luxshare is not just competing with Foxconn in smartphones; the Chinese firm is also moving into the fast-growing electric vehicles (EV) industry, where Foxconn hopes to carve out a new niche. In February, Luxshare established a US$267 million EV joint venture with Chery group, one of China’s largest automakers.

Foxconn has lofty EV ambitions. In March, Chairman Young Liu said that by 2025 the company intends to reach 5% of the EV market share globally, with production capacity of 500,000 to 700,000 vehicles a year.

Initially, Foxconn seemed to be focusing on the China EV market, the world’s largest. In 2021, China’s electric vehicle sales surged 169% to a record 2.99 million units, accounting for almost 15% of overall vehicle sales in the country, according to the China Passenger Car Association (CPCA).

Foxconn announced in early 2021 that it would invest in the Chinese-German EV startup Byton. The planned investment – reportedly US$200 million – would be used to launch mass production of the Byton M-Byte by the first quarter of 2022.

But in September 2021, the tie-up with Byton hit a snag due to the Chinese startup’s poor financial condition, reported Nikkei Asia. It is unclear if Foxconn has other China EV investments of note, although in early 2020 the company said it planned to form a joint venture with Fiat Chrysler Automobiles NV to develop and make electric vehicles in China. Otherwise, its prospects in the country’s EV market – large and fast-growing but ultracompetitive – are uncertain.

“Taiwanese manufacturers are good at [automotive] component manufacturing and OEM production,” says Caroline Chen, a research manager at the Taipei-based market research firm TrendForce. She notes that electric vehicles require more chips than traditional vehicles, “which means automotive semiconductors present a big opportunity for Taiwan.”

Traditionally, Foxconn’s forte is not in chipmaking, but it has expanded into that segment in recent years. Last year, it acquired local chipmaker Macronix’s Hsinchu facility, which will likely be used to develop silicon carbide chips for automotive applications.

Regarding the China EV market, Foxconn will also have to consider that “China has endeavored to achieve self-sufficiency in chips for all sectors, including electric vehicles,” says MIC’s Eric Tu, an industry analyst.

Stepping up diversification

Given steadily rising labor costs in China, Foxconn started to shift some manufacturing capacity to lower-cost destinations in Asia more than a decade ago. The company accelerated those efforts after the U.S.-China trade dispute began in 2018. Though Apple products ultimately received tariff waivers, that situation may not be permanent. It is thus seen as prudent for Apple and its suppliers to reduce reliance on China.

“Due to geopolitical tensions in recent years, Apple has gradually moved assembly plants of iPhones to other countries, such as India,” notes MIC’s Liao. While the assembly of new iPhones is still mainly based in China, India has also started mass production of some models such as the iPhone 12. “It is expected that Foxconn will keep expanding its production capacity in India in the future, and mass production of the iPhone 13 in India will likely kick off around mid-2022,” Liao says.

Foxconn has also signaled its intent to participate in India’s development of a domestic semiconductor ecosystem, a US$30 billion initiative. It is the first foreign manufacturer to do so. In February, the Taiwanese company announced it would cooperate with Indian natural resources conglomerate Vedanta to build a semiconductor fab in the subcontinent. Vedanta will be the majority shareholder in the joint venture while Foxconn will hold a minority stake, the two companies said in a statement.

At the same time, Foxconn is expanding production capacity in Vietnam, where it had already invested US$1.5 billion by 2021. Early last year, the Vietnamese government approved Foxconn’s bid to build a US$270 million plant in Vietnam for the assembly of notebook computers and tablets. The Taiwanese manufacturer reportedly set up the facility at the request of Apple, which aims to better mitigate the risks it faces from U.S.-China trade tensions.

When Apple shifts production outside of China, Foxconn often benefits. However, China remains the U.S. tech giant’s paramount manufacturing base. With that in mind, it could be harder for Foxconn in the long run to compete with Chinese manufacturers on their home turf, especially as Chinese leader Xi Jinping is focused on developing technological self-sufficiency. In December, online technology news site The Information reported that Apple in 2016 inked a secret five-year, US$275 billion investment deal with China, likely one of the reasons Luxshare and other Chinese suppliers have become a much bigger part of the California tech giant’s supply chain in recent years. Under the terms of the agreement, Apple promised to work with Chinese manufacturers to create “the most advanced manufacturing technologies.”

Meanwhile, the business environment for Taiwanese firms in China is becoming more difficult amid strained cross-Strait relations. In November, Chinese regulators fined two Chinese subsidiaries of Taiwan’s Far Eastern Group ¥88.6 million (US$13.9 million) for alleged environmental protection, fire safety, and taxation compliance violations.

