Trade war and safety concerns take centre stage at Shanghai auto show

SHANGHAI: China’s annual major auto shows have become a showcase for the rise of ever-cheaper, better-performing electric vehicles and more confident local brands in the world’s biggest market for cars.

But the Shanghai auto show opened on Wednesday amid deep industry-wide uncertainty over how the US-China trade war could dampen demand and scramble supply chains as 100 more models launch into an already crowded market with more losers than winners.

In a further complication, Chinese regulators signalled more and tougher scrutiny for smart-driving features that many automakers had seen as the next big thing in setting apart their cars from competitors just a week ago.

US President Donald Trump’s move to impose a 145 per cent tariff on Chinese imports and Beijing's counter-tariffs and trade restrictions have pushed global growth forecasts lower and forced automakers and their suppliers to confront new risks.

But there are also signs of trouble. China is now the world’s largest car exporter by volume. While the US market is essentially closed due to tariffs, analysts expect the Trump administration’s trade policies to put pressure on Chinese automakers. That could come through weaker demand in China if its economy wobbles or pressure from Washington that could force other US trade partners to align their tariffs.

CHINA CRACKS DOWN ON ‘SMART DRIVING’

Chinese automakers, which had been preparing to heavily market their driver-assistance features to set their cars apart from competitors at the show, were forced at last minute to switch to a “safety first” message.

Regulators last week cracked down on the use of marketing terms like “smart driving” and “autonomous driving” after a fatal accident involving Xiaomi’s best-selling SU7 EV in March that triggered concerns over how drivers were using systems not designed to be fully self-driving.

Xpeng, a brand built on the appeal of its in-house technology, including an artificial intelligence-powered virtual assistant, said it would launch a “training camp” for drivers on how to use its systems safely.

“We will emphasise the capability boundaries of the driving assistance functions to ensure safety,” Xpeng CEO He Xiaopeng told reporters on Wednesday. Volkswagen stressed its rigorous German craftsmanship and strict testing standards.

Lei Jun, the celebrity CEO of Xiaomi who stole the limelight with a crowd of cameras following his every move at last year’s Beijing show, was absent from Shanghai as the show opened.

CHINA SPEED

China’s hyper-competitive local market remains a minefield for foreign brands. Sales for Honda and Nissan, for example, were down 34 per cent and 28 per cent respectively in the first quarter from a year earlier.

Volkswagen, once China’s top-selling passenger car brand, saw sales drop 6.0 per cent in the first quarter. Under an electronic banner with the motto ‘CHINA SPEED’, the German automaker on Wednesday unveiled the first of five new models, including for its premium Audi brand.

Tesla, the only foreign automaker with a top-selling EV in China, said on Tuesday that it would have to reassess its growth forecast in three months because of the difficulty in predicting “the impacts of shifting global trade policy on the automotive and energy supply chains”.

The trade war has already hit Tesla. Its China sales were down 22 per cent through March from a year earlier. The company has suspended orders for the Model S and Model X because of China’s counter-tariffs and paused some imports of China-sourced components.

Tesla CEO Elon Musk said on Tuesday while announcing a 71 per cent plunge in first-quarter net profit that the EV maker’s already-delayed production plans for its Optimus humanoid robot had been slowed by China’s restrictions on the export of the rare earth magnets needed for the motor powering the robot’s arms. Musk had earlier predicted the robot would be working in Tesla factories this year.