5 large points from regulation and EVs to semiconductors

A technologist inspects a computer chip.

Sefa Ozel | E + | Getty Images

GUANGZHOU, China – China’s tech sector has been on a wild ride over the past year, with regulations tightened, billions of dollars devastating corporate market value, and ongoing pressures on Beijing to become self-sufficient in technology.

These are some of the important topics to consider. be treated CNBC’s annual East Tech West event in the Nansha district of Guangzhou in southern China.

Here’s a look at the top concerns and priorities of the Chinese tech sector right now.

China’s technical crackdown

That put a heavy strain on China’s internet name. For example, Alibaba’s shares are down 41% since the start of the year.

There are several questions:

  • Will China introduce more new regulations and in what areas?
  • Which companies could be targeted next?
  • What does this mean for the growth of the technology sector in China?

CNBC addressed some of this in a recent episode of the Beyond the Valley podcast below. These talks will continue at East Tech West.

semiconductor

The ongoing tech rivalry between the US and China has made Beijing’s efforts to become more self-sufficient in a variety of sectors even more urgent. One of them are semiconductors, which are vital for everything from automobiles to cell phones.

But China is struggling to catch up with the US and other countries, and that’s because of the complexity of the semiconductor supply chain, which is dominated by foreign companies.

A good example is the chip manufacturing sector. SMIC, China’s largest contract chip maker, is several years back Taiwan’s TSMC and South Korea’s Samsung. SMIC is unable to manufacture the latest chips needed for leading smartphones.

Foreign companies master the most advanced tools and equipment required for the production of high-end chips. US sanctions have denied China access to some of these tools. Chinese companies can’t keep up.

How China will boost its domestic chip industry in the face of these hurdles is a big and ongoing debate.

Read more about semiconductors

‘Frontier’ technology

The semiconductor industry is just one of many industries in which China is trying to improve its credentials.

In his Five-year development plan, the 14th of its kindBeijing, which was released earlier this year, said it would “make science and technology self-reliance and self-improvement a strategic pillar for national development.”

The plan identifies areas that Beijing sees as “frontier technology” – artificial intelligence (AI) and space travel.

China did remarkable progress in space, including launching its own space station. It has ambitions sends its first manned mission to Mars in 2033.

When it comes to artificial intelligence, Chinese tech giants from Baidu to Tencent are investing heavily.

Electric vehicles

According to market research company Canalys, around 1.1 million electric vehicles were sold in the first half of the year, almost as many as in all of 2020. China is the world’s largest market for electric vehicles.

This growth has attracted many new tech players. Xiaomi, which is known for smartphones, is expecting it Series production of our own electric vehicles in the first half of 2024while the search giant has Baidu Set up your own electric car business with the Chinese automaker Geely.

Read more about electric vehicles

China’s economic slowdown

Thai agency branches into EVs from renewable power

Many people expect electric vehicles to become a fixture in a future world that relies on renewable energies. But not many EV companies started out as renewable energy companies.

One company trying to accomplish this feat is Energy Absolute, based in Bangkok. The biodiesel maker and renewable energy company entered the commercial electric vehicle business in 2019.

In March of this year, Thailand set a goal of having one million electric vehicles on its roads by 2025 – and hopes that number will climb to 15 million a decade later. This includes not only private cars, but also commercial vehicles – delivery vans, trucks, buses and the like.

A former securities dealer, Somphote Ahunai, founded Energy Absolute in 2006. He listed the company in Thailand in 2013 and began expanding into energy storage in 2016 when the company acquired shares in Taiwanese company Amita Technologies, a manufacturer of energy storage systems. It is now in the final stages of building a $ 3 billion battery gigafactory project to manufacture lithium-ion batteries.

Ahunai told CNBC’s “Managing Asia” that the government’s efforts to encourage the adoption of electric vehicles in Thailand helped him get the project started, and now he says he is urging the government to “open up the market and get one.” to create favorable policies for the electric vehicle market “.

However, the pandemic has affected the company’s push toward electric vehicles. An order for 3,500 five-seat hatchbacks was canceled by a local taxi company as tourism dried up. Ahunai made a quick pan to focus on utility vehicles and battery storage instead.

