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Global automakers seek Chinese tech to overcome EV development hurdles

US, European brands explore global models on Chinese platforms

Concerns over long-term reliance on Chinese EV technology

SHANGHAI/MILAN, Sept 11 (Reuters) - When Audi executives first saw the Zeekr 001 in 2021, a long-range electric vehicle with European aesthetics, it was a wake-up call for the premium German auto brand - if it wanted to compete with the Chinese, it needed their technology.

"The Zeekr 001 back then shocked quite everyone," said Stefan Poetzl, president of SAIC Audi Sales and Marketing. "We needed to do something about it."

To boost its EV lineup for Chinese consumers, Audi built the AUDI E5 Sportback in just 18 months using technology provided by Chinese partner SAIC, including batteries, electric powertrain, infotainment software and advanced driving assisted systems.

Audi expects to start delivering the $33,000 EV to customers in China this month and its global rivals are now also looking to use Chinese intellectual property to roll out new models rapidly. Toyota and Volkswagen have joint development plans for China-dedicated models with technology from Chinese partners GAC and Xpeng, respectively.

Renault and Ford want to go one step further and develop global models on Chinese EV platforms, sources said. Renault did not respond to a request for comment. Ford declined to comment.

Such licensing deals make up relatively small but growing revenue streams for Chinese EV makers and, for now, offer a new quid-pro-quo.

Global automakers need Chinese technology to leapfrog development hurdles and launch new EVs quickly. Meanwhile, Chinese companies desperately need additional revenue amid a bruising price war at home and intensifying trade war abroad.

"It is a very smart, win-win solution," said Will Wang, General Manager of Shanghai-based consulting firm Autodatas, which provides teardown reports of best-selling EV models.

'CHINA INSIDE'

This new strategy resembles the "Intel Inside" campaign of the 1990s - where U.S. chipmaker Intel used state-of-the-art components to transform computers into premium products.

In this case, Chinese automakers sell EV technology in a box: the underpinnings for ready-to-build, white label battery-powered cars suitable even for low-volume manufacturers with small budgets.

Leapmotor (9863.HK), opens new tab has partnered with Stellantis (STLAM.MI), opens new tab to sell its EVs outside China and is talking to other brands to license its technology, CEO Zhu Jiangming told Reuters.

Using a ready-made Chinese EV chassis and software could save billions of dollars and years of development time and help traditional automakers catch up with Chinese rivals, auto industry experts say.

Renault (RENA.PA), opens new tab was an early adopter, building the low-cost Dacia Spring EV on a platform from China's Dongfeng for sale in Europe starting in 2021.

Renault has gone one step further with the new electric Twingo under development at its research centre in Shanghai, with a Chinese EV engineering firm Launch Design providing technical support in developing an EV platform, according to two people familiar with the matter.

Launch did not respond to requests for comment.

Other "China Inside" models could be coming soon. Ford is seeking a Chinese partner to provide EV platform technologies, said two people with knowledge of the matter. CEO Jim Farley has frequently tested Chinese EVs and recently praised Xiaomi's SU7 electric sedan.

Volkswagen has expanded plans to develop China-dedicated models of all fuel types based on platforms co-developed with Xpeng, using the latter’s layout designs of electronics and software.

Analysts say legacy automakers typically struggle to develop agile EV systems that can be rapidly updated, due to complicated organisational structures.

That is why Volkswagen wants to see if Xpeng’s EV technologies can complement or replace Volkswagen’s own, said Yale Zhang, managing director at Shanghai-based consultancy AutoForesight. If it works in China, Volkswagen could apply the strategy globally, Zhang added.

A Volkswagen China spokesperson told Reuters its collaboration with Xpeng was focused on China for now.

Xpeng's He Xiaopeng has said the two automakers want to expand their partnership beyond China. That would boost Xpeng’s revenue without building plants overseas, said Autodatas' Wang.

Oliver Wyman analyst Marco Santino said traditional automakers could use "firepower" of fierce Chinese EV competition to jump ahead of the development curve.

