How Beijing buried Western industry under a wave of EVs
China’s electric car manufacturing push is poised to reshape the global car industry beyond all recognition, reports
China has seized on the net zero transition to launch an electric car manufacturing push that’s gone from nought to 100 in the blink of an eye and is now poised to reshape the global car industry beyond all recognition.
Having already secured a switch to electric in its home market, the Asian superpower has embarked on a push for wider domination of the US$2.6 trillion (NZ$4.4t) auto industry. It is flooding emerging markets and Western economies alike with electric cars priced to vastly undercut rivals.
A new report from the International Energy Agency (IEA) has laid bare just how far the Chinese electric vehicle (EV) land grab has progressed.
It highlights China’s potential to leave established auto giants – everyone from Ford to Nissan – trailing in its wake as road transport undergoes the biggest transformation since the first Model T rolled off a Detroit production line in 1908.
China is already the biggest market in the world for electric cars by sales. Figures published in the IEA’s annual Global EV Outlook show that 60% of global electric car sales last year were in China, with Europe accounting for 25% and the United States just 10%.
In part, this represents the size of the market – there are 1.4b people in China. However, demand for electric cars is also rising rapidly.
More than one in three new car registrations in China last year were EVs. The proportion rose above 40% for the first time at the start of 2024.
The IEA predicts that electric cars will account for almost half of all sales in China for 2024 as a whole – almost twice the anticipated market share in Europe, and more than four times that in the US.
Registrations remain buoyant even after Beijing ceased subsidising purchases, a policy that underpinned the expansion of the sector for more than a decade. While tax breaks remain, sales are now being spurred more by price competition.
Electric cars are also now entirely responsible for overall growth in Chinese car sales, with demand for petrol and diesel models falling. Plug-in hybrids are flying out of the showroom faster than pure battery models.
It is not just demand that is strong – supply is, too.
Chinese carmakers produced more than half of all electric cars sold worldwide in 2023. Manufacturers exported 1.2 million EVs, a jump of 80% compared with 2022. The biggest markets were Europe and emerging economies in the AsiaPacific region.
China’s EV industry is benefiting from low labour costs, economies of scale from a large home market, and a command economy that made battery and EV production a focus of China’s five-year plan introduced in 2021.
National champions are now beginning to build manufacturing bases overseas. BYD, which last year briefly eclipsed Tesla as the world’s biggest EV maker, plans to start production in Thailand this year, with an annual capacity of 150,000 vehicles.
BYD is also planning to begin manufacturing in Brazil, investing US$600 million in its first EV plant outside Asia. Its rival Great Wall plans to open a factory in the South American country, too, with access to local deposits of battery metals an added incentive.
The US remains resistant to encroachment.
The chairperson of the Senate Banking Committee this month urged President Joe Biden to block all Chinese-made cars, saying that a deluge of concealed subsidies represented “an existential threat to the American auto industry”. The president has said they pose a threat to national security.
Mexico is a test case of China’s ability to project its EV might on to the doorstep of the US. The country benefits from subsidies under the Inflation Reduction Act, and three Chinese manufacturers – BYD, Chery and SAIC – are considering expanding to Mexico to take advantage of this.
Elsewhere, the European Union has opened an anti-dumping investigation into Chinese EVs.
One of the most startling comparisons is just how cheap EVs are in China compared to the rest of the world.
The average electric vehicle cost 16% more than a combustion-engine car in China in 2018. However, by 2022 EVs were selling for 14% less than their petrol- and diesel-powered rivals, data from the IEA shows. That was even before subsidies.
This is a unique development. EVs still cost 44% more than combustion-engine cars in Britain, and 59% more in the US. In France and Germany, the cost gap between EVs and traditional motors actually widened in the four years up to 2022, according to the IEA.
In China, it is smaller cars that have seen the biggest drop in prices.
Small EVs now sell at a 37% discount to comparable combustion-engine models. However, the gap has narrowed even for SUVs, which are approaching price parity.
Achieving price parity is regarded as a key tipping point for mass adoption. Surveys of American drivers suggest that affordability is the biggest barrier to their adoption of EVs.
The IEA forecasts that price parity between electric and fossil-fuel cars could be reached in some countries by 2030, so long as the expansion of charging infrastructure is maintained.
However, with China slashing prices far faster than the rest of the world, parity seems most likely to be achieved through a flood of imports. That points to an uncertain future for some of the industry’s most established names – and a political headache for governments committed to net zero but bound to protect their own economies. – Telegraph Group