Due to declining subsidies, the market for new energy vehicles is unlikely to continue the momentum it has seen in recent years. (Photo/China Daily)
At a CAAM press conference earlier this year, Wu Wei, an official at the National Development and Reform Commission, said: "Due to rapid expansion in the sector, we have seen the problem of blind investment, which must be addressed in order to prevent risks."
A survey by the China Times newspaper says that 32 major automakers have announced plans to invest 311 billion yuan in new energy car and battery plants.
Yet even more are making forays into the already overheated segment.
Last Monday, telecom equipment and smartphone maker ZTE Corp announced that it has purchased a 70 percent stake in Granton Auto, which is located in Zhuhai, Guangdong province, and plans to build a manufacturing base with investment of 14.6 billion yuan.
Tian Feng, an executive in ZTE's car division, said it was not an impulse purchase.
"We tend to look at cars as smartphones with wheels. If you see from this perspective, you can find it is logical that we enter into the sector."
Three days before ZTE's announcement, Dong Mingzhu, chairwoman of China's leading appliances maker Gree Electric Appliances, and four partners including China's richest man, Wang Jianlin, made public their plans to invest 3 billion yuan in a carmaker called Zhuhai Yinlong New Energy Co.
The move came after Gree's plan to acquire the company was vetoed by its shareholders in November.
"Gree failed to buy it. But I, Dong Mingzhu, will do it," said Dong at a recent forum in Beijing. She said this time she invested as an individual and that she has "put all (her) money into the project".
Experts are not as optimistic as Dong. Cui Dongshu, secretary-general of the China Passenger Car Association, said: "It is easy to churn out cars but difficult to produce good ones. And a number of factors including declining subsidies will make it difficult for the market to see explosive growth."
John Zeng, managing director of LMC Automotive Consulting (Shanghai), said the newcomers have underestimated the difficulty of building a car brand.
"There may be chances in the auto parts sector if they can produce breakthrough technology. But car making is different.
"They have to win recognition from suppliers, dealers and customers. But if they insist on making cars, there is a 99 percent chance that they fail," he said.
