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5 August, 2021updated 12 Oct 2021 05:03

How China is charging ahead in the electric vehicle race

The battle is on for electric vehicle dominance in China, as international tech brands attempt to follow Tesla's lead, while domestic players are fighting back.

By Giacomo Lee

electric-car-china

A BYD electric car charges at a charging station in Beijing. The Shenzhen-based company is the national champion, fighting Tesla’s market-leading status in the country. (Photo by Greg Baker/AFP via Getty Images)

“Don’t waste your time and money.” This was the warning from Wang Chuanfu, CEO of auto and electric vehicle (EV) manufacturer BYD, to the CEO of Xiaomi on the matter of making EVs in China.

The perhaps not-so-friendly advice was given to Xiaomi’s Lei Jun at an entrepreneur event this year, and was intended to reflect the fact that it isn’t an easy leap for non-automakers to make it in the world of EVs. Either that, or the BYD CEO may be getting a little tired of others encroaching into his lane. It is getting to be a busy lane, nowadays, especially in China.

Aside from smartphone and consumer hardware maker Xiaomi, the likes of Huawei, smartphone brands Oppo and Vivo, cybersecurity company Qihoo 360 and search giant Baidu are all rumoured or confirmed to be muscling in on the EV territory in China. The same trend can be seen outside the country as tech giants such as Sony and Amazon slowly position themselves with Tesla in the West, as BYD has been doing in China, where it is the country’s most popular Chinese EV brand. BYD EV car sales in China currently come a close second to those of Elon Musk’s.

Apple, too, is rumoured to be taking on Musk with its own EV, with some reports even suggesting it is discussing battery deals with the Shenzhen-headquartered BYD. The Chinese company is already making electric buses from one Californian factory, so it is likely Wang may excuse the Cupertino giant for wasting any of its time and wealth, unlike his nearby peers in China.

A spellbinding force

That Apple is possibly seeking to tap into BYD’s expertise perhaps underscores the changing nature of the market. As opposed to suddenly building car factories to go with their phone ones, tech brands are more likely to forge partnerships with automakers or, as in Amazon’s case, invest in EV start-ups. In some cases it is a natural fit, such as Taiwanese chipmaker Foxconn working with US EV start-up Fisker; chipsets are an integral auto component, after all.

In short, is the EV sector over-egged with a major shake-out pending by 2025? Michael Orme, GlobalData

The brand enthusiasm in China’s market, however, matches an appetite for EVs that isn’t seen elsewhere. A GlobalData report on EVs goes as far to say China is a “spellbinding” force in the area of EVs or, as termed by its government, new energy vehicles (NEVs). This includes plug-in hybrids (PHEVs), hybrid EVs (HEVs), battery EVs (BEVs) and fuel cell EVs (FCEVs).

“China has aimed to make NEVs account for 25% of its auto sales by 2025,” write GlobalData analysts in the thematic report. “The country accounts for nearly 38% of global EV sales, as of 2020, reflecting China’s position as the most populous country and the one with highest demand for transportation.”

The country’s success in what was a globally tumultuous year results in large part from government efforts to strengthen the domestic EV market by offering stimulus packages. In the view of GlobalData analyst Michael Orme, China is “probably aiming to do something along the lines of what it did in solar panels with BEVs : crash the market down the line.

“Wang, who is known as a straight shooter, was on the level when he warned Xiaomi off EVs. Thanks to deliberate Beijing policy, the BEV market is rattling with overcapacity and vastly overcapitalised. In short, is the sector over-egged with a major shake-out pending by 2025?”

China’s EV push may also have something to do with the end of the decade and beyond. Transportation demand also grows unabated in the country, hence its need to steer towards sustainable tech. China is more keen to go green than many other countries it seems, aiming for peak carbon emissions before 2030, and carbon neutrality before 2060.

“Over the years, China has emerged as the global leader in both supply and demand for EVs,” continues the GlobalData report. “On the supply side, China’s government has made it a priority to create favourable conditions for EV stakeholders, including investors.

“Another reason behind China’s thriving EV industry is its expertise and in-house production capability of automotive batteries. The country also has secured access to lithium and cobalt, through both domestic production and partnerships with various countries and companies.”

Lithium ion (li-ion) is currently the most mature battery technology. Most lithium-ion battery manufacturing plants are located in China, but Europe is expected to ramp up its li-ion battery manufacturing capacity to meet domestic demand in the near future.

However, li-ion batteries are not necessarily the safest or cheapest option for EV makers. It is here where BYD’s battery benefits to Apple become clear, making for a savvy move from the Cupertino titan if the partnership rumours with Wang's outfit are true.

"BYD’s success in BEVs is in large part due to its vertical integration and dominance of the lithium-iron phosphate [LFP] battery market," says Orme. "These batteries, unlike li-ion batteries, are safe, cost less and BYD’s latest Blade batteries have closed the performance gap with lithium-ion."

Any production of an Apple-branded car may be a flashpoint moment for EVs in the same way the original iPhone was in the 2000s cell phone market. This time round, Apple may be taking the Tesla from the garages of early adopters and placing them into more Millennial-owned driveways. If using safer LFP batteries, then it may also have a publicity advantage over Tesla's at-times spotty safety record.

However, despite the names of Musk and Tim Cook circling the EV word cloud, as it were, it may not be the US that shares the EV top spot with China.

EV markets and charging in China and the Nordics

In GlobalData’s view, the EV market share is less likely to increase in the US compared with China and Europe. This is all down to battery manufacturing ramping up in the latter, while battery tech innovations coupled with favourable regulatory policies will help to drive EV costs down.

Europe is also ahead on the hybrid front, with Orme noting that China is "nowhere" in the hybrid sector compared with both Europe and Japan, and that hybrids, not battery EVs, are likely to dominate the global EV scene until 2027.

