Dongfeng Seeks To Acquire EV Technology
BMI View : With Dongfeng Motor acquiring T Engineering AB , we see a trend of Chinese automakers buying foreign firms with electric technology know-how. We believe this trend is likely to continue given that many Chinese automakers are lagging in the development of this technology and do not want to cede market share to foreign firms. A key challenge would be to integrate newly acquired EV technology into local operations.
State-owned Chinese automaker, Dongfeng Motor Corp has acquired a 70% stake in Swedish firm, T Engineering AB, formerly a unit of Saab Automobile Powertrain AB. Under the agreement, Dongfeng will purchase the remaining 30% of T Engineering within two years. T Engineering develops control systems for combustion systems, hybrid powertrains and electric vehicles (EVs).
We believe that this trend of Chinese automakers acquiring foreign technology is likely to continue. It is BMI's view that Chinese automakers will seek to develop more joint-ventures (JVs) or acquire other companies in the electric technology space, going forward.
To be sure, developing EV technology in-house is going to take time and prove to be costly as well. Furthermore, with the highly fragmented EV market in China, a lot of companies in this segment are lagging their international peers in terms of technology. The Chinese government has put in place policies to encourage firms to leapfrog hybrid technology and focus on EV development. However, it would be hard for companies to build up their EV capabilities straight away (see our online service, July 16, 'Dismissal Of Hybrids Could Prove Costly'). Rather than allowing foreign companies to make inroads into the Chinese EV market while local firms build up their technology, cash-rich Chinese automakers would rather seek to buy other foreign players possessing this technology or tie-up with them through JVs.
A key challenge for Chinese companies acquiring EV technology would be the ability to integrate the newly acquired foreign technology into local operations. Although acquiring the know-how of an electric powertrain is the first step, using it to develop localised offerings in China will be a challenge due to the complexity of the technology. Going forward, we expect to see automakers training more EV engineers or incentivising foreign ones to relocate to China and supervise the production of EVs.