China’s Electric Vehicle Market Powers Up
Aidan Gilbert, University of Edinburgh – 28 February 2021
Seeing explosive growth in the last few years, the electric car industry is booming. As governments around the world make the legislative push to phase out fossil fuels, electric vehicles (or EVs for short) are looking certain to be the automotive success story of the 2020s and beyond. In no country, however, is this changing landscape more exciting and innovative than in China. Already the world’s largest single manufacturer of EVs, the Chinese domestic market continues to expand at a rapid pace as mainland drivers make the leap to emission-free cars.
Indeed, despite the negative effects of the pandemic on the global economy, new electric car sales in China bucked global trends and grew by 12%, giving the country a commanding share of almost half of the world’s EV market. Already impressive, the sector is primed and ready for even greater growth, as the Chinese government has announced ambitious targets for domestic production. By 2025, it expects 20% of all new cars to be electrified, rising to 40% by the end of the decade. Cars are not the only focus of this new frontier either, with public vehicles also trading in petrol for batteries. A staggering 99% of the world’s electric buses (eBuses) are in China, with Shenzhen alone fielding a fleet of 16,000 of the emission-free vehicles.
One of the most striking things about this boom is the strength of Chinese manufacturers, with many EV buyers choosing local companies over foreign brands. Buoyed by government subsidies, there are now more than 400 Chinese EV companies, creating an impressive spectrum of automotive innovation. Despite this challenge, western automakers are determined to carve out a slice of the market for themselves, with Volkswagen, Daimler, and Ford some of the foreign giants moving in. Not to forget that Tesla, perhaps the most famous EV brand, has also opened a new factory in Shanghai in the last year. Despite a soaring valuation and the enigmatic figure of Elon Musk, the company is already seeing stiff market competition from local (and cheaper) domestic rivals. So, who are the ones to watch in the Chinese EV world? First and foremost is BYD Auto, the country’s largest manufacturer of electric cars. Standing for the apt “Build Your Dreams”, the EV subsidiary of the Shenzhen-based tech multinational is the current market leader within China, with more than triple the sales of American rival Tesla. Keen to make it big on the international stage as well, the company has made recent forays into the Norwegian, Australian and New Zealand markets. Not content with just cars, BYD is also a major manufacturer of eBuses. The company will be hoping, with recent contracts awarded in Romania, the US, and a trial of an autonomous vehicle at Tokyo’s Haneda airport, that they will be just as successful as their car-based ventures.
Another major player is BAIC, which gained fame in recent years due to its lightweight, affordable city cars that proved a major hit among urban Chinese consumers. Its EC-Series became the best-selling electric car globally in 2017, putting a company that was previously known for military and agricultural vehicles on the EV watch list. This year is particularly shaping up to be an interesting one for BAIC as their hotly anticipated new model, developed using Huawei’s HiCar technology, is set to be unveiled to the public in April. Relatively unknown outside of China, could an EV push thrust the company into the global limelight?
Finally, any talk of the Chinese EV industry is incomplete without mentioning NIO, seen as the rising star in the industry. Affectionally nicknamed ‘the Chinese Tesla’, the company has amassed a loyal cult following in the west and has often been picked out a savvy buy for would-be investors on stock trading sites. As a result, the share price of the company has risen steadily over the last 12 months, buoyed by a combination of online buzz and a promising business model. Said model, in a bid to make its cars more affordable for consumers, offers generous discounts off the sale price of its vehicles in return for monthly battery subscriptions, a practice known as “Battery as a Service” or BaaS. Now preparing for an entry into the US market, NIO is being hotly tipped as one to watch in the coming years.
Despite already being crowded with hundreds of competing manufacturers, the sheer size and scope of future growth means that, even now, significant players from other industries are preparing forays into plug-in autos. Chief among them is Baidu, known for its internet search engine and AI research, who are reported to be teaming up with Geely, another major Chinese car company, to work on an EV of their own. With ambitious targets, smart technology, a new CEO for the venture and soaring stock, Baidu could be poised to become a major EV success story as their vehicles are unveiled over the next few years. Just as Apple and Google have dipped into the automotive world in the west, don’t be surprised as their Chinese tech counterparts follow suit.
Of course, while a strong domestic performance is one thing, it is another entirely to become a major global brand that can market cars across borders. This is made even more difficult by variation in legislation and infrastructure, which can make electric cars undesirable or expensive. Several companies, however, have risen to the challenge. Norway, where EVs are in high demand, has quickly become the staging ground for Chinese EV makers attempting to enter the European market. Companies such as BYD, WM and Xpeng are among those shipping to the country for the first time. As electrification efforts continue throughout Europe, the demand for EVs will only increase and Chinese companies will be hoping to claim some of the growth for themselves.
With many promising companies and an ever-increasing market, the Chinese electric vehicle scene is certainly the one to watch in the coming years. Almost overnight, a plethora of exciting and adventurous manufacturers have emerged to challenge the established giants of the automotive world. Moreover, as more and more governments take a harder stance on carbon emissions, they will be setting their sights on global expansion in the decade ahead. As many investors in the west continue to look to China for dynamic and innovative firms, they would be wise to keep an eye on the country’s EV market. The next big success story could be just around the corner.
Aidan Gilbert is a student at the University of Edinburgh, studying Japanese and Linguistics. He is in his third year and is expected to graduate in 2022. Always possessing a keen interest in East Asia, he has also taken modules in the histories and politics of Japan, China, and Korea. Outside of university and the role of student board member at the Asia Scotland Institute, he is also involved as an academic coordinator at the UK-Japan Student Conference.