Home » Cars made in China dominates the global EV industry: Here’s why
Electric cars made in China lead a 52% margin against Europe and the United States (US), at a market size of 4.5 million. Of which, 44% of said Chinese vehicles are manufactured within China’s borders. Such data are based from the study made by the Pew Research Center.
China’s large electric vehicle (EV) market share paved the way for it to be a leading hub for EV research, technology, and innovation. Such circumstance makes it challenging for competitors to rival Chinese EV manufacturers.
Establishment of a robust supply chain model
China’s low labor costs and favorable government policies make it an attractive destination for manufacturing companies. It has led to the development of an extensive network of suppliers and distributors that can provide goods at a lower cost compared to their counterparts from other countries.
Also, innovative Chinese electric car makers and entrepreneurs are constantly working to improve the country’s supply chain model. This drive for innovation has led to the utilization of new technologies. It also paved the way to techniques that have made the supply chain more efficient and cost-effective.
In terms of logistics, China has good transportation infrastructures that allow for the quick distribution of goods. Infrastructures include the most extensive railways and highways with over 140,000 km connecting most cities and regions.
China also has a complex network of waterways that allows transportation by barges and other watercraft. Not only that, but China also has many ports and airports that handle a large volume of goods for distribution.
“China has built an extensive and efficient supply chain for EVs, making it the world leader in both EV production and consumption. Companies in the industry are able to source high-quality components at competitive prices, allowing them to reduce production costs and bring more affordable EVs to market,”said John B. Goodman, CEO of the National Transportation Research Group.
Such highlights the various factors that have contributed to the success of China’s EV supply chain model in the industry. The said model has driven economic growth in recent years.
As reported by the International Energy Agency in its 2022 Global Electric Vehicle Outlook, sales of China’s EVs doubled in 2021 from the previous year. It resulted in a new record of 6.6 million.
Meanwhile, the Chinese government even have a massive infrastructure project called Belt and Road Initiatives (BRI) in 2013. Such efforts aim to create a new Silk Road Economic Belt and a 21st Century Maritime Silk Road that will connect China with Europe, Asia, and Africa.
The BRI will provide new trade and investment opportunities for countries along the Belt and Road. It will also help to improve regional connectivity and promote economic growth.
In addition, this will continuously enhance China’s ability to gain more traction and the opportunity to market electric Chinese vehicles. Wherein, the BRI presents a significant opportunity for Chinese EV companies to expand their reach and tap into new markets.
The improved connectivity facilitated by the BRI will make it easier for Chinese EV companies to transport their products to new markets. The increased investment in infrastructure will create favorable conditions for the growth of the EV industry in the region.
Government support ushers progress
The Chinese government supports and invests in the EV industry. Notably, China has been implementing policies encouraging the production and adoption of these electric Chinese vehicles.
Said efforts helped drive down costs. It also increase the overall production of cars made in China and Chinese vehicles in the US. It also paved the way towards the continuous demand for EVs. In turn, it usher more investments throughout Asia and even spur innovation in the automotive industry.
“It’s easier for them to reduce the cost of development of these cars than for carmakers that don’t have that much support from their local governments,”said Felipe Muñoz, global analyst at JATO Dynamics which is an automotive business intelligence supplier.
The Chinese government has introduced several trade policies to promote the growth of electric cars made in China. For example, the government has implemented tax incentives for EVs. They also provide subsidies to companies involved in developing EV technology.
China has a subsidy of 13,000 yuan per 300-400 km EV driving range. Therefore, one can benefit and save more by using EVs rather than driving conventional cars, according to the data found by Fastmarkets.
However, at the onset of 2023, subsidies to users of electric cars in China ceased. Other incentives, though, will remain until the end of the year, such as giving a 10% purchase tax exemption.
“Despite ending these subsidies, experts denounced that electric vehicles in China market will still rise since Chinese car manufacturers have dedicated more research and development to electric cars made in China,”shared by Gongmin Guan, head of UBS ChinaCar automotive industry research team to China Dialogue.
Keeping up with global demand
Massive investments in research and development are among the factors that led Chinese companies to produce high-quality batteries at a lower cost than their competitors. Said pricing scheme made them attractive to EV producers worldwide.
According to SC Johnson College of Business, China increased its battery component market shares to about 60 percent in 2020 from 43 percent in 2014.
The available supply of a battery’s key materials, such as cobalt, lithium, and nickel, is expensive, which had China in an advantageous position. Such gives China leverage in negotiations with other countries and companies.
Moreover, China has invested heavily in building a comprehensive charging infrastructure. R & D innovative technology that aids the growth of the EV industry.
This includes developing new fuel-efficient models that improve competitiveness to meet global demand. There are also better thermal management systems and more China EV designs that meet the customer’s eye.
The future of EVs
Chinese EV car companies have been expanding across Asia and the international market. Notably, Chinese cars are less expensive than their foreign counterparts which boosts their marketability.
The said effort helped China solidify and climb to the top of the EV supply chain as it leads production and sales. Also, being a battery production leader gives it an edge in negotiations and boosts the China’s desirability as an EV hub.
With a combination of government support, a large market, investing more in research and innovation, and dynamic expansion, China is leading the way in Asia’s EV market. As reported by Bloomberg, it now has 250 different battery-electric Chinese cars for sale.
The active pursuant of initiatives rendered electric cars made in China a significant threat to other EV manufacturers across the world. China’s EV industry is a fascinating illustration of how quickly technology can evolve, and brings about more exciting advances in the future.