[Congressional Record Volume 167, Number 36 (Thursday, February 25, 2021)]
[Extensions of Remarks]
[Pages E170-E171]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  CHINA AND THE ELECTRIC CAR INDUSTRY

                                 ______
                                 

                         HON. MARCY KAPTUR-----

                                of ohio

                    in the house of representatives

                      Thursday, February 25, 2021

  Ms. KAPTUR. Madam Speaker, I rise to include in the Record the 
following article that appeared in the New York Times regarding China 
and the electric car industry.

                [From the New York Times, Feb. 25, 2021]

       In China, an Electric Car Maker Loses Money but Thinks Big

                          (By Keith Bradsher)


Nio can tap an extensive supply chain that Beijing has built to achieve 
        its dream of dominating the manufacture of electric cars

       Hefei, China--Walk around the sprawling auto factory in 
     central China, and the wealth pouring into the country's 
     electric car industry quickly becomes clear.
       Rows of bright orange, 15-foot-tall robots--307 of them, 
     mainly from Sweden--whir with activity. They glue lightweight 
     aluminum panels to vehicle frames using aerospace-grade 
     adhesives. In an industry in which speed can mean cost 
     efficiency, the assembly line plods along at half the pace of 
     many lines elsewhere.
       Even by the standards of the $1.6 trillion global car 
     industry, an operation like this doesn't come cheap. In fact, 
     the Chinese operator of the factory, a company called Nio, 
     loses thousands of dollars on every car it makes. State-run 
     companies last year mustered a combined $2.7 billion to bail 
     it out.
       But Nio, or Chinese companies like it, could be the future 
     of the global car industry. General Motors and other major 
     names are increasingly betting that the next generation of 
     rides will be powered by batteries alone, without a drop of 
     gasoline or diesel. If so, China has invested so much money 
     in the industry that it could hit the accelerator with ease.
       An era of high-quality family electric cars that cost 
     $25,000 or less is about to dawn, said William Li, Nio's 
     chairman and chief executive, and Chinese automakers can 
     provide them.
       ``I don't think it's difficult,'' Mr. Li said. ``It's not a 
     big deal.''
       Investors see promise in Nio, even though it has one 
     factory, sold only about 7,200 cars last month and has never 
     made a profit. Its $82 billion market capitalization exceeds 
     G.M.'s and Ford's. Its New York-traded shares have soared as 
     high as nearly 30-fold in the last year.
       It is far from becoming China's top electric car maker. In 
     fact, the two best-selling electric car brands in China have 
     American ties:

[[Page E171]]

     Tesla, the maker of rides with price tags that can easily 
     spill into six figures, and a joint venture among G.M. and 
     two Chinese state companies that makes $5,000 microcars.
       But Nio has the advantage of being able to tap into China's 
     vast and well-funded supply chain for electric vehicles. As 
     President Biden mulls how much the United States should 
     invest in electric cars, China already has 14 years of 
     sustained government investment in the sector. China has also 
     used regulations for more than a decade to force 
     multinational companies to transfer their best electric 
     technologies to joint ventures with Chinese manufacturers as 
     a condition of entry into its vast market.
       China makes 70 to 80 percent of the world's battery 
     chemicals, battery anodes and battery cells. China similarly 
     controls most of the world's output of high-strength magnets 
     for electric motors, as well as the assembly of those magnets 
     into motors.
       ``China controls the cards in the battery supply chain,'' 
     said Vivas Kumar, a former Tesla manager of battery 
     materials.
       Nio manufactures practically nothing for its cars by 
     itself. While companies like Tesla make their own batteries 
     and other crucial systems, Nio is able to order parts 
     inexpensively from China's diverse array of electronics 
     manufacturers and auto parts suppliers.
       Nio has just 120 engineers to manage its assembly plant in 
     Hefei, the capital of Anhui Province in central China. Nio 
     then pays JAC, a state-controlled automaker also based in 
     Hefei, to send 2,300 experienced assembly line workers to run 
     the factory.
       The approach has drawbacks. When demand surged last summer 
     after China brought the coronavirus largely under control, 
     Nio found some suppliers unprepared to increase output 
     quickly. Buyers faced monthslong delays in getting cars 
     delivered.
       ``We have very small, close to zero, inventory,'' said 
     Victor Gu, general manager of the Nio factory. ``It is a big 
     challenge for the factory, because you need a quick 
     turnaround.''
       Nio also offers costly customer inducements under its 
     brand, like its Nio Houses. Essentially clubhouses for owners 
     of its cars, they provide coffee shops, libraries and even 
     free day care centers. They take up expensive real estate in 
     19 Chinese cities, including one at the base of East Asia's 
     tallest building, the 128-story Shanghai Tower.
       For a while, Nio also offered an extravagant perk: free 
     recharging of any Nio car throughout a customer's life, as 
     long as the customer keeps buying Nio cars and taking them to 
     one of the company's 183 battery-swapping stations. While a 
     customer sips a coffee, a technician swaps a depleted battery 
     for a fully charged one.
       ``It only takes about five minutes and costs nothing,'' 
     said Neo Fan, a 38-year-old Shanghai commercial banker who 
     paid $83,000 for his Nio ES8 minivan and is entitled to free 
     recharges for the rest of his life.
       Extravagance and the pandemic slammed Nio's finances. The 
     company lost $11,000 for each car sold in the July-through-
     September quarter.
       Government firms stepped up to help. State-owned entities 
     in Hefei joined a national state-owned investment fund last 
     spring in paying $1 billion in cash to acquire a 24 percent 
     stake in the company. Then, on July 10, the state-owned China 
     Construction Bank led a consortium of banks in extending $1.6 
     billion in credit to Nio.
       Nio's chairman, Mr. Li, defended his company, portraying it 
     as a start-up and noting that Tesla required many years 
     before it managed last summer to post a fourth consecutive 
     quarter of profits. ``We're very happy for Tesla, but this 
     only happened after 17 years,'' he said in an interview last 
     autumn.
       While Mr. Li envisions electric cars at $25,000 each 
     sometime soon, Nio's cars are now almost as expensive as 
     Tesla's. Nio's entry-level sedan, the ET7, has a starting 
     price of $58,500 with a 70 kilowatt-hour battery, which can 
     take the car 310 miles. Nio plans a new ET7 model late next 
     year with a much better battery that will double that range.
       The company emphasizes making its cars light, for better 
     driving range. Nio estimates that replacing steel with costly 
     aluminum saves 700 pounds for each car. Nio uses part of the 
     weight savings to add other gear, like two electric motors in 
     each car instead of one. That provides better vehicle 
     handling, but it also adds complexity and cost.
       Nio allows buyers to customize their cars, including six 
     types of wheels, 11 colors and so many other options that the 
     factory can go a month without building two identical cars. 
     That forces workers to vary their routines constantly.
       Mr. Gu, the factory's general manager, said his operation 
     was designed to run at just 20 cars an hour. Many auto 
     assembly lines run twice as fast.
       Nio has had little problem finding money lately. It sold 
     more shares in December in New York, raising $2.6 billion. 
     That is enough money to build a whole row of factories--and 
     Nio already plans to expand production considerably.
       Government support for electric cars remains crucial, and 
     Nio appears to be in good official graces.
       One recent indication came in September, when a former top 
     Communist Party official, Li Yuanchao, paid an unexpected 
     visit to Nio's display at the Beijing auto show. Mr. Li was 
     replaced as China's vice president in 2018 but remains 
     prominent.
       ``It was my first time to talk with him,'' Mr. Li, Nio's 
     chairman, said afterward. ``He actually offered many 
     suggestions about battery technology, for how to swap 
     batteries.''

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