In a sign of the times, last weekend’s Super Bowl in Los Angeles was saturated with advertisements for electric vehicles (EVs), with major players like BMW, General Motors and Chevrolet jostling for battery-powered prominence.
Of the 6.5 million EVs sold last year, just under half were sold in China, where a wide range of contenders is also hoping to cash in on the transition to electric cars.
Joining the group is Midea, the Guangdong-based home appliance manufacturer, which started out in the automotive industry as far back as 2003 by buying a group of companies that made cars and buses. Progress was poor, however, and it sold the carmaking plants a few years later.
It started anew with a fresh strategy in 2018, creating an auto parts company and operating it under the Welling brand (it had also bought the top German industrial robotic firm Kuka). Two years later it took a controlling stake in Hekang New Energy to get access to its commercial relationships with mainstream car manufacturers in the EV space. But the Welling unit is still to build a meaningful business from its auto parts product lines. “Our sales in 2021 were still very small, only in the order of tens of millions,” Fu Yongjun, president of the division, admitted to National Business Daily. “At the same time, the development speed of new energy vehicles is very fast and we can’t just wait around.”
Late last year Midea said it would be doubling down on the strategy by creating Midea Industrial Technology (MIT) as the coordinating force for a bigger push into automotive components. An “inflection point” was imminent, Chongqing Morning News prognosticated, with talk of at least $1 billion in investment in technical research over the next 10 years as Midea bids to become a ‘system-level’ supplier for new energy cars.
A key question is whether a home appliance brand like Midea can make this kind of breakthrough. Local rival Gree has struggled to make the same transition into EVs, for instance, despite investing billions of yuan in Yinlong New Energy (see WiC345). Various types of vehicle have been developed but none of them has been a sales success. Financial losses at the unit have been heavy.
Fu Yongjun told reporters at the launch ceremony that MIT has already started to deploy automobile main drive motors, electric automobile air-conditioning compressors, various types of automobile micromotors and electronic pumps five years ago, and all of them will be mass-produced this year.
Newcomers to the sector claim that direct experience of carmaking is no longer a prerequisite, because new energy vehicles have completely different systems to traditional cars. The supply business is also moving away from traditional mechanical parts to a world that pays more attention to software and technology, opined National Business Daily.
Here, perhaps, the home appliance companies have more of a background. All the same, Chongqing Morning News urged caution for many of the would-be carmakers, noting that more than 200 firms had announced ambitions in the EV sector over the last five years. As of the end of 2020, there were fewer than 40 still in contention.
Critics of Midea’s plans add that the home appliance brands don’t have the technical strengths of OEMs such as Bosch and Continental in automotive parts. Their systems integration skills and IT knowhow are behind those of telecoms and internet companies like Huawei and Xiaomi too.
Midea counters that the new division has a focus on thermal management systems and core components for electric drive systems that is rooted in 30 years of experience in disciplines such as compressors, motors, electromagnetics and precision machining. Midea claims a meaningful global market share of air-conditioning compressors – it sold 100 million of them last year – sends a message that it knows how to build a business to commercial scale as well.
Of course, growth in Midea’s more established business has been slowing sharply, so it needs new sources of revenue. Hence the targets for the new industrial technology team of a whopping Rmb100 billion ($15.6 billion) in annual sales within five years…
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