China’s automakers are sweeping the globe with their push for electric vehicles

For this week’s IAA Mobility auto show in Munich, Germany, a large contingent of electric vehicle manufacturers from China has attended.

According to China’s state media, about 50 companies, including BYD and newcomers like Xpeng, have visited the city. This is the largest Chinese delegation ever to attend a global auto show and roughly twice as many as the previous event. And everyone was talking about them.

Luca de Meo, the CEO of Renault, was praising the rapid advancements made by Chinese EV manufacturers on French radio before the show even started.

“It’s clear that they are very competitive in the electric car value chain. I think they are a generation ahead of us,” de Meo told RTL Radio Monday. “We need to catch up very, very quickly.”

Cheaper than models made in other countries, Chinese electric cars are gaining ground in Southeast Asia, Europe, and Australia. Competitors are concerned that Chinese brands may one day dominate the global electric vehicle market.

According to a post on the website of the China Association of Automobile Manufacturers, China overtook Japan to become the largest auto exporter in the world during the first quarter of this year. This was due to strong demand from Russia and a growing global appetite for electric vehicles.

The association reports that Chinese companies exported 1.07 million vehicles in the second quarter, representing a 68% increase over the previous year.

Chinese EV sales are exploding in Europe, China’s primary export market.

According to data from the China Passenger Car Association, Chinese companies shipped more EVs to nine European nations in the first half of the year than they did all of 2022. Furthermore, over the most recent five years, European Association imports of Chinese vehicles have quadrupled.

According to a recent estimate from UBS, Chinese carmakers could double their market share by 2030, going from 17% to 33%. European companies would lose the most market share.

Auto analysts say that a few Chinese EV manufacturers are emerging as “new global champions” in Europe.

“Overcapacity, economic slowdown, and the highly competitive automotive market at home are making Chinese [carmakers] look overseas for sales,” said Dylan Khoo, an EV industry analyst at New York-based ABI Research. “In Europe, they see a lucrative market with a great demand for EVs and few protectionist measures.”

When shipping vehicles to the EU, Chinese manufacturers are required to pay a 10% import duty, whereas the United States requires 27.5%.

Beside the low duty, what settles on Europe alluring is the alliance’s choice to boycott the offer of new gas powered motor vehicles by 2035.

According to a Deloitte report that was released at the end of last year, almost all Chinese automakers intend to concentrate on major European markets like Germany and France within the next three to five years. The consultancy surveyed 75% of businesses who also planned to enter the North American market.

Also, 88% of respondents wanted to trade primarily EVs.

A spokesperson for BYD, China’s largest electric vehicle manufacturer, Li Yunfei, told reporters in Munich on Tuesday that the company plans to increase the number of its dealer partners in Europe by 200 this year. In 2023, the company intends to increase its overall overseas vehicle sales to 250,000, up from 55,916 in 2022.

Xpeng, on the other hand, announced that it would enter the German market in 2024 and introduced new models at the show. Additionally, by the end of the year, it intends to expand the number of its European service and sales centers.

BMW President Oliver Zipse said Sunday that, as a result of the impending EU prohibition on regular vehicles and developing rivalry from Chinese automakers, European mass-market carmakers could leave the creation of mass-market vehicles after the boycott happen, because of productivity concerns.

EVs, which will turn into the main choice for European makers from 2035, will generally be more costly to create than their fuel or diesel peers.

As indicated by Khoo at ABI Exploration, “Chinese disruptors” offer European clients seriously valued EVs and excellent across various cost portions.

The automotive supply chain in Europe will be disrupted in two ways: These Chinese brands are expanding their presence in Europe, and Western automakers are expanding their production capacity in China in preparation for export to Europe,” he added.

Chinese vehicles are likewise acquiring fame in different regions of the planet.

Including EVs, Chinese car sales in Australia nearly doubled in the first half of 2023 to reach a market share of more than 16%.

Much less expensive The Chinese EVs’ cost advantage may be their trump card.

Chinese automobiles are generally 30% less expensive than their European and US counterparts, as per research firm Jato Elements.

The typical cost of an EV in China was €31,829 ($34,096) in the main portion of 2022, contrasted and €55,821 ($59,797) in Europe and €63,864 ($68,429) in the US, the firm said in a report the year before.

“Much of China’s success in driving widespread EV uptake has been attributed to the industry’s ability to produce affordable entry-level vehicles for the masses,” the researchers wrote.

They added that consumers’ perceptions of Chinese automakers producing lower-quality vehicles are also shifting.

MG, a previous English carmaker presently constrained by China’s SAIC, enlisted record deals in the Unified Realm in the primary quarter of this current year. It’s currently the subsequent smash hit EV in the nation, as per the organization.

They said that many car buyers in Europe and the United States who are looking for entry-level models are priced out of the new car market and instead look to buy used cars, delay buying new ones, or simply use other modes of transportation.

However, EVs have become the norm in China due to widespread demand, strong government incentives, and the rapid development of new technologies.

According to the Jato Dynamics researchers, “China’s focus has been to ensure that EVs were accessible to the masses, and it has done so to great success.”

EV manufacturers, on the other hand, have been unable to produce these vehicles “at such a pace” in Europe and the United States, which are mature car markets with limited government support.

Advantage in the supply chain The dominance of China in the EV battery supply chain is a major factor in the lower price of Chinese electric vehicles.

In 2022, data from the South Korean consulting firm SNE Research indicated that Chinese manufacturers held a 60% share of the global market for EV batteries.

Nickel, cobalt, and lithium are just a few of the battery materials produced by the nation.

According to a Moody’s analysts’ report from last month, “China’s competitive advantage in lithium-ion battery cell production gives its carmakers an edge in terms of EV production costs.”

They went on to say that China’s lower labor costs added to the fact that it supplies more than half of the world’s lithium.

However, China’s push into global markets may be complicated by geopolitical tensions.

“Increasingly, the US and Europe are looking to ‘de-risk’ from China, which could create barriers to Chinese imports, even if production costs are lower,” Moody’s analysts said. “This could see China’s current acceleration in the auto export race run out of puff.”