Beijing may also have been sending a political message to the company, which has previously donated to campaigns in Taiwan of both Democratic Progressive Party (DPP) and Chinese Nationalist Party (KMT) candidates. China “will absolutely not allow people who support Taiwan independence or destroy cross-Taiwan Strait relations, who dare bite the hand that feeds them, to make money in the mainland,” Taiwan Affairs Office spokesperson Zhu Fenglian said in November.

To be sure, Foxconn is known for the strong relationships it has built up in China over its 35 years of operating in the country. The company and a charity run by its founder Terry Gou were able to secure millions of Pfizer-BioNTech vaccines for Taiwan last year through Shanghai-based Fosun Pharma, which has the rights to distribute them in China, Hong Kong, Macau, and Taiwan, after a deal involving the Taiwanese government and BioNTech fell through.

That said, cross-Strait relations are at their lowest point in decades, and to Taiwanese the possibility of war seems a little less remote following Russia’s invasion of Ukraine. Given Foxconn’s preference for discretion, it is difficult to assess its readiness for a sharp increase in tensions with China. However, the company “does have an ability to pivot quickly to changes in the operating environment, to invest large amounts of money quickly, and to retain the trust of its clients, which will be useful should tensions between China and Taiwan rapidly increase,” says Ross Darrell Feingold, a Taipei-based lawyer and political risk analyst.

Feingold is not sanguine about the prospects for cross-Strait relations in the years to come. Even if the KMT, which is viewed more favorably by Beijing than the DPP, wins the presidency and/or a majority in the legislature in 2024, “there is little reason to believe such would result in China changing its views toward Taiwan or its policies that put pressure on Taiwan,” he says. “Unless China renounces the use of force against Taiwan or Taiwan creates a military capability that deters China, tensions are likely to continue to increase.” Such a prospect could bode ill for Foxconn and other Taiwanese manufacturers with extensive operations in China.

(Source: https://topics.amcham.com.tw/2022/04/will-foxconn-pivot-away-from-china/

2022-04-19

Global Proportion of Installed Lithium Iron Phosphate Battery Capacity Expected to Reach 60% in 2024, Becoming Mainstream of Power Battery Market, Says TrendForce

As a consequence of rising power battery raw material prices, a number of global new energy vehicle (NEV) brands including Tesla, BYD, NIO, Li Auto, and Volkswagen, have successively raised the sales prices of electric vehicles (EV) in 1Q22. TrendForce believes that power batteries are the core component that account for the greatest portion of an EV’s overall cost and reducing the cost of power batteries will be an important strategy for companies to remain competitive in the future. As technology continues to innovate, lithium iron phosphate batteries are expected to account for more than 60% of installed capacity in the global power battery market by 2024.

TrendForce indicates, from the perspective of the world’s largest EV market, China, the power battery market reversed in 2021 and lithium iron phosphate batteries officially surpassed ternary batteries with 52% of installed capacity. Lithium iron phosphate installed capacity continued to grow in 1Q22, rising to 58%, and demonstrating a growth rate far beyond that of ternary batteries. However, from the perspective of the global EV market, thanks to the increase in the penetration rate of NEVs in Europe and the United States, ternary batteries still accounted for a market share of more than 60% in 2021, far exceeding that of lithium iron phosphate batteries, which captured a market share of approximately 32~ 36%.

Although the current gap between these two materials remains substantial, according to production capacity planning of global new energy battery cathode material manufacturers in the past two years, the scale and speed of lithium iron phosphate materials expansion will far exceed that of ternary materials. According to TrendForce investigations, planned expansion projects announced by global cathode material manufacturers are currently concentrated in China and South Korea, with a nominal total planned production capacity of over 11 million tons, of which planned production capacity of lithium iron phosphate cathodes accounts for approximately 64%. However, since planned production capacity exceeds market demand, there will be a certain shortfall between the industry’s total planned production capacity and actual future production capacity. It remains to be seen to what level actual effective production capacity can rise in the future.

It is worth noting, as the price of core battery raw materials such as lithium, cobalt, and nickel has moved up clearly since 2H21 and the global power battery supply chain is plagued by uncertainty including the Russian-Ukrainian war and the global pandemic, there will be a short-term disparity between the growth rate of supply and demand and companies will focus more on reducing the cost of battery materials and supply chain security, two major issues related to future competitiveness. As a result of this trend, TrendForce expects the cost-effective advantage of lithium iron phosphate batteries to become more prominent and this type of battery has an opportunity to become the mainstream of the terminal market in the next 2-3 years. The global installed capacity ratio of lithium iron phosphate batteries to ternary batteries will also move from 3:7 to 6:4 in 2024

2022-03-10

8-inch Substrate Mass Production in 2H22, 3rd Gen Power Semiconductor CAGR to Reach 48% by 2025, Says TrendForce

At present, the materials with the most development potential are Wide Band Gap (WBG) semiconductors with high power and high frequency characteristics, including silicon carbide (SiC) and gallium nitride (GaN), which are mainly used in electric vehicles (EV) and the fast charging battery market. TrendForce research estimates, the output value of third generation power semiconductors will grow from US$980 million in 2021 to US$4.71 billion in 2025, with a CAGR of 48%.

