Chinese EVs: Disrupting the Global Automotive Industry
In this blog we discuss abut how China has expanded its presence in the electric vehicle (EV) market, disrupting European and American market.
In this blog we discuss abut how China has expanded its presence in the electric vehicle (EV) market, disrupting European and American market.
As China rapidly expands its presence in the electric vehicle (EV) market, it has become increasingly clear that the future of transportation is being shaped by Chinese innovation, manufacturing prowess, and government support. With its substantial investment in research and development, advanced manufacturing capabilities, and strong government backing, China is poised to remain a major player in the global EV market for years to come.
China is not just a rising player in the EV market, but the dominant force driving its growth. With the world’s largest market for EVs, Chinese manufacturers invest heavily in cutting-edge battery packs and electric vehicles to meet growing demand. The fierce competition they face from Chinese banks has prompted urgency in their actions, spurring advancements in technology and production capabilities.
China's EV market share increased from 50% in 2019 to 53% in 2021. In 2021, EVs comprised 13.3% of the Chinese vehicle market and 15% of new car sales in China. This share is expected to rise further in 2022 with the monthly launch of new EV models.
China's EV production hit 3.5 million units in 2021, generating revenues of around $102.2 billion. Successful EV start-ups like Neta, AITO, IM Motors, Zeeker, Aiways, and Livan drive intense competition and strengthen China's dominance in EV production.
China's electric vehicle (EV) market is booming, fueled by lower labour costs and generous government subsidies. Labour costs in China are around 40% cheaper than in Europe, giving Chinese manufacturers a significant advantage. The government's subsidies for EV purchases in China are five times higher than those in the US, spurring a surge in demand for Chinese-made EVs. In 2021, China produced 3.5 million EVs, an increase of 1.6 times year-over-year.
Unlike the US, where government support for the EV industry comes in the form of tax credits for plug-in electric vehicles (PEVs) purchased after December 31, 2009, ranging from $2,500 to $7,500 for each vehicle based on its battery capacity and gross vehicle weight rating, China has taken a more aggressive approach. EVs were exempt from purchase taxes from 2014 to 2017, and the exemption has been extended through 2020. Additionally, the central government initiated a consumer subsidy program to encourage EV adoption.
China's success in the EV industry is not limited to its domestic market. Chinese manufacturers, like BYD (Build Your Dream), are making their mark globally, competing with the likes of Tesla to become the world's top-selling EV maker. With the backing of renowned investor Warren Buffett, BYD has expanded its operations internationally, solidifying China's position as a major player in the global EV market.
The European electric vehicle market faces a new challenge as Chinese carmakers expand their presence in the region. KPMG predicts that Chinese carmakers, including BYD, Nio, and Li Auto, are expected to capture around 15% of Europe's EV market by 2025, causing concerns among European car companies. This influx of Chinese electric vehicles has European car companies bracing for what some predict to be a “terrible fight” and a storm on the horizon.
The Chinese government's significant investments in EV production over the last 15 years have made China the global leader in the sector. As a result, Chinese carmakers can manufacture EVs at a lower cost compared to their European counterparts. For example, the average price of a Chinese EV was $30,000 in Europe in 2022, compared to more than $45,000 for Tesla’s cheapest Model 3.
This pricing advantage, combined with a diverse range of models, has made Chinese EVs appealing to European consumers, raising concerns about potential impact on the European car industry.
In response to the competition, European carmakers are taking action by announcing the rollout of affordable electric vehicles to counter the rise of Chinese competitors. Volkswagen, for instance, unveiled the ID Life, a compact EV set to go on sale in 2025 for €20,000 ($23,719), offering a 30% lower price compared to current electric vehicles in the market.
European car companies are facing tough competition from Chinese EV manufacturers as China gradually expands into the European market. Concerns are growing as it is predicted that around 1 million Chinese EVs will be exported to Europe by 2025. One significant advantage China holds is its lower labour costs, estimated to be 40% cheaper than in Europe, coupled with substantial government subsidies for the EV industry.
To effectively compete, European carmakers must undergo a mindset shift, focusing on producing high-quality cars and prioritising software-driven technology. Volkswagen, for instance, is accelerating its transformation into a software-driven mobility provider through its ACCELERATE strategy, preparing for the profound changes in the automotive industry.
Gartner identifies software as one of the top technology trends for 2022 that carmakers need to consider to better prepare for digital transformations. As the Chinese stronghold on the EV market strengthens, European carmakers must adapt quickly to meet evolving consumer demands and expectations, with software becoming the main profitability growth driver for the industry.
The electric vehicle (EV) market has experienced remarkable growth, with a staggering 10 million EVs sold globally in 2022. Industry experts predict this number will rise to 14 million in 2023, with Chinese car manufacturers contributing 60% of those sales.
China's dominance in the EV market can be attributed to heavy government investment in EV research and development, earning them the highest e-mobility index score in 2021. As the largest EV manufacturer, China produced 3.5 million units in 2021, with revenues reaching approximately $102.2 billion, the highest in the Asia-Pacific region.
Local brands hold an 81% share of the EV market, with companies like BYD, Wuling, Chery, Changan, and GAC being key players. Additionally, a variety of EV start-ups, including Nio, Xpeng, Neta, AITO, IM Motors, Zeeker, Aiways, and Livan, are performing well and competing fiercely with established foreign brands.
The rise of Chinese EVs is reshaping the global automotive industry. China leads the global battery electric vehicle market with a $10.4 billion EV battery market. Their long-term strategy and innovative automakers like NIO keep them at the forefront of the industry. With its lower labour costs and substantial government subsidies, strong domestic market and growing global presence, China’s EV industry is poised for continued growth and success.
European carmakers face challenges as Chinese EV manufacturers expand in the region. To compete effectively, European carmakers must prioritise high-quality cars and software-driven technology to adapt swiftly to embrace the evolving demands and expectations of consumers. China's substantial investment in research and development ensures their continued dominance in the global EV market
As this competition heats up, it will be interesting to see how both European and American car companies respond and adapt to this changing landscape. It is clear that both need to adapt swiftly to keep pace with the Chinese automotive revolution.
Stay tuned to "Hiring in Tech" for more insights on the ever-evolving landscape of the tech industry.
