China’s globally dominant electric vehicle sector achieved two major milestones last yr. First, China has overtaken Japan because the world’s largest auto exporter, thanks partly to inexpensive Chinese electric vehicles. And second, electric vehicle giant BYD briefly overtook Tesla because the world’s largest seller of battery electric cars in the ultimate quarter of 2023. (Tesla has since reclaimed the highest spot.)
But the specter of a flood of low cost electric vehicles is unsettling foreign governments. The European Union launched an anti-subsidy investigation into Chinese electric vehicle firms last yr, which could lead on to higher tariffs on Chinese electric vehicles. The US – which sees Chinese cars as a threat to national security – warns: “Overcapacity” in China could overwhelm global markets.
But on the Fortune Innovation Forum last week in Hong Kong, Roger Atkins, founding father of Electric Vehicles Outlook, an electrical vehicle consultancy, noted that previous auto exporters had found a technique to cope with protectionist backlash.
“We’ve been here before,” Atkins said. “Japan already experienced an export attack in the USA and Europe in the 1970s and 1980s. The Europeans and Americans imposed tariffs, and the Japanese tried to get around that by locating production facilities in these locations.”
Atkins then pointed to BYD’s latest factory in Hungary for instance of how the Chinese automaker is now expanding its global manufacturing presence. (BYD can also be constructing factories in Thailand And Braziland is considering latest production facilities in Indonesia and Mexico.)
Christopher Beddor, deputy China research director at Gavekal, saw parallels with previous Beijing-led campaigns to advertise the solar and wind power industries. “China is essentially tightening its industrial policy,” he said.
“The central leadership will say: We want to target a specific industry. That’s what everyone is focused on, it’s done campaign style,” he later explained.
Beijing is now beginning to worry about excess capability within the system, and an official vowed to accomplish that in early January.violent measures” to tackle latest EV projects that weren’t supported by demand.
This push-and-pull is a component of China’s industrial strategy, Beddor said. “[Officials] go forward, [then] At some point there is a realization [they’ve] gone too far. They’re pulling it back,” he said.
Beijing began offering tax and infrastructure incentives within the early 2010s, at one point helping to create as much as 500 electric vehicle firms. This number has now fallen to around 100 firms.
China is now scaling back its support for the sector, which could lead on to further consolidation within the sector as electric vehicle firms, a lot of which have yet to show a profit, exit the market.
Still, Paul Gong, managing director of automotive research at UBS, said on the forum last week that the “fierce competition” within the industry – between startups, legacy automakers and even tech giants – was good for the industry.
Thanks to competition out there, China’s “automakers have actually reduced the cost of electric vehicles to the same level.” [internal combustion engines],” he said. “It is that this market force that has created the innovation [and] Efficiency game.”
BYD and Tesla
Gong also discussed the differences between BYD and Tesla, each of that are vying for the position of the world’s top EV seller, eventually week’s forum.
After the demolition of the Tesla Model 3 five years ago, Gong said the UBS team was “shocked at how far ahead Tesla was in terms of technology leadership.” But the same teardown of a BYD automobile just a number of years later showed that the corporate’s technical level was approaching that of Tesla.
“There is hardly any gap [in] Technology, but just different priorities,” he said. Tesla prioritized top speed and autonomous driving, while BYD focused on space and 5G connectivity, he continued.
But Gong noticed a key difference: A BYD automobile, comparable to the Model 3, cost 15% lower than production at Tesla’s Shanghai Gigafactory.
Unlike Tesla, BYD produces its own proprietary battery, the Blade Battery, and due to this fact doesn’t depend on an external supplier equivalent to CATL or LG Energy Solutions. (The battery can account for as much as 40% of the price of an electrical vehicle.)
“We were shocked at how quickly BYD caught up,” Gong said.