“A lot of manufacturers are focusing on the passenger car. Not many people are focusing on the commercial vehicle yet because they can’t overcome how to charge the vehicle faster and the battery last longer,” said Ahunai.

Ahunai plans to install 1,000 charging stations across the country in the next few years.

A charging sign is located at an Energy Absolute Anywhere charging station in Bangkok, Thailand, 2019.

Nicolas Axelrod | Bloomberg | Getty Images

“We have introduced nearly 500 charging stations across the country, mainly in Bangkok and the surrounding area,” said Ahunai, adding that the company holds nearly 80% of the market share of charging stations in Thailand.

His focus on commercial vehicles is in line with Thai policy of putting around 70,000 electric commercial vehicles on the road every year.

Read more about electric vehicles from CNBC Pro

“If we back up successfully [the commercial electric vehicle] Segment … then we create economies of scale so that we can move into the other segments, “said Ahunai.

Japanese, American, and German automakers have all made vehicles in Thailand, but despite the country’s auto-building expertise, it does not have its own internationally recognized vehicle brand. Ahunai said he believed electric cars could change that. He wants Energy Absolute to be at the center of that effort.

“We believe that by using [our] Technology and Thailand [auto-making] Infrastructure, we can use that as a stepping stone to the world market, “said Ahunai.” At least we can penetrate the ASEAN market with almost 600 million inhabitants. So that’s a good market for us at the beginning. “

At the moment, most of the company’s revenue comes from renewables like wind and solar, but Ahunai said his foray into commercial electric vehicles will be an important source of income for the future.

“If you look at what we are investing [in] Now, “he said,” it will completely change the company’s revenue structure in a few years. “

Democrat local weather plan provides tax breaks for EVs that price as much as $80,000

Cavan Pictures | Getty Images

Democratic MPs on Wednesday reveals a revised Social Spending and Climate Protection, which expands an electric vehicle tax credit of up to $ 12,500 for more expensive cars and suggests a lower income limit for buyers who are eligible for the credit.

The House Democrats update makes vans, sport utility vehicles, and trucks eligible for full tax credit at a cost of up to $ 80,000. The previous bill capped loans for vans priced at $ 64,000, SUVs priced at $ 69,000, and trucks priced at $ 74,000.

The proposal also limits the full tax credit for individual taxpayers reporting a modified adjusted gross income of $ 250,000 or $ 500,000 on joint tax returns. The previous plan had caps of $ 400,000 for individual submissions and $ 800,000 for joint submissions.

The transportation sector is one of the largest emitters of US greenhouse gas emissions, accounting for around a third of its emissions annually. The transition from gas vehicles to electric cars and trucks will be critical to tackling climate change.

The Democratic proposal includes a $ 4,500 tax incentive on purchases of an electric vehicle made in a unionized factory. Above all, car manufacturers would benefit from the regulation, such as General Motors and fordwhose workers in production are represented by the United Auto Workers union.

Read more about electric vehicles from CNBC Pro

Republicans have spoken out against tax incentives for buying electric vehicles that are union-made.

The optimized legislation that is part of President. is Joe BidenThe $ 1.75 trillion social and climate spending package would give the electric vehicle market a significant boost. According to industry forecasts, EV sales this year are expected to represent less than 4% of US sales.

Democrats want to finalize negotiations on the president’s Build Back Better plan this week. The House could vote in the next few days on the invoice.

People are shopping for Teslas, not EVs. Here is why that is about to vary

Americans don’t buy electric vehicles, they buy Teslas.

That has been a fairly accurate statement for US consumers over the past few years, with Tesla This accounts for the majority of electric vehicles sold, according to IHS Markit, including 79% in 2020. But that is starting to change as the so-called traditional Car manufacturers and start-ups are investing billions in a number of new electric vehicles to compete against Tesla.

The influx of electric vehicles – from a few dozen today to estimates of hundreds of new models by 2025 – is expected to detract from Tesla’s market share in the years to come. The new electric vehicles are planned as larger automakers, such as General Motors and Volkswagen, Transition to building almost entirely electric vehicles in the next decade or so.

