Decoding China: The race to electric vehicle dominance

Chinese electronics manufacturer Xiaomi plans to deliver its first electric vehicle in China on March 28, three years after the company first pitched its idea for a battery-powered sports car.

Now, premium car manufacturers in the US and Germany will have to deal with another competitor from the Far East.

The new vehicle is called the SU7, with SU standing for "speed ultra." The car needs just 2.78 seconds to accelerate from 0 to 100 kph (0-60 mph). The top speed is 265 kph.

The maximum range with a fully charged battery is specified by the manufacturer as 800 kilometers (500 miles). The base price of the SU7 is around €33,000 ($36,000), making the SU7's comparable with a Tesla model 3, and only around a third of the price of Porsche's Taycan.

Xiaomi CEO Lei Jun has his sight set on competitors from the US and Germany. "We don't want compromise or mediocrity," Lei said. "We want to build a dream car that stands up to Tesla and Porsche."

From smartphones to cars

China has long been the world's largest manufacturer of electric cars. E-mobility would be unimaginable without innovations from Chinese companies, this includes many electronics companies that were not originally focused on the automotive industry.

Xiaomi mainly produces so-called intelligent household appliances with web functions, such as door sensors or rice cookers that send notifications to one's cell phone when the rice is ready.

In Europe, Xiaomi is primarily known for its smartphones, just like the other telecommunications supplier Huawei, which has been launching its e-SUVs under the name AITO in China since 2021.

Electronics companies trying to cross over into car making is not limited to China. The Californian company Apple also had the idea of producing cars 14 years ago. However, at the end of February 2024, the iPhone manufacturer from Cupertino announced that the "Apple Car" project had finally been discontinued. The company is said to have invested a total of $10 billion.

China's dominant automobile market

China is the largest and fastest growing car market in the world. Germany's major car manufacturers sold around one in three cars worldwide in 2023. But their market position is now being challenged by domestic e-car manufacturers.

 "China leads the global supply chain for lithium-ion batteries," said Bernd Diepenseifen, partner at the consulting firm KPMG.

In terms of battery production, industrial innovation and sales, China is clearly number one on the scale of competitiveness. "Asian suppliers have a dominant position here, at least for the time being," he added. And for German car makers, things are not moving in the right direction.

"The production of raw materials is certainly not a field in which German suppliers are sensibly looking for opportunities, nor is battery production," said Diepenseifen.

The high standards China's car makers are aiming for became even more clear at the Geneva International Motor Show in February.

Not a single car manufacturer from Germany was present, but there were plenty from China. Exhibition vehicles demonstrated a new generation of connected cars, with entertainment packages integrating audio and video streaming services, and navigation that indicates with a countdown when the next traffic light turns green.

China builds a new generation of cars

China's automobile industry today is looking at cars more than as a mere means of transportation. Cars are more than just an engine plus gearbox, and e-mobility is not just a chassis with a socket.

China is thinking ahead with emphasis on automated driving and artificial intelligence, an environmentally friendly transportation concept and technological leadership in industrial production.

This is why electronics and telecommunications giants like Huawei and Xiaomi are positioning themselves in this competitive market.

"Currently, cars are 'mobile data centers'," said Xiaomi boss Lei. "The automotive industry of the future will produce advanced and connected 'smart spaces'."

Chinese EV maker NIO has called its cars a "living room on wheels."

At the IAA 2023 motor show in Munich, Wan Gang, China's former research minister, enthused that electric cars could be used to store energy in the power grid when charging and discharging.

A data-driven future

"For production and the vehicle of the future, 'smart' is the next big step," said Jürgen Unser, who was President of Audi China until January 2024. This includes smart cars, smart production and smart infrastructure.

Production will soon be controlled by data and artificial intelligence. "It is very important for our society, including in Germany, that we become much more open in the way we handle and use data," he added.

Compared to other countries, Chinese drivers are not sensitive to the collection of private data. By using data, the innovative digital industry is then able to develop algorithms for the application of artificial intelligence to develop tools in the future.

"Artificial intelligence will contribute to our progress and prosperity," Unser said. "We need to be fast, open and flexible." However, the data collected must also be exchanged in a regulated manner.

In 2018, the German government and China signed a joint declaration of intent for automated and connected driving.

According to the document, both countries want to create and develop "non-discriminatory multilateral standards and requirements for data access and storage, data transmission and IT security (cybersecurity) in the field of automated and connected driving and the associated infrastructure."

But the reality of sharing data across borders is far more complicated. According to the EU Commission, many EU companies are complaining about difficulties in using industrial data from their subsidiaries in China.

Foreign investors must operate their data centers in China which are usually decoupled from the database or cloud service of the parent company.

China's data and cyber security regulations are "a problem" for European industry, according to reports from Brussels. The transfer of data out of China requires state approval from the cyber supervisory authority CAC, which wants to check all exports of "important data."

The German government is also aware of the high hurdles. Federal Digital Minister Volker Wissing emphasized the need for free data transfer at the German-Chinese intergovernmental consultations in 2023.

The EU and China are currently negotiating uniform industry standards for information and communication technologies (ICT) in the interests of borderless data regulation. They are still looking for common ground.

"Decoding China" is a DW series that examines Chinese positions and arguments on current international issues from a critical German and European perspective.

This article was originally written in German.