"You get a much more quality-proof product in the market in a shorter timeframe," Santino said.

MORE CHOICE?

Inspired by Tesla, China's EV makers have developed modular platforms that cut costs and accelerate development and lower barriers of entry.

"They are quick learners from Tesla," said Forest Tu, a former executive at Chinese battery giant CATL (300750.SZ), opens new tab who founded consulting firm Mapleview Technology.

That advantage is now big enough to sustain "licensing and royalty service" as Chinese EV makers expand overseas, Tu said.

CATL adopted that approach with Ford (F.N), opens new tab, licensing its technology for a battery plant.

Exporting Chinese technology could help less-industrialized countries build their own "national EV brands," Tu said.

Abu Dhabi-based CYVN Holdings, a strategic investor in Nio (9866.HK), opens new tab, has developed its own premium EV model using the Chinese EV maker's chassis and software.

CYVN bought British sports car maker McLaren in April and now plans to sell its EV using the McLaren brand, according to two sources familiar with the matter. But future models will incorporate far more McLaren "DNA" and less Chinese technology, one source said.

Nio declined to comment. CYVN did not respond to a request for comment.

CATL's new EV chassis, meanwhile, will allow consumers to "decide what an EV looks like, rather than having giant automakers decide what to sell," its executive president Hu Guoliang said.

CATL said it would ramp up chassis production in the next three years after signing with several domestic automakers. Its Bedrock Chassis debuted in Europe this week at the IAA Mobility show in Munich.

Whether the mutual benefits of China's EV technology last over the longer-term, however, remains a key question.

Former Aston Martin CEO Andy Palmer said while there were savings in R&D, automakers should avoid over-reliance on third-party technology. "In the long-term you're screwed because you're just a retailer," said Palmer.

Oliver Wyman's Santino said the big risk for traditional automakers is that using someone else's technology means "your capability to differentiate your brand is really limited." By blending in their own technology, automakers can "limit the risk," Santino added.

Reporting By Zhang Yan in Shanghai and Giulio Piovaccari in Milan; Additional reporting by Nora Eckert and Gilles Guillaume; Editing by Nick Carey and Sam Holmes

The kingdom is betting that sunshine can power new AI data centers and help boost oil exports

The world’s ultimate petrostate is turning to solar power.

Saudi Arabia is building some of the world’s biggest solar farms, along with giant arrays of batteries to store their electricity till after dark. The rapid rollout is making the country into one of the fastest-growing markets for solar power from a near-standing start.

The kingdom is betting that sunshine can transform its economy and bolster its coffers. It needs electricity for new tourism resorts, factories and AI data centers. Green energy could also squeeze more value from the fossil fuels that made the kingdom rich. Saudi Arabia burns oil to generate electricity; embracing alternatives frees up barrels for export.

The spread of glass across the desert is one of the starkest illustrations yet of how the plummeting cost of Chinese-made solar panels and batteries is changing how the world generates power, even as the U.S. takes aim at renewables.

“Today, solar is the cheapest, the fastest, the simplest and the most secure source of energy that you can install,” said Marco Arcelli, chief executive of ACWA Power, the company driving the Saudi grid overhaul.

Saudi Arabia aims to get half its electricity from clean sources by 2030. ACWA, whose largest shareholder is Saudi Arabia’s sovereign-wealth fund, is charged with delivering most of the new power needed to hit the target—roughly 100 gigawatts of capacity. That’s a lot for a country that last year had roughly 4 gigawatts of installed solar, about as much as South Dakota.

Ramping up clean energy was part of Crown Prince Mohammed bin Salman’s grand plan to diversify the kingdom’s economy, announced in 2016. For years, progress was scant, even as the country began megaprojects including Neom, the futuristic city in the desert. A $200 billion solar project unveiled by Japan’s SoftBank in 2018 was shelved within months.

