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CWA # 1318, 18 May 2024
NIAS China Reader
Beijing Auto Show 2024: China’s global domination in EV sector

  Akhil Ajith

On 22 April, China opened its auto show in 2024 to the general public. The premier auto show is back in Beijing after four years due to the Covid-19 pandemic. The auto show will continue to run till 4 May. Around 1500 companies are exhibiting their products, including China’s leading players like BYD, Chery, and SAIC Motors, as well as new entry players such as Tencent Holdings and Xiaomi. According to the event organizer, around 117 brand-new models and 41 new concept cars will be displayed. The auto show comes as China faces increased competition in the domestic EV market and a greater desire to mark its dominance in the export markets.

The State of the EV sector in China today, and its history
While the rest of the world is slowly moving towards the EV, China has emerged as a world leader in producing and purchasing EV vehicles. In the past two years, China sold around 6.8 million EVs in 2023 compared to 1.4 million, making it one of the largest markets for EVs. In China, the government played a critical role in increasing the demand for and supply of EVs. Due to increased government subsidies, tax breaks, national and regional procurement contracts, and other policy incentives, many homegrown EV brands have emerged and continued to develop new technologies. This has led to the cultivation of new buyers among the young population in China.

In 2008, China's EV sector received a significant boost as it became a critical focus area in its national economic planning. Since 2009, the government granted subsidies and grants to EV companies and to individual customers. The government played a key role as it became the major customer in inducting EVs into public transport. For China, the EV has a greater potential to solve significant problems such as curbing severe air pollution, reducing its reliance on imported oil, and revamping its economy from its current stagnating economy, thus benefiting Beijing.

⁠What has caused the rise of China’s EV sector?
Chinese automakers are building more car factories in overseas markets to boost their global presence and growth. Build Your Dream (BYD), the world’s largest EV maker, has been increasingly expanding in Southeast Asia, especially Thailand, and other countries such as Brazil, Hungary, and Uzbekistan. It has the capacity to produce four million cars per annum. Cherry Auto, China’s largest automaker in volume, has sold half of its cars outside China in 2023. It has a significant presence in Russian and Latin American markets. State-owned SAIC, China's second-largest auto exporter with its MG-branded cars, has a greater presence in the UK and other European markets. It also has manufacturing plants in Thailand, Indonesia, and India.

Using the EV, China aims to utilize all its resources available to create a made-in-China EV supply chain through greater focus on research and development. This includes achieving complete control from mining lithium and other critical minerals to battery manufacturing and semiconductors. The threat from Chinese automakers has forced some companies, such as Honda, Nissan, etc., to form joint ventures, thereby sustaining their limited presence in the existing export markets.

⁠What are the concerns outside China?
The growing clout of Chinese car exports has caused friction with Western countries, which plan to impose various restrictions on their imports. The EU is investigating China’s EV sector as their cars are cheaper than European ones. This has created price wars in Europe, which has triggered calls for probes against Chinese cars. The Chinese automaker BYD, which has overthrown Volkswagen in China, has become a rising brand across the continent, competing against Tesla’s Model 3. China sees the EU as a huge market potential as the continent embraces the switch to green energy away from ICE, making Chinese EV autos attractive to European customers. The European brands may be happy with the probe against Chinese cars as they can defend their domestic market amid stiff competition. However, the EU fears a potential Chinese retaliation against the European brands, which are already facing a declining share in China and the global slowdown in automobile sales.

On 30 January, the US ordered the Department of Commerce to investigate the potential national security risks of importing Chinese vehicles. In the US, legacy American automakers like Ford and General Motors face an existential threat as they see Chinese cars as another Tesla-like market disruption. Even Tesla is concerned about Chinese cars as it reduces its prices in export markets to compete against Chinese cars. The US aims to tackle a potential surge in Chinese imports through tariffs and other trade barriers. The US is using the export restrictions of critical components such as semiconductors through near-shoring the supply chains back to the US and its allies.

⁠What it means?
For the US, China’s export of EV cars to Mexico has become a concern as the country serves as a backdoor to the US market. This created an issue within the domestic lobby group within the US as they pushed for greater protection of the American market from dumping cheap Chinese cars. Despite selling fewer cars than European brands, the US imposes heavy tariffs on Chinese cars.

Given the competing priorities of decarbonization, economic goals, and the mitigation of security risks, Chinese EVs continue to challenge the US and European markets. Also, it will be difficult for global EV makers to match the prices of the Chinese EVs in the near future as China has built an entire EV industry on an ecosystem that ranges from minerals to batteries and components.

For China, the Beijing Auto Show 2024 is another step to showcase its technological advancements in the EV sector and the ability to produce reliable and cost-effective modern EV vehicles. This auto show also signifies the level of expertise China has gained in the entire EV supply chain ecosystem, from mining minerals to processing, battery making, and other components.

References:
Zeyi Yang, “How did China come to dominate the world of electric cars?” MIT Technology Review, 21 February 2023
Joseph Webster, “China has become an electric vehicle export behemoth. How should the US and EU respond?” The Atlantic Council, 29 February 2024
Stefan Nicola, “Why Europe Is Pushing Back Against Chinese EV Blitz,” Bloomberg, 13 September 2023
Kenji Kawase, “Beijing auto show welcomes world as China's carmakers aim to conquer it,” Nikkei Asia, 25 April 2024,” Associated Press, 25 April 2024

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