Chinese Electric Car Supplier
China largely dominates the global market for electric cars. Companies like BYD, Great Wall Motors’ budget brand Ora and Xpeng, and upmarket brand Wey all sell models in western Europe.
Their success rides on Chinese industrial policy 101: government subsidies and explicit or implicit local-government protections. But that playbook can’t last forever in any market, and China is starting to scale back.
Local battery ecosystem
The tidal wave of EVs sweeping China has spawned an ecosystem of local battery companies that are poised to enter Europe, and possibly chinese electric car supplier the United States. BYD, Nio, Wuling, and Xpeng are major players at home, and all have ambitions to sell in the US as well. But they are skittish about entering a market that requires big investments in dealerships and charging networks, and where the political tensions between Washington and Beijing make a move even more challenging.
Geely, the Zhejiang-based parent company of Volvo, is probably the best known of the Chinese EV companies. It also owns London Taxi and Lotus, and holds a 49.9% stake in Malaysian automaker Proton. It has also expanded its EV portfolio with a range of battery-powered vehicles that includes the new Geely Zhi Dou, a small EV that is only allowed to drive on city streets.
The company’s sales have been strong, and it recently became the first of the so-called Wei Xiao Li (first-character-based names) brands to break profitability barriers. The other two are NIO and XPeng, which are both still in their infancy. But they have strong ambitions and have been investing heavily in research and development. They are also focusing on decarbonising the lithium supply chain, which is crucial for making EVs greener. This could involve using low-carbon hydrogen and biofuel to process lithium and creating a system for tracking and recycling batteries.
Local EV offerings
Chinese companies’ lightning-fast development has led to a glut of electric cars that haven’t found a home. The EV graveyards aren’t just an eyesore; they’re a waste of energy and money for the manufacturers, as well as a loss of climate benefits for the consumers who used them. They also take up valuable parking space and contain precious ingredients like nickel, cobalt and lithium, which could be better used to produce new battery tech.
Despite the glut, some Chinese EV makers have found a niche. MG, the former British automaker controlled by SAIC, saw record sales of its entry-level EV in the United Kingdom this year, boosted by a hefty discount. The cheapest MG EV costs $11,000 and is packed with features, including a large display and autonomous driving capability.
Other companies are expanding abroad, with BYD, China’s largest EV producer, setting its sights on Europe. The continent has the second-biggest EV market, and its car import tariffs are just 10% compared to 27.5% in the U.S.
BYD is bolstering its presence with a factory in Shanghai and a joint venture with BMW. The company is supplying batteries for BMW’s new iX3 SUV and has signed an agreement to build a production facility in Germany. It is also working with Geely-owned Polestar to develop a premium brand.
Local connectivity
As the world’s largest EV market, China offers an enticing opportunity for foreign investors. Its supportive sectoral policies and focus on technological innovation further encourage investment. Foreign electric car supplier companies can invest directly in Chinese EV manufacturers and distributors, or partner with local technology and manufacturing partners to create joint ventures. They can also explore opportunities for sharing technological expertise or patents with Chinese companies.
Chinese EVs are known for their advanced battery technology and innovative vehicle designs, which set them apart from the competition. They also boast a wide range of smart features that allow them to be easily integrated with the Internet of Things. For example, some models come with built-in voice assistants that can provide users with important information about the vehicle’s location or status.
The dominance of Chinese EV brands in the global auto industry has surprised many observers. It is partly due to the government’s extensive support for the industry, including subsidies, tax breaks, procurement contracts, and other policy incentives. These policies have accelerated and magnified technology development and consumer acceptance of EVs.
However, despite the many advantages of China’s EV industry, it faces challenges in the international marketplace. For one, the US levies high tariffs on car imports from China, limiting the amount of money that Chinese companies can make from sales abroad. In addition, political tensions between Washington and Beijing make some Chinese EV makers skittish about entering the US market.
Local branding
Chinese EV makers are rapidly expanding their presence abroad, leveraging economies of scale to offset high production costs and avoid tariffs and transportation fees. They are also gaining favor in countries that offer attractive incentives, including temporary corporate tax waivers and government support for investments. In 2022, BYD became the world’s largest EV producer by exporting vehicles and batteries to Europe, Southeast Asia (especially Thailand), and Brazil, where local consumers are eager to buy electric cars.
These companies are benefiting from strong domestic consumer demand, driven by government subsidies and a desire for greater energy independence. As a result, their local sales are growing rapidly. For example, CNBC recently spotted 11 Teslas on the streets of Beijing during a morning commute, while Nio and WM Motor both saw their deliveries surge during the coronavirus pandemic in 2020.
Many western incumbents are struggling to compete with Chinese manufacturers in the global EV market. However, Chinese OEMs have a natural advantage in their home market, where they can leverage their extensive technical know-how and access to components and materials. Furthermore, local consumers are enthusiastic about smart BEV features such as advanced HMIs and robust connectivity that enables online services. They are willing to pay a premium for these technologies, which are increasingly important as climate change forces us to rethink how we travel.