The logo marks the showroom and service center of the US automobile and energy company Tesla in Amsterdam on October 23, 2019.

John Thys | AFP | Getty Images

“It’s no surprise that Tesla still dominates electric vehicle sales because they are the only ones with truly viable products in full swing,” said Michael Fiske, IHS Markit deputy director. “In a growth market, it is extremely difficult to maintain the majority market share, regardless of the industry. … As we move towards a larger and really significant number of manufacturers to play in this space, Tesla has to lose market share. “

Tesla’s market share of all-electric vehicles is expected to drop to 56% in 2021 as early as this year as new vehicles such as the Ford Mustang Mach-E and Volkswagen ID.4 are introduced, IHS Markit said.

Read more about electric vehicles

The research and forecasting firm expects Tesla’s US market share of all-electric vehicles to be 20% in 2025.

2021 vs. 2030

Tesla’s current dominance affects a relatively insignificant market. Despite the attention and hype surrounding electric vehicles, sales of all-electric and plug-in hybrid electric vehicles – which include both electric motors and an internal combustion engine – remain tiny. Electric vehicle sales, including plug-in hybrids, are expected to account for less than 4% of US sales this year, according to industry forecasts. According to LMC, fully electric models – such as Teslas – only account for 2.6% of the market or around 394,000 vehicles.

“Going on, it doesn’t take long to get into pretty big volume and share the growth,” said Jeff Schuster, LMC president for America. “This is a massive linchpin for the auto industry.”

LMC expects electric vehicles to account for 34.2% of new car sales in the U.S. by 2030, with all-electric 30.1% and plug-in hybrids accounting for 4.1%. Some of AutoForecast Solutions’ most pessimistic estimates predict that electric vehicles will account for about 23% of the market by 2030, with all-electric cars and trucks accounting for 18.6% of US sales. IHS Markit predicts that electric vehicles will make up about 40% of the US industry by 2030.

Biden’s goal “very optimistic”

While analysts and forecasters differ on how many electric vehicles will be sold this decade, they agree that the rollout will be quick, but likely not President Joe Biden’s order for half of the new vehicles sold be electric vehicles in the country.

“It is very optimistic to reach 50% by then,” said Tony Salerno, managing director for automotive analytics and advisory at JD Power, citing challenges such as consumer education, charging infrastructure and support from the US power grid. “I think it will get there at some point from a utility standpoint, but it’s early days and there are many pieces of the puzzle that we need to figure out to get there.”

When Biden announced the deal earlier this year, dubbed more of a “friendly target,” automakers weren’t fully on board. Many, including the Detroit automakers, said they aim to “achieve 40-50 percent of the annual US volume of electric vehicles” by 2030.

“It’s not going to happen. Mainly because it’s an unexplored market. Nobody really knows how much there is,” said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions. “Nobody really knows how deep the market is right now. If you take Tesla out of the picture, the market is less than 1% of all electric vehicles.”

GM, Ford are all-in on EVs. Right here’s how sellers really feel about it

A sign will be unveiled at General Motors Detroit-Hamtramck Assembly on October 16, 2020, introducing the facility’s new name: Factory Zero, Detroit-Hamtramck Assembly Center.

GM

After years of predictions that battery-powered sedans, pickups and SUVs would replace fuel-guzzling, emission-saving models, the switch to electric vehicles is in full swing. Beyond EV pioneers and market leaders Tesla, virtually every major automaker is queuing to flip the electric switch, and it’s a big deal not only for consumers but also for thousands of dealerships across the country facing the electric future.

General Motors said it aims only produce electric vehicles by 2035, with 30 new plug-in models to be launched by 2025, representing an investment of $ 27 billion. ford, which previously allocated $ 22 billion to develop electric vehicles, just announced it 40% of the vehicles are electrified by 2030. Toyota, Volkswagen, Daimler, Hyundai, Fiat Chrysler, Honda and other automakers are making similar commitments.