SiC is suitable for high-power applications, such as energy storage, wind power, solar energy, EVs, new energy vehicles (NEV) and other industries that utilize highly demanding battery systems. Among these industries, EVs have attracted a great deal of attention from the market. However, most of the power semiconductors used in EVs currently on the market are Si base materials, such as Si IGBT and Si MOSFET. However, as EV battery power systems gradually develop to voltage levels greater than 800V, compared with Si, SiC will produce better performance in high-voltage systems. SiC is expected to gradually replace part of the Si base design, greatly improve vehicle performance, and optimize vehicle architecture. The SiC power semiconductor market is estimated to reach US$3.39 billion by 2025.

GaN is suitable for high-frequency applications, including communication devices and fast charging for mobile phones, tablets, and laptops. Compared with traditional fast charging, GaN fast charging has higher power density, so charging speed is faster within a smaller package that is easier to carry. These advantages have proven attractive to many OEMs and ODMs and several have started rapidly developing this material. The GaN power semiconductor market is estimated to reach US$1.32 billion by 2025.

TrendForce emphasizes that third generation power semiconductor substrates are more difficult to manufacture and more expensive compared to traditional Si bases. Taking advantage of the current development of major substrate suppliers, companies including Wolfspeed, II-VI, and Qromis successively expanded their production capacity and will mass-produce 8-inch substrates in the 2H22. Output value of third generation power semiconductors is estimated to have room for continued growth in the next few years.

2022-02-24

Total NEV Sales Reached 6.47 Million in 2021 with BYD First in Plug-in Hybrids, Says TrendForce

In 2021, total sales of new energy vehicles (NEVs including battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles) reached 6.473 million units, with annual growth rate reaching 122%, the highest growth rate since the development of vehicle electrification, according to TrendForce’s research. Battery electric vehicles (BEV) accounted for approximately 71.6% of total sales and plug-in hybrid electric vehicles (PHEV) accounted for approximately 28.1%, while the scale of fuel cell vehicles remained small.

Tesla ranked first among BEV brands with total global sales exceeding 930,000 vehicles and a 20.2% market share. SAIC-GM-Wuling ranked second, posting strong sales numbers for their low-priced mini electric vehicles in 2021. Other BEV brands such as Ora and Chery have also greatly increased sales performance on the backs of mini-vehicle products. The significance of this segment in the NEV market is considerable. On the whole, a reinvigorated BEV market has birthed a number of new brands that have further fractured market share. The concentration of market share among the top ten BEV brands dropped from 64.4% in 2020 to 57% in 2022, indicating an escalation of market competition.

BYD ranked first in PHEV sales with 273,000 vehicles sold in 2021, accounting for 15% of the market. Both BYD and seventh ranked Li Auto posted multifold growth, suggesting China’s reduced PHEV subsidy policy exerted minimum impact on the market. In addition to a number of luxury European brands holding their spots on the sales ranking, TOYOTA moved swiftly into fifth place while Jeep, a part of the Stellantis group and known for its performance cars, ranked 10th with the lion’s share of sales coming from the United States and Europe.

From a regional perspective, NEV sales in China once again exceeded half of the global total in 2021 while NEVs accounted for 19.3% of China’s overall auto market. TrendForce states, in addition to fierce competition, the Chinese market also includes numerous new brands, accelerated mass production, joint venture brands adjusting strategies, and overseas deployment of domestic brands targeting Europe, the Middle East, and Southeast Asia.

In addition, with the European Union strongly promoting electrification, the penetration rate of NEVs in several leading countries such as Germany and France is expected to reach 20~25% in 2022. In terms of the currently trailing US market, the Biden administration’s many policy incentives have focused the actions of brands and supply chains which include the introduction of ever-popular (in the U.S. market) battery electric pickups by a number of automakers. In addition, many new brands such as Rivian, Lucid Motors, Fisker, and Lordstown Motors have successively entered the mass production and assembly stage of vehicle manufacturing or plan to enter mass production in 2022, making the future of the U.S. electric vehicle market worth observing in terms of quantity and competition.

As the global trend of energy conservation and carbon reduction remains unchanged and automakers shift greater proportions of their product lines to electric vehicles, the total number of NEVs is forecast to exceed 10 million in 2022. However, the international situation is turbulent, and the Russia-Ukraine conflict has caused the price of crude oil to rise. In addition, Ukraine supplies neon gas for the semiconductor process and Russia is a producer of nickel ore. Nickel is a key material for electric vehicle batteries. Once the war heats up, the automotive industry will bear the brunt of rising costs and unstable supply chains, which are variables for the development of NEVs in 2022.

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