"There is a good chance that your next electric vehicle could be made in China -- especially if you live outside the U.S., which is busy erecting barriers to foreign-made EVs, and Chinese batteries in particular.
China overtook Japan as the largest auto exporter in the world last quarter. Surging exports to Russia gave the country's car exports a big bump. But the strength of China's electric-vehicle ecosystem is also an important factor driving the trend.
China exported 1.07 million vehicles in the first quarter of this year, a 58% increase from a year earlier, according to official figures. In comparison, Japan shipped 950,000 vehicles abroad during the quarter, according to the Japan Automobile Manufacturers Association.
Russia accounted for a significant part of the surge. Sanctions on Russia -- which cut the country off from many Western goods -- left a big hole to fill, especially for gas-powered vehicles. Vehicles and auto part exports from China to Russia more than tripled year over year in the first four months of 2023 to $6.1 billion, according to official Chinese statistics. Russia was the top auto-export destination for China last quarter, according to the China Association of Automobile Manufacturers.
But Russia is only part of the story. If anything, sanctions only sped up the inevitable. That is because China is becoming a juggernaut in EV exports, too.
China is the largest exporter of EVs, and its lead appears to be growing: Around 35% of EVs exported globally came from China last year, compared with 25% in 2021, according to the International Energy Agency.
China exported around 335,000 new-energy passenger vehicles, including plug-in hybrids, in the first four months of this year -- more than twice the number in the same period in 2022, according to the CAAM. That accounted for roughly 30% of passenger cars exported from China in January to April 2023.
And that number will probably rise further as more consumers shift to EVs. EVs shipped from Tesla's Shanghai factory to other countries including Europe are a significant part: It exported nearly 130,000 cars from China in the first four months, according to the China Passenger Car Association. Other foreign carmakers including BMW and Renault used China as a manufacturing base for EVs heading to other countries.
But local players are growing stronger and in most cases, have done better than their foreign rivals. State-owned SAIC and BYD are among the top EV exporters from China. MG Motor, a British carmaker bought by SAIC in 2007, is doing quite well in Europe. BYD has overtaken Volkswagen as the best-selling carmaker in China this year.
While Chinese automakers never managed to catch up with foreign peers in the internal-combustion-engine era, EVs -- a new technology -- are a very different story. Aided by years of government subsidies, China has developed a huge domestic market and a cluster of suppliers which help its carmakers to innovate and create better and cheaper products, quickly.
BYD, for example, introduced a hatchback called Seagull last month with a starting price of only $11,000.
The parallel with the smartphone ecosystem kick-started by Apple is easy to see, although there are important differences, too. Tesla is important to China's new dominance but its local brands and upstream suppliers like battery giant Contemporary Amperex Technology have also emerged concurrently as dominant suppliers, in part thanks to generous subsidies and barriers to foreign battery makers.
Made-in-China cars were once an uncommon sight outside the country, particularly in developed economies. But that is about to change in the EV era." [1]
So, this is how those clumsy sanctions worked... Germany, by participating in the sanctions against Russia, cut off the branch Germany was sitting on.
1. China Takes Lead in Car Exports --- The strength of its electric-vehicle ecosystem is an important factor. Wong, Jacky.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 30 May 2023: B.10.
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