China still leads the Asia region for EV sales. Over in Europe, Norway is the EV king with PHEVs accounting for more than 70% of all cars sold in 2020. In the view of Anders Bergtoft, CEO of Swedish green tech company Charge Amps, this has been largely driven by government policy measures such as tax and toll incentives.

“[Also] Norway is a bit of a unicorn with high wealth and a median household income that is far higher than in most other countries,” says Bergtoft. “Vehicle import and registration is also heavily taxed in Norway, meaning that incentives that remove this cost equals a significant reduction in price for the buyer.”

Other European countries the CEO is eyeing up for his brand’s smart car battery chargers are Germany, the Netherlands and England. He also says entering the Chinese market is not a matter of if, but when, especially as China already has an advantage that should make European EV makers concerned.

Something that China is doing really well is to make compact EVs, specifically designed for urban life and crowded streets. Anders Bergtoft, Charge Amps

“China is a massive market and a really interesting one that we watch closely," says Bergtoft. "Something that China is doing really well is to make compact EVs, specifically designed for urban life and crowded streets. Look at the Hong Guang Mini EV, for example, which has grown incredibly popular as ‘the people’s commuting car’ and comes at a fraction of the price of cars from other EV brands.

“This is a prime example of Chinese EV innovation which I think could pose a threat to European carmakers if they don’t watch out. After all, the space issue is not unique to China, but something that cities across the globe are struggling with and whoever makes the best city car will be able to grab significant market shares.”

A chargeless EV charge?

Not that it will be all 'plain driving' for China. If a city car is to thrive the city will need charging infrastructure around it, and it is easy to overlook the humble car charger amid all the chatter of booming sales and Mars-bound Tesla cars.

According to the International Energy Agency, the global number of publicly accessible chargers (slow and fast) increased by 60% in 2019 compared with 2018. The growth was mainly driven by China due to its dense urban areas with less opportunity for private home charging.

The trick to meet zero-emission targets and to make widespread EV-ownership possible globally will be to make public charging as accessible as it can be. Anders Bergtoft

The country, as GlobalData reports, is in top position in terms of EV charging infrastructure due to various policy and regulatory-level initiatives, with primary growth in charging infrastructure occurring in major cities such as Beijing, Shanghai, Guangdong and Shenzhen due to strong policy support.

“Different territories require market-specific approaches to solve local challenges,” says Bergtoft. “If we take China as an example, you need to address behavioural patterns that are very different to say, Sweden. In China, charging infrastructure needs to take into account high levels of carpooling and ride-sharing. A high proportion of the population also lives in urban areas, where they may not have access to private parking. This affects how you develop incentives, and puts higher pressure on making public charging infrastructure available at a low cost.

“In Sweden on the other hand, subsidising home chargers makes more sense, since nearly half of our population lives in a house with a driveway or garage, and many people live in rural areas where access to public charging infrastructure is less available.”

For Bergtoft, most countries across the globe need a sufficient mix of both public and private charging solutions.

“I think the trick to meet zero-emission targets and to make widespread EV-ownership possible globally will be to make public charging as accessible as it can be, while at-home and in-office charging is made affordable enough to act as a viable complement.”

Tesla's Chinese dumpster fire

In the same way charging infrastructure success depends on territory, so does brand success vary by region. China’s booming EV brands, for example, are driven by both a national sense of pride and a tide that is slowly turning against Tesla.

As reported earlier this year, the EV maker suffered a wave of social backlash from Chinese citizens after a woman claimed in April that the brakes in her Tesla malfunctioned, causing the car to crash. Tesla denied the allegations and insisted that the woman was speeding.

How well non-car brands trying to grab market shares from the car manufacturers will do in producing EVs still remains to be seen. Anders Bergtoft

The incident happened only a few weeks after Chinese authorities grilled the company’s executives over the safety of its cars; the same month saw a 28% decline in Chinese sales for Tesla.

For Orme, Beijing is using Tesla to cause "constructive havoc" among domestic players and to create the "Apple of auto".

"Over the years, intellectual property and tech spillage from Apple’s supply chain was a boon to China’s smartphone players," Orme explains. "Meanwhile, to boost domestic demand for indigenous vehicles the state media really has it in for Tesla, calling it arrogant, its cars unsafe (with some justification) and not understanding Chinese consumers. The regulators are getting very heavy with it."

This domestic-first attitude may mean the likes of Huawei and Xiaomi won’t end up wasting their time and money, but Orme's boom-bust prediction for 2025 may make Wang's warning come true. Bergtoft, meanwhile, isn’t entirely convinced that anyone is on track to become the Apple of auto, and that includes Apple.

“How well non-car brands trying to grab market shares from the car manufacturers will do in producing EVs still remains to be seen,” he says. “Whether we are talking brand new or age-old players, there is equal value in understanding car-making as there is to understand the software required to build a high-quality EV.

“For example, take Polestar, which sprung out of Volvo, a company that has been making cars since the 1920s, and Tesla, which has been tech-led from the start. A Tesla is not as good a car as a Polestar, but Tesla comes with more solid software than Polestar does.”

While Bergtoft doesn’t entirely rule out tech giants such as Google successfully competing in the EV space one day, Bergtoft thinks the names of future EV leaders are on nobody's lips. Not yet, anyway.

“Where I think the most interesting developments will take place is when ‘EV natives’ that have been able to closely watch companies such as Tesla over the past decade, and are born into an electric-first world, start making cars," he says.

“There are some early examples of this already, but I think the true winners are yet to emerge.”

Additional reporting by Verdict's Elles Houweling. Find GlobalData’s Thematic Research Electric Vehicle report here.

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