The Olympics of EVs: After Toyota's 'Team Japan', Chinese and European automakers also want alliances

Renault CEO Luca de Meo is calling for European car companies to work together in developing low-cost battery EVs. Meanwhile, China’s Li Auto’s CEO Li Xiang warns of social upheaval if more Chinese EV manufacturers go under, egging the government to mediate for mergers and acquisitions.

The calls were made in response to intense cost pressure and uncertainties in the world’s transition to fully electric, software defined vehicles.

A pan-Euro Avengers alliance

Speaking to the European press at the sidelines of Geneva Auto Show late last month, Renault’s de Meo, who presented the reborn Renault 5, said that to compete against cheap Chinese imports, partnerships are important.

His new generation Renault 5 will go on sale in Europe in September, with an estimated starting price of around 25,000 Euros, about 5,000 Euros cheaper than a BYD Dolphin there. Battery capacity will be up to 52 kWh, with a driving range of up to 400 km (WLTP).

“Many Chinese battery companies are building gigafactories in Europe. This is the form of co-operation we need to find…You compete on one side, you co-operate on the other,” he told BBC.

de Meo, who is also the president of ACEA (European automotive manufacturers association), has previously suggested a pan-Euro partnership modelled after Airbus – a European consortium established to match the competition posed by the USA’s Boeing/

“Let’s put in place all the conditions for the emergence of structural projects and allow European champions to emerge in key technologies. Europe did it in the past: it is called Airbus.

“It is just as urgent to finally coordinate the efforts of the many industries involved in the huge automotive transition that is already under way, because it is intertwined with challenges across other sectors, including those of the energy and digital sectors, which are undergoing their own revolutions.

“For instance, the mining, chemicals, energy and manufacturing industries, plus infrastructure, national and local authorities all need to work together,” said de Meo in his editorial published by UK AutoCar last month.

Stellantis also expressed openness for more partnerships. CEO Carlos Tavares said European anti-competition regulators need to be more open to mergers if they want their domestic manufacturing industries to survive, and that Europe’s current automotive industry is too fragmented, lacking in scale.

“The pressure to make EVs affordable and profitable is why I think it's Darwinian," he said in an interview with Automotive News. "That's why I think that in a few years, if you want to have the scale to be as efficient as a company like BYD, can we afford to be fragmented as we are today? But that's the question for the industry — not for Stellantis, because I believe we have the scale."

One in every 5 new battery EV model sold in Europe is made by Stellantis. The Peugeot e-208, Fiat 500e, Opel Corsa Electric, and Pro One commercial van series are the region’s best sellers.

Stellantis already partners with Germany’s Mercedes-Benz and France’s TotalEnergies to manufacture EV batteries. Each owns an equal share of Automotive Cells Company (ACC), which operates a Gigafactory in Billy-Berclau Douvrin, France.

Chinese subsidies

Chinese EVs benefit from huge subsidies, a point of contention with the European Union.

As of 2022, China has spent over USD 28 billion (~RM 133.2 billion) in subsidies to promote a domestic manufacturing base for plug-in hybrid (PHEVs) and battery electric vehicles (BEVs), collectively known in China as NEVs, or New Energy Vehicles.

Beyond exemptions on consumption tax and purchase tax, Chinese NEV manufacturers also enjoy cheap coal-generated electricity. At the same time, local provincial governments will buy renewable energy from the plant’s rooftop solar panels at a higher price – thus giving manufacturers an indirect subsidy. State governments also boost demand for NEVs by forming joint ventures in ride sharing / hailing companies, which will then be used to absorb unsold cars.

The Europe Union on the other hand, requires manufacturers to meet anti-competition laws, use not just green energy, but also green steel, and sustainably sourced minerals for batteries, thus significantly raising cost.

In short, European automakers must fight not just low-cost Chinese manufacturers, but their own governments’ virtue signaling policies.

This was why de Meo lamented in his editorial, “…while the Americans massively stimulate and incentivise the industry and the Chinese organise it through planning, we Europeans regulate, often with no coherence and without any holistic view of our challenges.”

Toyota's Team Japan is now Team Japan+Thailand 

Over in Japan, Toyota’s ‘Team Japan’ is well ahead in partnerships. Every Japanese manufacturer except Nissan and Mitsubishi (both are tied to Renault) is working with Toyota.

All of Japan's manufacturing sector, not just automotive, look up to Toyota Chairman Akio Toyoda.

Toyota has manufacturing joint ventures with Mazda (in USA), co-developed models with Subaru, fuel cell technology partnerships with Honda (Moving e, a portable fuel cell power generator, and Super Formula, a domestic open-wheel racing series), and contract manufacturing with Suzuki in India.

In the commercial vehicles space, the Toyota-led Commercial Japan Partnership (CJPT) pairs Suzuki and Isuzu with its subsidiaries Daihatsu and Hino. Even motorcycle manufacturers Yamaha and Kawasaki are working with Toyota on hydrogen-related projects.