That’s now changing. A trio of Saudi companies, including ACWA, said in July they would invest $8.3 billion in 15 gigawatts of renewable-energy projects, mostly solar along with some wind. That’s on top of a slightly larger amount already under construction, according to research firm Rystad Energy. Natural-gas power plants are going up, too.

Until recently, Nishant Kumar, an analyst at Rystad, didn’t think the kingdom could get close to the 50% target. But new projects keep popping up. He now thinks low-carbon energy could represent a third or more of Saudi Arabia’s power mix by 2030, up from 2% last year. That would put the kingdom in the world’s top five markets for new solar capacity over that period, Rystad forecasts.

Finding enough electrical engineers, project managers and other workers has become a headache, said Luc Koechlin, head of French energy company EDF’s Middle East power-solutions business.

“The growth is so fast, so massive, that staffing our teams and following this pace is not easy,” Koechlin said. EDF has stakes in several Saudi power projects, mostly solar.

Saudi Arabia’s clean-energy ambitions reach beyond the Gulf. ACWA has a growing portfolio of power projects across Africa and Asia. The company is working on the world’s biggest facility to use renewables to make and export hydrogen. In July, it said it was exploring the idea of sending electricity to Europe in a consortium with providers of transmission technology and European energy companies.

That plan, Arcelli said, is “for the next decade.”

The kingdom’s strategy faces challenges. Middle Eastern deserts aren’t quite perfect for solar panels—heat can sap their output, as can dust. (Automatic sweeping devices help keep equipment dust-free.) But dependable sunshine outweighs those drawbacks.

Managing a power grid is also more complicated, with a greater share of renewables that can’t be switched on and off to match demand—a problem the giant battery farms are designed to address. And the world doesn’t yet make enough cable to build the power line to Europe, Arcelli said.

The power-grid overhaul is about squeezing value from fossil fuels, not shunning them.

Saudi Arabia burns oil to generate roughly a third of its electricity. That means it foregoes roughly $20 billion worth of oil exports a year at current prices, according to Oliver Connor, an analyst at Citi.

“It’s hideously inefficient,” Connor said.

Solar power is a low-cost alternative. ACWA and others recently sold it for below 1.3 cents a kilowatt-hour (enough to run a microwave for an hour), about a third of prices in Spain, the lowest in Europe.

Aside from blazing sunshine, the low prices reflect government-backed capital and low-cost labor, Connor said.

Lower oil prices are strengthening the case to end so-called crude burn.

Saudi Arabia is struggling to fund megaprojects that could cost trillions of dollars. The International Monetary Fund estimates that Riyadh needs oil prices above $90 a barrel to balance the books; today’s prices are well below $70.

The appeal of renewable energy has also increased thanks to the relentless decline in the cost of solar panels and batteries that mostly come from China.

That’s a bright spot for costly developments such as a plan to build 50 luxury hotels across more than 10,000 square miles of Red Sea islands and coast. The five hotels open so far are powered by a solar-and-battery system installed by ACWA, a spokesman for the tourism project said.

The U.S. has been trying to shut out Chinese solar panels and batteries. For countries willing to buy, these low-cost exports can cut the price of low-carbon power.

“If a country like Saudi Arabia is finally starting to take its renewable-energy strategy seriously, it shows that solar panels and all that are so cheap it’s starting to make a difference,” said Ana Missirliu of Climate Action Tracker. The group, which assesses countries’ emissions policies, is critical of the kingdom’s commitment to fossil fuels.

China has long needed Saudi crude; now the energy trade goes two ways. Saudi Arabia has, though, started requiring the use of some domestically produced kit, part of a push to attract investment and create jobs.

Among the companies betting that Saudi Arabia now means business in green energy is GameChange Solar, a U.S. manufacturer of devices that ensure solar panels point toward the sun.

Chief Executive Andrew Worden said the kingdom’s renewables plans sounded like a stretch when he heard about them nearly a decade ago. But lately, it has become a crucial market. Last April, GameChange started work on a factory in Dammam with a Chinese partner. Now it’s doubling its size to meet demand.

