By VICTORIA GIBSON
Tuesday, June 19, 2018
Magna International Inc. is set to build and develop cars in China to cash in on a growing market for electric vehicles.
At a ceremony Monday in Nanjing, the Aurora, Ont.-based auto parts giant announced plans for a pair of joint ventures with Beijing Electric Vehicle Co. Ltd - a subsidiary of Beijing Automotive Industry Holding Co. (BAIC Group) - that will see the groups take over an existing BAIC facility in Zhenjiang with the capacity to build up to 180,000 vehicles a year.
With the first cars set to roll off the assembly line in 2020, the move is a big one for Magna. The company has engineered and assembled vehicles in Graz, Austria, for 20 years at the Steyr plant - Magna's only complete vehicle manufacturing operation.
Magna chief executive Don Walker has recently expressed concern about the rising costs of business in Canada, and Ontario in particular.
Magna, with about 22,000 employees at 51 factories in Ontario, is one of the province's largest employers.
In a news release Monday, Mr.
Walker touted the company's "ability to produce vehicles with conventional, hybrid and electric powertrains," noting the "tremendous opportunity" for the Chinese market.
China, which has struggled with smothering air pollution, has set a goal of having 20 per cent of sales by 2025 consist of "new energy vehicles" - meaning electric or plug-in hybrids.
Sales in this category doubled last year to more than 520,000, and China has been identified as a leader alongside California and Norway. Companies such as Volkswagen AG and General Motors Corp. see China as a key market, due to both demand and the country's stringent regulations.
"By 2020, analysts predict that the number of all-electric cars on China's roads could reach around five million, due in part to subsidies and quotas by the Chinese government," Magna spokesperson Tracy Fuerst said in an e-mail.
"The joint ventures will give Magna access to the Chinese market and Chinese customers."
Monday's announcement comes two months after Magna and BAIC Group announced their intention to jointly develop "next generation" smart electric vehicle design for the Chinese market. That design "architecture" is now expected to be transferred to the engineering joint venture. (The other venture will focus on the manufacturing side.)
While electric vehicles are a booming market overseas, they've yet to catch a similar hold on Canada and the United States.
Dennis DesRosiers, president of DesRosiers Automotive Consultants, believes it's because consumers still have to make some compromises when they purchase electric vehicles - whether it's the vehicle's power, charging concerns, the style, colour or space available to them.
"Very few consumers like to compromise on their vehicles of choice, and pay more," he said.
"The secret to more acceptance of electric vehicles in any market is science. The science of electric vehicles has to be further developed to get rid of the compromises consumers make buying them."
In Canada, billions of dollars' worth of charging infrastructure, substantial improvements to battery technologies and changes in consumers' perception of electric vehicles have been identified as necessary before the electric vehicle market can take hold.
The needed science is expensive though, Mr. DesRosiers cautioned. "So you need a market in order to generate the revenue to afford the science. Being in a market that accepts them is a critical element to manufacturing." The Chinese have already accepted the vehicles in their market, because they had to.
Magna's efforts in China date back to the mid-1990s, when it began to build its presence in Asia. Magna currently list approximately 26,500 employees at 67 manufacturing locations and 20 product development, engineering and sales offices across the continent, with 22,600 of those employees in China. Magna is calling Monday's announcement a "historic milestone."