In preparation for this onslaught of new models, franchise auto dealerships in the United States – many of them long-standing small businesses in suburbs and rural communities – are preparing. Sales reps are preparing to put you in an EV today. And because electric vehicles have fewer moving parts, service technicians are trained to maintain them.

“Electric vehicles are the big hot topic right now,” said Mark Paladino, general manager of Colonial Ford in Danbury, Connecticut and a 40-year veteran in the industry. He was still excited about Ford’s debut of the F-150 Lightning pickup, an all-electric version of the country’s best-selling vehicle line for four decades in a row.

Ford F-150 Lightning exceeds expectations

Paladino’s excitement is justified when you consider that in the first week of its official release on May 19, Ford.com collected 70,000 reservations for the Lightning, with $ 500 deposits for each, reported Jason Mase, Ford’s Cross Vehicle Marketing Manager. “Almost 70% of these customers were new to Ford, 90% ordered the highest equipment variant and 80% ordered the battery with extended range,” he reported. “It exceeded our expectations.”

Colonial is one of 2,300 Ford dealerships out of a total of approximately 3,000 who have volunteered for EV certification, an investment that includes training sales and service personnel, upgrading battery charging stations, and purchasing specialty equipment, parts and tools. The remaining third have so far opted against spending nearly $ 50,000 on certification. Other manufacturers charge more than $ 300,000 for the designation.

“We were all there right away,” said Paladino, adding that the family-run dealership had previously received training on several gas-electric hybrid models as well as Ford’s first electric vehicle, the Mustang Mach-E SUV, which was unveiled in December 2021. “We see electric vehicles as part of our business that is only going to get bigger, and we want to be in this world.”

Electric vehicles account for less than 3% of total new vehicle sales in the United States. Tesla has dominated the market, making up about 55% of it, according to Credit Suisse – although that’s down from 72% a few months ago, reflecting growth in the US competition.

Although electric vehicles now make up a fraction of the US auto fleet, they “will later become a significant part of a car dealer’s business,” said Chris Sutton, vice president of auto retail at research firm JD Power.

Read more about electric vehicles from CNBC Pro

A Bloomberg New Energy Finance report It is estimated that electric vehicles will account for 58% of global car sales by 2040, with China, Europe and the US all ahead.

“By providing their sales and service expertise and serving as an educational resource for customers, they create value for the automakers,” Sutton said of the dealers. Though he added that many dealerships elsewhere are in wait and see mode as EV sales have so far been concentrated in the coastal states of Michigan and Texas.

Two thirds of car consumers are interested in electric vehicles

In addition to the manufacturers’ ambitious targets, the Biden government has proposed spending nearly $ 42 billion to build nationwide electric vehicle charging infrastructure, gas prices have risen, and ExxonMobil shareholders have elected three climate-friendly directors from an activist investment group are supported blackboard. support for Biden’s infrastructure spending planHowever, to which the expenses for the EV infrastructure are tied, remains uncertain.

Car dealerships focus on the here and now. So you should be encouraged by a Cars.com survey this shows that two-thirds of Americans are interested in buying an electric vehicle despite barriers like higher sticker prices than models with internal combustion engine (ICE) and the lack of charging stations. Additionally, some EVs still qualify for a federal tax credit of $ 7,500, while states like California, New Jersey, and New York offer additional discounts of up to $ 5,000.

This data helps explain why the 17,000 members of the National Automobile Dealers Association (NADA) “can’t wait for EV products to arrive,” said NADA President and CEO Mike Stanton. “Dealers are in the business of selling cars and making customers happy, so why not sell electric vehicles?” he said, dismissing reports of lackluster enthusiasm among dealers.

Political support for climate change policies varies across the country, and over the past year Republican support has waned for the federal government making clean energy action a top priority, according to a current survey conducted by the Yale Program on Climate Change Communication and the George Mason Center for Climate Change Communication. However, there remains considerable support among Conservatives for giving tax breaks to people who buy energy-efficient vehicles or solar panels: 78% of moderate Republicans and 60% of Conservative Republicans. It was the only “climate-friendly energy policy” in the poll that received a majority support from both moderate Republican and Conservative registered voters.

