Tesla confronts domestic car manufacturers, heating up the "war" of smart electric cars in China

Tesla đối đầu với các nhà sản xuất xe nội địa, nóng 'cuộc chiến' xe điện thông minh ở Trung Quốc

Tesla is facing fierce competition from domestic smart electric vehicle manufacturers. (Source: SCMP)

Zhang Hua spent three months researching more than a dozen smart electric car models before deciding to ditch his eight-year-old Honda Civic. The researcher, who is currently working at Shanghai Jiao Tong University, went online to compare and evaluate cars, even tried tires at showrooms, and consulted about additional services before deciding to buy a P7 sedan made by Chinese low-cost electric car maker Xpeng.

He did not hesitate to spend 250,000 yuan (about 36,340 USD) as he was particularly impressed with the driver assistance system and voice command functions of the car from this Guangzhou-based manufacturer.

“I always prioritize intelligence because now is the digital era, where drivers and passengers have higher demands for in-car entertainment and digital connectivity. Smart electric cars made in China are now the optimal choice for middle-class consumers because most of their technology and services meet our needs,” he said.

When domestic brands "rise up"

Recently, many consumers have shared the same thoughts as Mr. Zhang. The rise of domestic electric vehicle brands such as Nio, Xpeng, Li Auto, BYD, etc. has caused the "giant" Tesla - once the leading electric vehicle brand in China - to fall to 10th place, according to a survey conducted by JD Power and Shanghai Tongji University in December 2022.

“Tesla used to be very successful in China, based on sales and brand recognition,” said David Zhang, an analyst at the Automotive Innovation Research Center at North China University of Technology. “But now the smart electric car company from the United States is facing the difficult question of how to regain the lead from domestic rivals.”

According to auto experts, customers choosing smart electric cars are mainly attracted by the bells and whistles, digital cockpits, in-car entertainment audio and especially the voice recognition system that can recognize many voices from different regions of China.

“We see that Chinese consumers are more interested in new technologies that can bring them comfort and entertainment features,” said Jeff Cai, Chief Advisor of JD Power China Automotive Product Practice.

The top 10 electric car models in the ranking all understand at least 87% of Chinese consumers' voice commands, he added.

“Some Chinese smart electric car manufacturers have shown superiority over other global competitors in terms of digital cockpit development capabilities,” the expert analyzed.

For example, Nio's ET7 is equipped with PanoCinema, a panoramic digital cockpit that immerses users in augmented reality (AR) and virtual reality (VR) technologies. The PanoCinema system is powered by 256-color curtain ambient lighting and a 7.1.4 Dolby Atmos surround sound system.

Although Tesla has offered voice recognition technology to Chinese users, the system does not work well in noisy environments, according to a survey by JD Power and Tongji University.

In recent years, Tesla's main competitors in China - Nio, Xpeng and Li Auto - have developed battery-powered cars ranging from sedans and coupes to large SUVs with longer driving ranges than the Model 3 and Model Y.

While the base versions of Tesla's Shanghai-made Model 3 and Model Y can travel 556km and 545km respectively on a single charge, the entry-level versions of Nio's ET7, Xpeng's P7 and Li Auto's L8 have ranges of 530km, 480km and 1,315km respectively.

Top 10 best-selling smart electric vehicle models in the Chinese market in early 2023. (Source: JD Powe, Tongji University)

The ET7, China’s smart electric vehicle, is also equipped with AR and VR systems to provide passengers with immersive experiences, something that Tesla’s vehicles lack. Furthermore, Tesla’s advanced driver assistance system, Full Self-Driving (FSD), has not yet been approved for use in China.

Seizing the opportunity, manufacturer Xpeng, backed by e-commerce giant Alibaba Group Holding, also launched its Guidance Control Program (NGP) X software - similar to Tesla's FSD - in late March this year. Accordingly, this software allows Xpeng's cars to be able to autonomously navigate Chinese streets better than FSD.

Tesla still maintains its appeal

Despite its drop in rankings, Tesla continues to lead the premium electric vehicle segment in China. After three consecutive years of resounding success, Tesla’s growth story in China remains intact and the “giant” is expected to soon overcome the shock of declining market share.

The Shanghai Gigafactory, Tesla's largest manufacturing facility worldwide , is still operating at full capacity, while its domestically produced Model Y and Smart electric vehicles continue to be the best-selling premium models, after a recent sharp price cut.

The Texas-based automaker is always the first thing Chinese drivers think of when they want to buy a smart electric car. Tesla's Model 3, when officially launched in January 2020, "stirred up" the billion-people national market and received "a shower of compliments" from Chinese drivers and users.

Even in the context of declining consumption due to the impact of the Covid-19 pandemic, the Model 3 still maintained its appeal as the best-selling electric car in China until it was officially "dethroned" by a mini electric car assembled by SAIC-GM-Wuling in September 2020.

Occupying the “throne” in the battle for market share in the world’s second-largest economy , the Tesla brand has always maintained its appeal. Last year, the company delivered more than 710,000 Model 3 and Model Y vehicles to customers here, up 50% compared to the same period last year. Meanwhile, Beijing-based “rival” Li Auto sold only 133,246 vehicles.