With cross-Japan partnerships complete, Chairman Akio Toyoda moved on to Southeast Asia, where he once again spoke the message of finding 'like-minded friends' - including those outside the automotive industry - "to build a future together."

Toyota is now working with the Thailand's CP Group, one of the largest food companies in the world, to generate hydrogen from biowaste (manure). The circular economy-generated hydrogen is used to power CP Group's fuel cell trucks supplying the company's 7-11, Lotus's, and Makro stores.

"We can't reach carbon neutrality on our own. It must be a group effort and include other industries beyond automobiles," said Akio Toyoda when announcing the Toyota-CP partnership in 2022.

A CP Group board member Kachorn Chiaravanont, himself an experienced race car driver, recently partnered with Akio Toyoda in a 10-hour endurance race in Buriram, racing a Toyota Prius fueled with carbon neutral synthetic fuel - the first time a standard powertrain Prius competed in a race.

The duo raced under Akio's privately owned Rookie Racing team, which is focused on building partnerships and testing experimental powertrains, and is run separately from the official Toyota Gazoo Racing team.

Team China – for anyone who is not BYD?

Last year, BYD Chairman Wang Chuanfu said, “I believe the time has come for Chinese brands,” before playing video that says "Our stories are different from each other but share the same direction,” referring to Chinese manufacturers' efforts to export. "There's no distinction between 'you' and 'me'."

Wang called for Chinese manufacturers to unite under the slogan of “Chinese Autos” to "demolish the old legends and achieve new world-class brands."

Wang’s call was meet with positive reception, but it didn’t last long. As the Chinese car market continue to decline, BYD launched another round of price cuts just days after Chinese New Year, pressuring rivals further.

Sales of New Energy Vehicles (including plug-in hybrids) plunged 39 percent in January 2024. Compared to January 2023, sales are up 80 percent but that’s because Chinese New Year holidays in 2023 took place in January.

Meanwhile, Li Auto is the most successful Chinese EV manufacturer that is not BYD. It is the first new energy vehicle start-up outside of BYD to post a profit, eclipsing Nio and Xpeng, supposedly the Chinese equivalents to Tesla.

Li Auto’s secret to success is quite ironic – don’t throw out combustion engines but use them wisely.

While BYD makes battery EVs (BEVs) and plug-in hybrids (PHEVs), Li Auto focuses on E-REV – extended range electric vehicles, EVs with a small petrol engine working as an on-board generator. This way, drivers can use their cars freely, without being tied down to public charging infrastructure, which even in China, can be tricky in peak holiday seasons, cold winters, and rural areas. Where charging is available, E-REVs can also be plugged in.

Li Auto’s first BEV, the Li Mega minivan has just gone on sale this month.

To break the impasse on price wars, Li Auto’s Li Xiang is motioning for Chinese manufacturers to organize themselves into a bigger, stronger body, rather than fighting each other.

Of course, this is China, Li Xiang is not talking about loose alliances, but outright takeovers and mergers.

Li recently posted on his Weibo, China’s equivalent to X, “In the future, many new brands will encounter operational and financial problems because of competition. If social loss caused by mergers and acquisition is 10, that by bankruptcies is 100,” said Li.

Li reasoned that even in the US, General Motors and Chrysler (now part of Stellantis) are the result of fierce competition and mergers.

Of course, nobody took up Li’s (or BYD Wang’s) calls to unite. Why should they? Unlike Japanese or European manufacturers, which has over 100 years to settle on a predictable pecking order, it’s too early for the Chinese to accept their positions in the hierarchy.

Beyond the car industry, the tech world has organized itself into two camps – the USA-led Apple, Google, Meta, Netflix, Amazon, and China’s Huawei, Baidu, Alibaba, iQiyi, Tencent. Both camps exist in different digital universes, splitting the Internet world into two. There are concerns that the car world will share a similar fate.

As OEMs decouple from China, a window of opportunity opens for SEA nations

With Europe and USA erecting trade barriers blocking Chinese cars, similar to China’s firewall blocking non-Chinese apps, many manufacturers are predicting that by 2030, they will need to decouple from China.

Stellantis has already exited China, choosing Malaysia as their base. Even Chinese manufacturers are looking to Southeast Asia to cover for their losses from brutal price wars at home.

This shakeup presents a unique opportunity for Southeast Asia. Our region is the only high-growth market that is neutral to both China and the West. The Thais are racing ahead with their EV3.5 incentive-stimulus package. BMW, Great Wall Motor, and BYD have already committed themselves there. The Indonesians are banking on their huge nickel reserves, Wuling and Hyundai are there.

Over in Malaysia, we haven’t even figure out fuel subsidy rationalization. We are the only country in ASEAN to still be stuck on this topic. You cannot talk about low carbon mobility, EVs and what not, while still subsidizing RON 95 petrol going into Mercedes-Benzes and BMWs.