Observations on New Energy Enterprises Going Global

Chinese new energy companies face five key challenges when expanding overseas: regulations, customer demands, supply chains, talent, and cultural differences.

Custom strategies are needed to adapt to different markets.

Chinese companies are making significant strides abroad, with the new energy sector being a key force.

According to statistics from the General Administration of Customs and other agencies, from January to August this year, China exported 818,000 new energy vehicles and 80.8 GWh of power batteries, reflecting year-on-year growth of 12.6% and 5.3%, respectively.

However, in this wave of overseas expansion, new energy companies are no longer just exporting products. Overseas production is becoming more frequent. The 21st Century Business Herald has noted that, particularly in the power battery and photovoltaic sectors, many Chinese companies have announced the construction of production bases in regions such as Europe, the Middle East, and Southeast Asia. As a result, localizing production and operations has become a critical issue for these companies.

“China is transitioning from traditional heavy industries to high value-added industries. For example, in the chemical sector, it’s evolving from basic chemical materials to specialized chemical materials,” said Davide Vassallo, Global CEO of dss⁺, in an interview with the 21st Century Business Herald. He believes that China's new energy and power battery markets are in a rapid growth phase, and international expansion is a significant feature at this stage.

Currently, Chinese companies, especially in the new energy sector, are accelerating their globalization efforts through diverse strategies and models.

From the well-established markets of Europe and the U.S. to the fast-growing sectors in Southeast Asia, and further into the Middle East, where non-oil economies are flourishing, Chinese companies are expanding their global “roadmap.”

But for Chinese new energy companies, the current challenge is no longer about product, service, or price competition. The challenge lies in establishing deep connections with overseas markets.

Vassallo told the 21st Century Business Herald, "Chinese companies face five main challenges: regulations, customer expectations, supply chains, talent, and culture."

“When working with Chinese companies on their overseas business considerations, we help them understand the context and analyze whether these five challenges work for or against them. After understanding the context, we assist companies in building frameworks that include relevant processes, capabilities, organizations, and cultures to help them adapt.”

dss⁺ has helped a Chinese company successfully establish a business in Indonesia.

“In this case in Indonesia, we first helped the Chinese client understand the local economic, cultural, and social environment, as well as factors like labor and regulations. Chinese clients need a solution that aligns with local standards, which includes regulatory compliance consulting, risk assessments, and workforce training programs,” said Srinivasan Ramabhadran, Managing Director of dss⁺ Asia Pacific, in this interview with the 21st Century Business Herald.

In fact, different countries and regions have varying policies, laws, cultures, and economic dynamics, which make the process of Chinese new energy companies going global inherently "multifaceted and complex."

“Chinese companies will face vastly different regulatory landscapes in overseas markets. Whether in Europe, the U.S., or Latin America, the local regulatory rules are distinct,” Vassallo observed. He stressed that Chinese companies need to craft specific strategies for each region they enter.

This process can be approached in two steps:

Step 1: How to integrate into local markets?

“Chinese companies need to truly integrate into foreign markets and become part of them. This means they must be prepared to follow the same rules as local companies,” Vassallo explained.

Step 2: How to compete with local enterprises?

“Chinese companies need to enhance their adaptability and establish truly flexible strategies,” Vassallo noted. “I see room for improvement in the leadership and business models of Chinese companies in terms of flexibility and adaptability.”

It’s important to note that the domestic new energy industry is currently going through a highly competitive “shakeout period,” and this competition is also a concern for overseas markets.

Ian Xie, Managing Director of dss⁺ China, commented that he believes China's new energy expansion aims to promote global technological development and lead advancements in new energy technologies, not merely to take advantage of legal policies that lower corporate costs.

“If the goal of going abroad is purely for low-cost competition, there will be more resistance,” Xie remarked. He emphasized that Chinese companies need to clearly define their purpose for expanding abroad. “Only by delivering real benefits to overseas markets will they be welcomed, especially when focusing on high-tech and new production capacities. Companies must think long-term and shift their mindset.”

Source:
21st Century Business Herald
by Cao Enhui, Intern Sun Chenyang | September 15, 2024, 08:00

The interview is first published in Chinese at 新能源出海观察丨对话dss⁺：中国新能源企业出海为何“多维而复杂”？ - 21财经 (21jingji.com)