EV service will definitely evolve and won’t be exactly the same. … Nobody panics about this, but we know this will change over time, so we’re working on it with our dealers.

Travis Hester, GM’s Chief Electric Vehicle Officer

A real problem for dealers, however, is the fact that EVs don’t require oil changes, transmission repairs, and other service owners of ICE vehicles routinely – and that explains and 50% of the gross profit of the traders. A AlixPartners 2019 report It is estimated that over the life of any EV they sell, dealers could see $ 1,300 less in service and parts sales.

Although 70% of the aftermarket services for ICE vehicles are handled by independent shops, franchise dealers do not want to cede electric vehicles to them, especially since consumers are familiarizing themselves with battery charging and other special features. “Electric vehicle owners may trust dealerships more to provide service than aftermarket stores when they first started their ownership,” said Sutton.

The service element is occupied by Rita Case, CEO of the Rick Case Automotive Group in Ft. Lauderdale, which represents VW, Hyundai, Honda, Audi, Mazda and other brands at its dealerships in South Florida and Atlanta. “Electric vehicles need tires, brakes, batteries, lights, and some maintenance on the steering and drivetrain,” she said. Rick Case Auto already sells and services a limited number of electric and hybrid vehicles, but “within the last six months we have stepped up electric vehicle training for our salespeople and technicians and purchased new charging equipment,” in anticipation of increasing consumer demand for new electric vehicle models, said Case.

The 2024 GMC Hummer EV SUV and the 2022 GMC Hummer EV Sport Utility Truck or SUT.

GM

GM didn’t just prep its 4,100 franchise dealerships for the refreshed Chevrolet Bolt last year – an early EV entry-level that ran away a current design – but also the upcoming electric GMC Hummer and the Cadillac Lyriq. “Service is critical to what our dealers do today and will be in the future,” said Travis Hester, GM’s chief electric vehicle officer. “The EV service will definitely evolve and won’t be exactly the same” compared to that for ICE vehicles, he said, noting that some EV parts can last for 10-15 years. “Nobody panics about it, but we know that will change over time, so we’re working on it with our dealers.”

Meanwhile, Paladino cannot keep up with Colonial Ford’s conventional service demands. “We book and service every vehicle we can,” he said. “At the moment I’m on the road for three weeks servicing your car.”

Online car sales threat

Another issue that concerns dealers is Direct Selling (D2C), the business model that has driven Tesla’s marketing of more than 385,000 electric vehicles on US roads to date. Tesla operates about 130 company-owned showrooms, but sales are done online. At the last count, 33 states allowed D2C cars to be sold, with other lawmakers debating bills that would circumvent the so-called franchise system that has legally linked dealers and manufacturers for more than a century. NADA, state dealer groups and traditional automakers have spoken out in favor of maintaining the franchise system, claiming that there is a level playing field.

On the other hand, online marketing is nothing new to automobile manufacturers and dealers. Each brand maintains a website where buyers can view models and prices, and even customize a new car. But they will ultimately be referred to a local dealer who will finalize the transaction and aim to build a loyal relationship that includes routine maintenance, service, and possibly a future sale.

The generation of pedestrian traffic – the proverbial routine of “stepping on the tires” – is the lifeblood of the dealers’ business models. So to survive, they have to adapt to consumers’ appetites to buy directly online, a routine that only broadened during the pandemic. That means manufacturers can make reservations and deposits online like Ford and other manufacturers do, and find ways to create and maintain long-term relationships with a new generation of EV drivers, such as mobile service technicians making house calls. “The dealer network has been around for a long time because they can adjust to where the market is and what customers expect and need,” said Sutton.

The auto industry is at a turning point in the transition to electric vehicles, and retailers large and small will have to turn again. “If you want to play in the EV sector, you have to embrace it now – the charging infrastructure, the parts, the equipment, the work,” said Paladino.

While Case is waiting for greater demand for electric vehicles, she is “super positive” about the future. “I sell cars and I know for sure that people will want cars.”