“All of a sudden it became this huge thing,” Worden said.

Leveraged $5bn bet with option protection prompts interest from regulators on how other companies can follow suit

Hong Kong regulators have begun allowing companies to avoid stringent rules on bond issuances and share buybacks, following the success of a $5bn transaction launched by Alibaba last year.

China’s largest technology company borrowed $5bn at near-zero rates in May 2024 through an issuance of debt that can be turned into equity, in the biggest ever convertible bond deal in the Asia-Pacific region.

It then used the proceeds to buy back its New York-listed shares — which had fallen by about 75 per cent from their late 2020 peak — in the following weeks. Since then the shares have recovered from roughly $80 to about $147 — a more than 80 per cent gain — helped by a broader rally in Chinese stocks and the rapid emergence of AI company DeepSeek, which has fuelled global investor interest in China’s tech sector.

Investors and bankers have hailed Alibaba’s well timed bet. Its success appears to be a driving force behind Hong Kong regulators’ decision to issue exemptions to rules preventing companies conducting concurrent buybacks and using a particular structure of derivatives to protect themselves.

“The exchange has taken the lessons from the Alibaba convertible deal and gotten comfortable with them . . . and they’ve come to the conclusion that they will provide waivers subject to reviewing on a case-by-case basis against their existing regulations,” said one person familiar with the thinking of Hong Kong’s financial regulators.

“This is certainly one of the reasons why we’ve seen increased activity in the Asian convertible bond market.”

Alibaba executed the trade on its American depository shares before it upgraded its secondary Hong Kong listing to a so-called “dual primary” alongside New York. Having a dual primary listing when it put on the trade would have subjected the company to the HKEX and Hong Kong’s Securities and Futures Commission’s more stringent rules.

Two people familiar with the deal said they were asked to give evidence to financial authorities on the specifics of the structure and the clauses within securities law preventing a similar deal by a company with a primary listing in the territory. The aim was to offer locally listed companies the same opportunities that a primary US listing gave Alibaba, the people said.

In newsletters circulated by the HKEX in November last year and June this year, it invited locally listed companies to apply for exemptions allowing them to put on this trade, including share buybacks and option protection.

Alibaba on Thursday announced its latest convertible bond issuance of some $3.2bn alongside capped call options, which it said was in order to invest in its cloud infrastructure and international ecommerce capacities. 

Chinese video platform Bilibili in May announced a $690mn convertible bond issuance that included a waiver to launch a concurrent share buyback. Chow Tai Fook Jewellery, controlled by Hong Kong’s influential Cheng family, gained approval for a concurrent buyback for a HK$8.8bn convertible issuance in June.

“Since 2024, the exchange, after receiving clearance from the SFC, has permitted specific listed issuers to carry out share repurchases or call spread transactions concurrently with the issuance of convertible bonds,” said the SFC.

“The SFC and the exchange demonstrated their willingness to permit novel transaction structures when there is sound commercial justification and adequate features to protect market integrity.”

With US interest rates staying higher for longer, Asian companies have been piling into convertible bonds to tap cheap financing or refinance debt raised during the zero rate era. Citi expects Asian issuance of convertible bonds outside mainland China to hit a record in 2025, citing Dealogic figures showing about $21bn had been raised by the end of August.

As well as offering a lower coupon, convertibles have the benefit of not immediately diluting a company’s equity. Alibaba’s bonds were issued with a 0.5 per cent coupon, compared with US interest rates at the time of 5.25-5.5 per cent and 10-year Treasury yields above 4.3 per cent.

In order to hedge itself against the risk that its shares quickly hit the conversion price and bondholders convert their debt into equity, Alibaba spent $637.5mn of the money it raised on an options strategy known as a capped call, a common hedge used by convertible bond issuers.

This hedge gave it a call option — the right to buy shares — at a price of $105, which was around the conversion price for the convertible bonds. However, the benefit of this option was capped at a strike price of $161.60, which helped limit the cost of the strategy.

