China EV: The new kings of mobility?

    MobilityCarsChina EV: The new kings of mobility?

    There has been a small but noticeable shift in both the domestic and global car market in recent years. Once dominated by Japanese car manufacturers and German sophistication, the last couple of years have seen the rise of a new global car power, China. Touted as the biggest car market, it has evolved from being a mere market to a global exporter to leading electric vehicle (EV) production and supplying over 60% of the world’s EV population.

    Taking over from the old guard

    In 2023, China overtook Europe and Japan to become the world’s largest car exporter — and not just in EVs. While Tesla still holds the title of EV king, BYD claims to have overtaken sales by the American juggernaut for the last quarter of 2023. According to reports, BYD was able to sell 3.02 million electrified vehicles last year, with 526,000 EVs sold in the last quarter alone. Tesla only sold 484,000 globally for the final quarter.

    China’s rise to the pinnacle of mobility is somewhat of a miracle, yet it was also bound to happen. It is a miracle in that it has massively transformed its auto industry. A couple of decades ago, the country was merely a manufacturer of foreign brands, with homegrown vehicles taking more of a back seat. Then, Chinese factories churned out products with foreign badges.

    The shift started in 2009 when China overtook the US as the world’s largest automotive market. Around this time, policymakers in China changed their strategy, finding an opportunity in a small automotive niche, Electric Vehicles. In this niche area, domestic manufacturers could tinker and experiment with new energy vehicles (their term for EVs). With government backing and incentives, manufacturers soon ramped up the pace.

    The King of EVs

    It has been reported that there are over 500 EV makers in China, thanks to the government’s push for the technology. As most of the world shifts its policies to favor EVs, China is ready to fill in the demand, leaving the traditional brands to play catch up.

    There is also a bit of good timing here. Until recently, EVs were still on the back foot vis-a-vis ICE (internal combustion engines. In fact, when it comes to utility, many would argue they still are. However, in the ever-changing landscape of global politics and the establishment of various climate agreements, the rise of EVs is becoming much more imminent. As countries set goals for full EV adoption, the once niche market is now an in-demand segment.

    Outside investments through the years have been another driving force in the rise of the Chinese EV industry. When the Chinese economy was at its peak, China-owned businesses invested in foreign auto-makers — one example is Shanghai Automotive Industry Corporation (SAIC), which now controls MG Motors, thanks to a merger with the Nanjing Automobile Corporation (NAC) in 2007. NAC bought the struggling British brand in 2005. SAIC is also a partner of General Motors in China and has several joint ventures with them, including the SAIC-GM-Wuling partnership that gave rise to China’s most popular EV, the small Wuling Hongguang Mini EV.

    Another notable player/investor is the Zhejiang Geely Holding Group. The company bought Volvo from Ford in 2010 and started ramping up their automotive plans. In 2017, the company added another international brand to its portfolio when it acquired a 51% controlling stake in British supercar brand Lotus. Then, in 2018, they bought a small stake in Daimler AG, the parent company of Mercedez-Benz and Smart. This inside track allowed the company to further expand its automotive capability and eventually step up its automotive manufacturing techniques.

    Offering Features beyond value

    In the domestic scene, Chinese automotive brands have slowly taken up spots left behind by other foreign brands. A perfect example was Geely’s Coolray, which quickly gained market share by filling the then-open sub-compact crossover category.

    In other categories, Chinese brands have also slowly gained traction. Sedans, for instance, have seen MG, GAC, and Geely enter the fray—thanks to their great looks and aggressive pricing. You can have a car with nifty features like Android Auto or Apple CarPlay, Adaptive Cruise, and many more for the same amount of money or even less.

    It’s the same for Evs. While many other brands (both Western and Eastern) have strategized bringing flagship and premium EVs to the Philippine market, Chinese automakers have done the opposite and are looking at more entry-level pricing. Brands like BYD and MG have strategically priced their models to be competitive in the EV market.

    Globally, Chinese EV makers have strategically priced their models way below their Western counterparts. They can do this by implementing vertical integration within their factories. Vertical integration is the process by which the manufacturer creates most of the parts of the vehicles. Traditional car manufacturers make only around 15 to 20% of the vehicle internally and source the other parts from original equipment manufacturers like Bosch or Continental. However, companies like BYD and Wuling have managed to create up to 75% or more in-house. Lower manufacturing costs translate to lower retail prices.

    These factors, aided by government incentives and geopolitics, have allowed China to evolve from being an automotive importer into a rising star of the automotive world. No one can say Whether they’ll stay at the top. But, until the rest of the world catches up on the EV front, China will likely hold on to the title for a while longer.

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