The rise of Chinese electric car manufacturers such as BYD and Nio signals a radical change in the global auto industry landscape.
The sharp rise in automobile exports from China – which have doubled significantly since 2020 – has sparked terror among traditional auto industry giants such as Toyota, revealing a new era of competition that companies have never experienced before, in terms of production volume, components, manufacturing capacity, and distribution across outlets.
According to Takeru Kato, head of Toyota’s electric vehicle division, who spoke to the Financial Times, his visit to China in 2018 was a surprise, as the visit revealed to him the country’s advanced manufacturing capabilities.
This comes at a time when China is overtaking Japan as the world’s largest car exporter, with the Chinese company BYD overtaking its competitor Tesla in the last quarter of 2023.
The Financial Times report refers to the “aggressive” approach of BYD, which, along with other Chinese electric car manufacturers targeting foreign markets, raises a challenge to traditional car giants globally.
The report acknowledges that the influx of cheap Chinese electric cars into Western markets raises pressing questions for Western governments, and places them between the hammer of encouraging the adoption of electric vehicles and the anvil of protecting local manufacturers.
The report quotes Michael Dunn, CEO of Dunn Insights – which provides global advisory services to investors and electric car manufacturers – as saying: “While the United States provides financial support to increase domestic production, Europe is confused about imposing customs duties to limit cheap Chinese cars.” .
Low cost advantage
The Financial Times report adds that despite the presence of potential trade barriers, Chinese car manufacturers enjoy a low cost advantage compared to other manufacturers, thanks to their experience in lithium batteries, which is clearly evident with the sale of the “Auto 03” model from “BYD” at prices lower than Tesla Model 3 in major European markets.
The report indicates that with spare capacity to meet 75% of global demand for electric cars, in addition to their ambitions to expand in the United States, Chinese car manufacturers such as BYD are ready to penetrate Western markets, however challenges remain, such as tariff barriers. Tariffs and anti-China sentiment are present in those markets before them.
Jorge Guajardo, a specialist expert at Dentons Global Advisors, a consulting company, highlights the complexity that Chinese car companies face when operating outside China, as he points out that they lack the government support that these companies enjoy inside China, and this reality could affect their cost advantage. which it enjoys in competitive markets.
The report adds that Western governments are on alert against China’s incursion into their markets, as the Biden administration has warned Mexico in particular about the upcoming wave of Chinese investments.
The report also pointed out the importance of the results of the European Union investigation, which highlights the results of dumping and Chinese support for the markets, and the results will be released in November of this year.
Assumed security risks
Meanwhile, government officials in the United States and Europe are also focusing on the supposed security risks of having Chinese components in critical infrastructure such as energy and telecommunications, according to the Financial Times, concerns that are now expected to apply to China’s vehicle sector, as well as batteries and other clean technologies.
On the other hand, Corey Coombs, an expert in the Trivium China Team, who specializes in market research, defines Western politicians who are thinking about preventing China from accessing clean supply chains by considering the impact on their ambitions to achieve a zero carbon emissions policy, noting that this step They may limit their own climate transitions without adequate mitigation strategies.
This great rise of Chinese electric car products shows a pivotal moment for the global automobile industry. While Western countries struggle to protect their industries and their climate goals, the great Chinese expansion constitutes an urgent challenge and a prelude to an imminent clash of interests between its climate aspirations and its goals in confronting and curbing China.
