Are Chinese manufacturers able to prove themselves globally?
It is worth thinking a bit about how we got to the present situation. For much of the past decade, debates have been raging about whether Chinese manufacturers have been able to assert themselves in the global market. These discussions have assumed a somewhat theoretical direction, given the inability of Chinese manufacturers to control even their own domestic markets.
In 2015, 66% of all vehicle sales in China came from joint ventures between domestic and international brands. Entering the United States or Germany also seemed like quite a breakthrough.
Electric cars are turning a situation on its head, when many Western brands idled and spent years battling tough fuel-constraining regulations. China has been evaluating its electric vehicle industry through orders for the state transport fleet, subsidies and supply-side incentives, as well as heavy investment in charging infrastructure. China controls about 60% of all electric vehicle sales, with a larger share of battery supply chains.
High battery prices threaten the transition to electric cars
Most of China’s electric vehicle exports fall into the higher price segment of the market, but that may change. Increasingly traditional Western automakers are trying to move to the top of the market to sell more premium cars. Some are leaving the passenger car segment entirely to focus on higher-earning SUVs and trucks.
This trend makes sense in terms of profitability, but it creates a huge gap in the lower marketing segments that Chinese automakers may be trying to fill.
China has a real competitive advantage in terms of prices. The Bloomberg NEF lithium-ion battery price survey shows that the battery pack is 33% more expensive in Europe and 24% more expensive in the US than its counterparts in China. The average price of a battery electric vehicle in China in 2021 was $26,500, which is two-thirds less than the average price of a battery electric vehicle in Europe and half that of the United States.
BMW is pumping $1.7 billion into developing electric cars
Real demand for electric cars
The continued reluctance of traditional car manufacturers over the past decade was set so that they would rapidly increase production and dominate the market as soon as there was real demand for electric cars. It didn’t work out that way in the world’s largest auto market. Rechargeable electric vehicles now account for about 30% of the total sales volume in China. Global companies, with the exception of Tesla, own a small share of these sales.
And it still continues to dwindle.
Traditional automakers are now generally talking about competing for second place, succeeding Tesla, or overtaking it later in the current decade. Even this possibility shows a BYD blind spot in this view. BYD is racing to sell two million plug-in electric cars this year, with a target of selling more than 3 million in 2023. That far exceeds what traditional Volkswagen is likely to reach in the same year.
Also read: America and Europe avoid a trade war over subsidizing electric cars
All of the above does not mean that the road is paved for Chinese brands to global markets, but rather that gaining consumer trust, brand recognition and obtaining market share takes time. It is also still difficult to make high-quality cars.
However, studies after studies reveal that consumers who own electric cars really like them, and that markets have their own way of getting people what they want. And recent export data prove that they do.