The overall effect was that when the price of the New York-listed shares rose above $105, instead of the company having to issue new shares to holders of the convertible bonds who chose to convert, it could instead use profits it made from the call options to meet demand. This meant the level at which the company had to issue new shares rose from a 30 per cent premium to the share price at the time of issuance, according to Alibaba’s filings, to a 100 per cent premium.

“Alibaba is an astute user of the capital markets — this was [Alibaba chair] Joe Tsai’s brainchild,” said one banker involved in the transaction.

“The whole thesis was that their share price was very low . . . the question was ‘how do we buy back a large amount quickly?’” the banker added.

If the company were to sell the shares it bought now — minus adviser fees, coupons and the net cost of the capped calls — the profit would be about $3bn, according to Financial Times calculations. In accounting terms, Alibaba’s gain on repurchasing shares does not show up in the firm’s profits but instead increases earnings per share.

“The deal was very favourable and shrewd for Alibaba,” said Sid Choraria, a portfolio manager at SC Marwar who owns shares in the company. “With today’s price, that repurchase has already created substantial value per share for continuing shareholders.”

However, if Alibaba’s share price rises above $161.60 by 2031, then the firm will no longer be able to meet demand from converting noteholders by using its call options and will have to dilute its own equity, which will reduce the gain from the trade.

The deal, run by banks including JPMorgan, Citi and Morgan Stanley, has also helped Alibaba towards its target of $35bn of share buybacks by 2027.

Alibaba and HKEX declined to comment.

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Mexico to slap 50% tariff on Chinese cars under US pressure

World’s biggest buyer of Chinese autos seeks to preserve US free trade deal

Mexico is slapping a 50 per cent tariff on Chinese cars, in a blow to Beijing as its biggest auto buyer tries to preserve a free trade deal with the United States.

Washington has put heavy pressure on Mexican President Claudia Sheinbaum to stamp out Beijing’s growing influence in the country’s economy, which has recorded a years-long climb in Chinese imports and investment.

The measure is buried in a list of tariffs proposed in a draft bill to congress on roughly 1,400 products, from textiles to steel, that will apply to all countries with which Mexico does not have a trade deal. But Chinese cars were by far the biggest import affected by the tariffs, said Gabriela Siller, chief economist at Banco Base.

The 50 per cent levy — more than double the current 15-20 per cent — was the maximum allowed under World Trade Organization rules, experts said, showing how much of a priority US concerns were.

Mexico was the world’s biggest buyer of Chinese-made cars, according to data from Shanghai consultancy Automobility, ahead of the United Arab Emirates and Russia in the first half of this year.

The Latin American country, which is the US’s biggest trading partner, is one of the countries most vulnerable to Trump’s upheaval of the global economy — and under heavy pressure from the US president on areas from security to migration.

North America’s free trade deal, a 500mn-person trade bloc accounting for 30 per cent of global GDP, gives Mexico privileged access to the US. Almost 90 per cent of its exports to the US are currently going tariff-free, a competitive advantage Sheinbaum is determined to preserve.

The deal is up for review next year and one of the top US complaints has been China using Mexico as a “backdoor” for goods to circumvent high US tariffs.

The tariffs were “a huge jump” from current levels, and a signal that Mexican trade policy may no longer prioritise competitively-priced inputs for manufacturers, former deputy economy minister Juan Carlos Baker said on local radio on Wednesday.

China’s embassy in Mexico did not immediately respond to a request for comment.

While prioritising Washington, Sheinbaum has been careful to not completely alienate Beijing, which has support in parts of her left-wing coalition. She briefly met Chinese President Xi Jinping on the sidelines of the G20 in Rio de Janeiro last year, and, on Wednesday, she spun the tariffs as part of her broader “Plan Mexico” to reduce imports and produce more at home.

“What’s the objective? Strengthening national production,” she said.

Siller said the measures would raise some tax revenue and help please President Donald Trump, but could also push up prices.

“Obviously everything has a cost, and the cost of this will be higher costs and greater inflationary pressures,” she said.