China has spent billions of dollars building far too many data centers for AI and compute - could it lead to a huge market crash?

[Arthur Hanson]

I have worked extensively in the battery/EV industry, so in this topic I am speaking from direct experiance.

The reason that legacy auto makers are failing in EV is because it goes against their existing business model and supply chains. An ICE factory cannot just be retooled to make EVs, with the exception of the body and paint shops. They extensive supply chains that automakers have built over decades need to be changed, but most importantly the business model has changed.

Historically automakers would build a "Vehicle Platform" which you can think of as a library of parts that are interchangeable like lego blocks for building cars according to standard vehicle architectures, and selling a luxury SUV uses many of the same parts as a basic sedan - with a bunch of extra comfort features added. The platform development costs are spread out on a large number of vehicles so they are able to make all their money on luxury SUVs while the basic sedans break even. (sound familliar?)

EVs disrupt this in two ways. First, the platform is not reusable for EVs, so for every EV a legacy automaker sells that cannibalizes an ICE sale, it undermines the scale of the platform and increases per unit platform development costs. Second, legacy automakers are wired to sell their highest margin SUVs, since it doesn't cost that much more to build an SUV vs a sedan, but the profit margins are much higher since costs don't scale with size. With EVs, costs increase faster the bigger you go, so you can't make money by selling big SUVs. So all the marketing legacy automakers do conflicts with selling EVs.

So legacy automakers simply cannot compete in EVs without undermining their profitable ICE business. It's a difficult position to be in.

Excellent observation,

 

[count]

Chinese do it very comfortably, stuffing engine and cooling system either where the engine was, and battery in place of fuel tank, or in reverse: battery in place of engine, and rear axle + fuel tank space houses electric powertrain.

There are still more EV conversions of ICE car bodies, than purpose made chassis in the mainland.

The battery, because of it's mass, cannot just be put anywhere, it needs to be at the bottom of the vehicle. Otherwise the vehicle dynamics would suffer greatly.

The electric powertrain cannot be stuffed anywhere either, the electric powertrain is literally just electric motors + software. The electric motors drive the wheels directly, so they will also be located next to the wheels. There is no transmission in the sense of a transmission in an ICE car.

There are hundreds of failed EV makers in China that tried to convert ICE to EV, but none of the successful ones do that. The most successful EV companies in China are either EV/PHEV (which is based on an EV architecture and not an ICE architecture).

I doubt you have any experience in this industry, where I have been working in the EV/battery industry for years. The companies who tried the strategy of taking an ICE architecture and putting a battery in it have all failed and changed strategies. Even the legacy auto companies have realized this years ago and built or pivoted to dedicated EV platforms.

 

[Paul2]

The battery, because of it's mass, cannot just be put anywhere, it needs to be at the bottom of the vehicle. Otherwise the vehicle dynamics would suffer greatly.

The electric powertrain cannot be stuffed anywhere either, the electric powertrain is literally just electric motors + software. The electric motors drive the wheels directly, so they will also be located next to the wheels. There is no transmission in the sense of a transmission in an ICE car.

There are hundreds of failed EV makers in China that tried to convert ICE to EV, but none of the successful ones do that. The most successful EV companies in China are either EV/PHEV (which is based on an EV architecture and not an ICE architecture).

I doubt you have any experience in this industry, where I have been working in the EV/battery industry for years. The companies who tried the strategy of taking an ICE architecture and putting a battery in it have all failed and changed strategies. Even the legacy auto companies have realized this years ago and built or pivoted to dedicated EV platforms.

Most EVs on Chinese street are FWD vehicles with the motor driving a gearbox not too dissimilar from a regular ICE vehicle one, and battery pack in the place where the fuel tank is in a sedan.

They share many, many parts with ICE vehicles, down to 12V electric system with lead acid battery, and that's why they are so cheap, even if there is not that much of engineering sense in an ICE architecture reuse.

The Achilles heel, and a non-minor cost component of any FWD vehicle are the very strong, high angle CV joints. Moving a reasonably sized electric motor to the rear is trivial, and it will simplify the undercarriage, and vehicle kinematic behaviour massively, but they are fine with what they have. Throwing out a carbon-copy of an ICE 12V electrical system is also equally trivial, but it's only the most cost conscious, or completely from-ground-up new EVs which go for that.

The battery, because of it's mass, cannot just be put anywhere, it needs to be at the bottom of the vehicle. Otherwise the vehicle dynamics would suffer greatly.

And this is exactly the rationale for placing the battery pack forward, because dynamics of many cars, suspension parts characteristics, and ABS/ESC system are already tuned for an ICE car weight distribution.

