Global car giants are new kids on China's tech block

Struggling foreign automakers in China are looking for help from local tech giants to try and stay competitive in the world's biggest electric vehicle market, where shiny smart screens, assisted driving and sophisticated map technology are in high demand.

At the recent Beijing Auto Show, China's biggest, a number of foreign firms announced tech partnerships - from Nissan joining forces with Baidu to Toyota signing a cooperation agreement with Tencent.

The two Japanese giants are among traditional auto juggernauts, once dominant in China, that are now struggling to keep pace with a new generation of local EV startups.

"They are notoriously conservative and their competencies aren't tech," Sino Auto Insights managing director Tu Le said.

"They've tried to invest in frontier technology for the automotive space but it doesn't come naturally," he said.

"But they are being forced to try to be more open-minded due to where the market is moving in China and new entrants like Xiaomi and Huawei with high-tech consumer products backgrounds."

They are now in a brutal price war with more than 100 Chinese EV brands, fighting to offer the most attractive prices and the most advanced tech to wealthier drivers.

Gregor Sebastian, an expert with Rhodium Group, an independent research firm, said "foreign car makers in China in general, but particularly the Japanese, have really been hammered in the past 12 to 18 months in the Chinese market.

"They've lost market share rapidlyThis is linked to intense Chinese competition from producers like BYD, but also the numerous EV startups."

BYD, which has emerged as the country's undisputed champion, beat Tesla in the final quarter of 2023 in global EV sales.

Foreign automakers are now compelled to find ways to boost their standing in a market increasingly dominated by a low-cost and high-tech vehicle lineup.

Smart tech features are among the new set of requirements to get a leading edge in China's EV race.

But with Sino-US geopolitical competition intensifying in recent years, Beijing has tightened control over foreign firms' access to information it considers sensitive, such as data produced by domestic cars.

One major reason why foreign carmakers are seeking partnerships with local tech firms is to benefit from their innovation, which local executives have attributed to cutthroat competition.

But another is access to data.

"There is a bit of a walled garden scenario going on here," said Intralink head of automotive and mobility Daniel Kollar.

"China wants to be seen as playing by the rules, letting foreign players access the market. But they really don't want to give up on the security side of things."

The solution: work with a Chinese ally.

"If you want to offer highly advanced mapping solutions in China, you need to work with a local company and either license their mapping data or enter into a joint venture," Sebastian said.

Nissan has hailed its deal with Baidu as allowing it to bring "exciting intelligence systems and AI-based services to customers in China and beyond."

And Toyota said its deal with Tencent on AI would help it capitalize on growing Chinese appetite for advanced smart features in the cars it sells in China.

Baidu has also just started collaborating with Hyundai and its affiliate Kia.

These Chinese firms are the "experts" in precisely the space where foreign firms are falling behind, Tu Le said. "That combined with most automakers being especially weak in digital creates the perfect opportunity for Tencent and Baidu to make that pivot toward the mobility space."

In his visit last week, Tesla boss Elon Musk met top Chinese officials and got security clearance for its locally produced EVs, a regulatory breakthrough that coincided with reports it had entered into a deal with Baidu for maps and navigation.

Sebastian said tech partnerships are driven by a more long-term strategy aimed at staying ahead in the Chinese market.

"This is more talking about the next five to 10 years rather than the next two to three years," he said. "If political relationships with China continue to be stable and not deteriorate further, maybe [foreign firms] can tap Baidu or Tencent for next-generation products in the 2030s."

For Tu Le, the possibilities of AI could be huge.

"Imagine the autonomous system in a vehicle has access to all your historical data along with your ride and drive data, buying habits and preferences," he said.

"It could create ways to try to monetize you every few minutes."

AGENCE FRANCE-PRESSE