Where will be the Detroit of electric vehicles?

Chongqing’s mountainous, cyberpunk panoramas and sticky summer heat seem worlds away from flat and dry Detroit. But carmakers in the Chinese metropolis cannot stop drawing parallels with the American city. Standing outside one of Chongqing’s sprawling car-assembly plants, a boss at Changan, a state-owned auto giant, notes with pleasure that the sheer number of cars being produced in the city—some 2.5m last year—has earned it the moniker “Motown of China”.

In many senses, Chongqing has surpassed its American rival. Most importantly, it makes hundreds of thousands more cars per year, as do several other Chinese cities. But the comments reflect a more profound aspiration: that Chongqing can be the defining city of the electric vehicle, much as Detroit was of the petrol car.

It will be a challenge. Although China’s EV dominance is plain, its carmaking is dispersed. Twelve provinces and administrative regions produced more than 1m cars last year; four managed over 2m. And some of these also want the “Detroit” crown. Guangdong province, home to BYD, is a giant. The government of Wuhan has said that the city will “build itself into China’s Detroit”. Changchun, in the far north-east, has similar hopes. Analysts have also dubbed Hefei, an up-and-coming industrial hub 400km inland from Shanghai, the “Detroit of the 21st century”.

This competition is not just a question of bragging rights—it matters dearly to local-government officials. Not long ago they relied on the property industry to produce stunning economic-growth figures. But a real-estate crisis has forced them to look elsewhere, as property (broadly defined) has shrunk from 30% of China’s GDP five years ago to just over 20%. The Chinese Communist Party believes a vigorous push into high-end manufacturing is the solution to the country’s woes. Although carmaking is the biggest prize, it cannot entirely offset the property industry’s woes; at its current size it accounts for just 5% of GDP. Hence the fierce regional competition for whatever output is available.

Local-government infighting is exacerbated by decisions that party cadres made many decades ago. In the 1950s central planners spread car production across the country in a bid to avoid over-reliance on any single province. Regions do not always compete on sensible terms. Local governments still try and fail to create lucrative brands. One, called Qiantu, was established in 2015 with generous financial support from Suzhou, an eastern city. It stopped production within four years. Byton, backed by a nearby city, lasted about as long. Local support is now less extravagant, but still ongoing. City governments often procure local brands for official use or for their taxis. Shenzhen has been deploying BYD taxi fleets for more than a decade; Shanghai prefers Roewe, a locally made sedan, for its cabbies.

Does Chongqing have a shot at the carmaking crown? The city is certainly adaptable, which should help. By 2016 it was producing more than 3m vehicles a year, making it the world’s biggest auto city. But its rise owed much to cheap petrol-fuelled cars and a national sales-tax cut for small-engine vehicles, notes Paul Gong, a Chongqinger now at UBS, a bank. When the tax cuts ended in 2018, so did the city’s success. Production fell by more than half in 2019 from its peak. Since then the Chinese state has pushed carmakers away from internal combustion engines, encouraging them to transition to electric motors. EVs now account for over 50% of Chinese car sales, up from 5% in 2018. This has sent a shockwave through supply chains, rendering many manufacturers obsolete.

Despite its earlier focus on small petrol engines, Chongqing has done remarkably well during the transition. In 2019 BYD, the world’s largest EV-maker, spent 10bn yuan ($1.4bn) in the city establishing a large, high-tech battery factory. Other battery-makers followed its example. In 2021 Seres, a private automaker, chose the city as the location for its newest production plant. In 2017 Changan set aside about 100bn yuan to invest in EVs and has since launched several brands, which are still loss-making. Executives say the company has worked closely with its suppliers while moving to electric motors. Chongqing briefly reclaimed its status as the top Chinese producer of cars in the first half of last year.

Attracting foreign investment was once seen as essential for a city hoping to bolster its carmaking abilities. The technology transferred from international companies to local ones helped turbocharge growth. But landing a homegrown private EV firm is even more crucial today, such is China’s lead in the industry. Guangdong province is a good example. BYD is based in its tech hub of Shenzhen. Xpeng, an EV and autonomous-driving startup, is in the nearby city of Guangzhou, as is state-owned Guangzhou Automotive, which has joint ventures with Honda and Toyota, two Japanese brands. Large-scale production in these cities means that the province is now churning out more cars than any other, having made 5.7m last year. Similarly, Hefei in Anhui province is home to the manufacturing plants of NIO, a private firm that produces sleek EVs, and a new innovation centre built by Volkswagen, a German firm. Meanwhile, the launch of Seres in Chongqing has breathed new life into the city. The firm has partnered with Huawei, a Chinese tech giant, to produce an increasingly popular line of EVs.

For the moment, Chongqing and Anhui are fighting it out for the silver medal. The two places made around 2.5m and 2.6m cars last year, respectively. But they do have an advantage in the battles to come. As inland regions, house prices and the cost of living are more attractive than in coastal areas such as Guangdong and Shanghai. This has made it easier to attract talent to Chongqing, says Huang Yiwu of the Chongqing Academy of Social Sciences, a state think-tank. The city is also well-known for its spicy dishes and exciting nightlife. In a war for talent, cultural appeal could give it an edge over Hefei, which has a bland reputation. After all, Detroit was much more than a factory town; architecture and music helped give the city the reputation it retains today. ■