EVs with RWD, and the battery placement closer to the rear axle gets the weight distribution of mid-engine Porsches, very small moment of inertia, and equally deadly handling characteristics in hands of non-expert driver. Porsches, before they put a ton of electronic guardrails for the driver, were very easy to put into spin.

 

[KevinK]

The Achilles heel, and a not a minor cost component of any FWD vehicle are the high angle CV joints. Moving a reasonably sized electric motor to the rear is trivial, and it will simplify the undercarriage, and vehicle kinematic behaviour massively, but they are fine with what they have. Throwing out a carbon-copy of an ICE 12V electrical system is also equally trivial, but it's only the most cost conscious, or completely from-ground-up new EVs which go for that.

There's a lot more ground-up EV design happening today. Hit enough volume and design throughout the supply chain is cost-effect for reaching a new level of efficiencies.

China's CATL launches EV chassis, flagging safety as top selling point​

https://www.reuters.com/business/autos-transportation/chinas-catl-launches-ev-platform-flagging-safety-top-selling-point-2024-12-24/

 

[count]

Most EVs on Chinese street are FWD vehicles with the motor driving a gearbox not too dissimilar from a regular ICE vehicle one, and battery pack in the place where the fuel tank is in a sedan.

This was the way a lot of companies did things 5-10 years ago, but I assure you that the leading Chinese EV companies today have dedicated EV platforms and are not repurposing their ICE platforms. There is not a lot of cost sharing between leading EV platforms and ICE platforms anymore.

Look at BYD as an example here. They no longer have an ICE platform. What they did for their hybrid, is instead of putting a battery in an ICE platform, they put a small engine on their EV platform and downsized the battery.

 

[Paul2]

Look at BYD as an example here. They no longer have an ICE platform. What they did for their hybrid, is instead of putting a battery in an ICE platform, they put a small engine on their EV platform and downsized the battery.

BYD, yes they are ahead of the Chinese domestic market, and are pretty much unique in their supply chain sufficiency, because they started so long ago. Others not so much, even ones with ground-up new models.

They are one of few Chinese car companies with moderately good bodywork expertise, which is half-way to European level, I was told. And they employ a ton of German engineering consultants.

GAC, FAW, SAIC, Changan taken together of course far outsell BYD, and they don't have anywhere near as much exports as BYD, their market is mostly smaller, poorer mainland China cities, where people can still register non-electric, and hybrid cars. Yet this market outside top 10 cities is huuuuuge, albeit not as profitable.

 

[count]

BYD, yes they are ahead of the Chinese domestic market, and are pretty much unique in their supply chain sufficiency, because they started so long ago. Others not so much, even ones with ground-up new models.

They are one of few Chinese car companies with moderately good bodywork expertise, which is half-way to European level, I was told. And they employ a ton of German engineering consultants.

GAC, FAW, SAIC, Changan taken together of course far outsell BYD, and they don't have anywhere near as much exports as BYD, their market is mostly smaller, poorer mainland China cities, where people can still register non-electric, and hybrid cars. Yet this market outside top 10 cities is huuuuuge, albeit not as profitable.

These companies were a little slower, but they are either developing their own EV platforms or switching to CATL/BYD platforms for battery/drive train. See SAIC as an example.

SAIC to make battery swap-enabled models based on CATL's solution

SAIC will develop and sell battery swap-enabled models, while CATL will lead the development and iteration of battery blocks.

cnevpost.com

Early on when companies were skeptical or did not have scale for EVs, they were converting ICE to EV... but these models are not competitive anymore today (arguably they never were competitive, since these EVs built on ICE platform were generally money losers) and most companies have either already changed direction or are in the process of changing direction. You see that at GM with it's Ultium platform, and you see that in VWs partnership with Rivian, Toyota has licensed BYD's ePlatform, and Honda terporarily using GM's Ultium platform while it builds it's own ground up platform. My overall point on the market still stands. Legacy automakers cannot easily convert to becoming EV makers without undermining their ICE business.

 

[DanX]

The newcomer, Xiaomi (the one that builds mobile phones), is very impressive in China.

 

[Paul2]

The newcomer, Xiaomi (the one that builds mobile phones), is very impressive in China.

I don't think they actually build the car besides the entertainment system. It's OEM I think.

 

[KevinK]

I don't think they actually build the car besides the entertainment system. It's OEM I think.

They claim to have a nearly 100% automated factory.

 

[Daniel Nenni]

Are there too many EV companies in China?
Yes. But in the end, only these survivors will remain globally.
If you cannot compete with them in cost, you will also fail to compete with them in the global market.

The automotive industry itself is a cyclical industry with consolidation cycles. The US is in a cooling period so consolidation is probably coming. China is still growing but tariffs may stop that. Hard to predict with tariffs looming.