China's Explosive Exports: Two Roads
BYD, Great Wall, Geely, SAIC MG, GAC-Aion, NIO, Xpeng, Changan
China’s Explosive Exports: Two Roads
Two roads diverged in a yellow wood…
… so Chinese automakers decided to take them both.
By now, you have heard that China has surpassed Japan as the world’s number one car exporter.
Chinese automakers like BYD, SAIC and Chery - together with Tesla and a few global joint ventures - will ship just almost 5 million vehicles from the PRC this year.
Five million cars is not small potatoes - it’s almost twice the size of the entire German market.
Drowning in Capacity / Price Wars
What is driving the explosive growth? China’s domestic market is no longer a walled garden of growth and profits. Demand for gasoline cars is dropping like a stone. In the EV arena, Tesla launched aggressive price cuts at the end of 2022 that continue today.
For Chinese automakers, staying home, sitting on idle capacity and fighting price wars is simply not an option. So, they are re-directing their vastly-improved vehicles to global markets.
Today, we are seeing the Chinese pursue two distinct tracks.
Two Roads
• Affordable, gasoline cars are going to price-sensitive consumers in developing markets in South America, Africa, Southeast Asia. China is now the number one supplier of cars to Mexico. There are also huge numbers of new Chinese cars going to Russia. (In 2023, Chinese brands are accounting for half of new car sales in Putin’s kingdom).
• China-built electric cars, one the other hand, are landing mostly in Europe. SAIC leads today thanks to the MG brand’s strong welcome in the UK. Watch BYD hit its stride in 2024. According to Schmidt Automotive Research, Chinese brands already account for 10% of Europe’s EV sales.
So What, Now What
No one can match Chinese automakers on costs. They have the scale, they have the supply chains and they enjoy significant support from national and local governments.
Chinese products are now poised to overwhelm Europe.
To buy some time, the European Commission president Ursula von der Leyen is launching an anti-subsidy probe. She will not have to look very far: Between 2018 and 2022, Chinese automakers received more than $55 billion in subsidies from Chinese state and local governments.
Can We Talk?
Where will the EU investigation lead us? Each party needs something:
• Europe (and America) need time to catch up with China on electrics and batteries.
• China’s EV makers needs access to lucrative European and American markets.
Are they in the mood to work something out?
Future Cars & Markets
Electrics
Smart. Chinese automakers excel in global markets when they use Western brands. Just look at Volvo and MG. Now comes Smart – the 57-43 joint venture between Geely and Mercedes. The Smart #1 in now selling in Germany, France and Spain. Link
Tesla Model Y - No. 1. No wonder executives at the traditional automotive companies feel stressed out. The Tesla Model Y has surpassed the Toyota Corolla and the Ford F-150 to become the world’s best-selling model. Link
Batteries / Supply Chains
Battery Prices Slide Under $100 per kWh. Simon Moores, CEO at Benchmark Minerals Intelligence, has some good news. Battery cell prices are down 33% compared to a year ago thanks to much cheaper lithium. Think about that: The price of lithium, the key battery input, can swing dramatically within months. How certain can we be about the price of electric vehicles a year from now?
Advanced Technologies
Baidu JiYue. They are calling it the world’s first car robot powered by AI. It is the Jiyue 01, a joint venture product from Geely and Baidu. And it starts at $36,000 Link
New Numbers / Milestones
1. BYD - 300,000/month. Building on momentum of new products and new brands, BYD is on track to manufacture more 3 million cars this year. Ford and GM - combined - make a small fraction as many EVs. Link
2. Tesla 5 million. Tesla built its 5 millionth vehicle last week. It is hard to imagine that the company delivered just 101,000 cars in 2017. Link
3. California Beast EV Mode. Jaan of the EV Universe points out that California is the world’s 4th largest EV market - after China, the US and Germany. I just signed up for Jaan’s newsletter. He brings great energy and knowledge on EVs.
4. Michigan football is 3-0 which should comes as a surprise to exactly no one outside of Ohio.
His Blockbuster China Story Won a Pulitzer
David Barboza, Frmr NY Times Reporter & Founder The Wire - China
Conversation will be published this Thursday, September 21.
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