The electric vehicle industry in China is the largest in the world, accounting for around 58% of global production of electric vehicles (EVs) in [3] and more than 1.28 million exports in .[4] In , CAAM reported China had sold 12.87 million passenger electric vehicles, with 60% of those sales being BEVs (battery-only EVs) and 40% being PHEV (plug-in hybrid electric vehicles).[4] China also dominates the plug-in electric bus and light commercial vehicle market, reaching over 500,000 buses (95% of global stock)[2] and recording new sales of 447,000 commercial EVs in .[5]
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Plug-in electric vehicle (BEV and PHEV) sales were 47.9% of the overall automotive sales in China in . This is a significant increase from , when plug-in electric vehicles accounted for only 6.3% of total sales.[6] The plug-in market in China was dominated by Chinese companies, with BYD Auto and SAIC Motor occupying the top two spots, and 5 out of the top 7 spots.[7]
The battery industry is closely related to the EV industry as batteries constitute around 1/3 of the cost of EVs[8] and around 80% of lithium-ion batteries in the world are used in EVs.[9] The industry also has significant Chinese presence, with major players including world's largest CATL, BYD, CALB, Gotion, SVOLT and EVE Energy.[10]
Plug-in electric vehicle (BEV and PHEV) sales was 15% of the overall automotive sales in China in .[12] NEV adoption rapidly increased to a record 28% in March , and according to BYD chairman Wang Chuanfu could reach 35% by end of , exceeding the government goal of 20% by .[13] The plug-in market in China was dominated by Chinese companies, with BYD Auto and SAIC Motor occupying the top two spots, and 5 out of the top 7 spots.[7]
It is difficult to estimate the comparative size of EV companies in China as foreign companies such as Tesla and VW have significant sales and manufacturing in China, while Chinese companies such as BYD have significant overseas sales. Some Chinese companies also have foreign-based subsidiaries such as Geely, which owns Polestar and Lynk & Co.
According to Bloomberg, there were 500 Chinese electric car manufacturers in China in . After fierce competition, only 100 manufacturers remained by .[14] According to Wired, as many as 300 manufacturers, both domestic and international, were offering electric vehicles in China in .[15]
Tesla opened its first "Gigafactory" outside the United States in Shanghai, China, in . Giga Shanghai was the first automobile factory in China fully owned by a foreign company, and was built in less than 6 months, becoming Tesla's main export hub.[16] In November , total production was 56,965 vehicles and capacity was estimated to be nearing 700,000 vehicles per year, becoming the largest of the Tesla factories.[17] There is an expansion planned to increase capacity to up to 1.1 million in , and possibly 2 million in the future, becoming the company's largest plant by far.[18]
Volkswagen manufactures electric vehicles in China through joint ventures such as Volkswagen Anhui (formerly JAC-VW), SAIC-VW (Anting), FAW-VW (Foshan), producing vehicles based on the Volkswagen MEB platform. Capacity is expected to reach a total of 1 million by , around 20% of Volkswagen's total automotive production in China.[19][20]
On 26 July , the Volkswagen Group announced its investment of $700 million in XPeng for purchasing 4.99% stake of the company. The VW Group will collaborate with XPeng to develop two VW brand electric models for the mid-size segment in the Chinese market in .[21][22] In February , XPeng and Volkswagen Group signed a technology cooperation and joint development agreement on platform and software.[23]
On 26 October , Stellantis acquired "approximately 20%" of Chinese electric vehicle manufacturer Leapmotor in a transaction worth €1.5 billion.[24] Under the terms of the agreement, Stellantis gained exclusive rights to sell, export, and manufacture Leapmotor products outside of China under the newly established joint venture Leapmotor International, of which Stellantis holds 51% of the capital.[25]
As of at least , the Chinese EV industry is in a strong competitive position in the developing world market, including southeast Asia.[26]: 58–59 Many southeast Asian countries have made policy Changes in an effort to attract investment from Chinese automakers.[26]: 59
BYD Auto Co., Ltd. is the automotive subsidiary of the Chinese multinational BYD Co Ltd,[27] headquartered in Xi'an, Shaanxi Province.[28] It was founded in January , following BYD Company's acquisition of Qinchuan Automobile Company in .[29] The company produces cars, buses, trucks, electric bicycles, forklifts and rechargeable batteries. The current model range of automobiles includes electric vehicles, plug-in hybrid vehicles and petrol engine vehicles.
It is the fourth largest plug-in electric vehicle (BEV and PHEV) company and fourth largest BEV company in the world, with 9.1% and 7% global market share respectively in .[30] The company is undertaking rapid expansion, with sales hitting over 100,000 per month in March , and is expecting to sell between 1.5 million to 2 million plug-in EVs in , around 3 to 4 times the volume in , possibly overtaking current world leader Tesla.[31]
The company also has a battery division, which is the world's fourth largest producer of EV batteries with a market share of 14.4% as of January .
SAIC Motor Corp., Ltd. (formerly Shanghai Automotive Industry Corporation) is a Chinese state-owned automobile manufacturer headquartered in Anting, Shanghai. Founded in ,[32] it is currently the largest of the "Big Four" state-owned car manufacturers of China, namely: SAIC Motor, FAW Group, Dongfeng Motor Corporation, and Changan Automobile, with car sales of 5.37 million, 3.50 million, 3.28 million and 2.30 million in respectively.[33]
The company produces and sells vehicles under its own branding, such as Maxus, MG, Roewe, Baojun (under SGMW), Wuling (under SGMW), Feifan, as well as under foreign-branded joint ventures such as SAIC-Volkswagen and SAIC-General Motors. In , domestic-branded cars took 52% of sales.[34][35] It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Feifan.
It is currently a Fortune Global 100 company, ranked 60 on the list. Including SGMW, it is also the third largest plug-in electric vehicle (BEV and PHEV) company and second largest BEV company in the world, with 10.5% and 13% global market share respectively in , selling under brand names such as Wuling, Baojun, Maxus, MG, Roewe and Feifan.[30]
Great Wall Motor Co., Ltd. (GWM)[36] is a Chinese privately owned automobile manufacturer headquartered in Baoding, Hebei. Founded in , it is currently the eighth largest automobile manufacturer in China, with 1.281 million sales in .
The company produces and sells vehicles under its own branding, such as GWM, Haval, WEY, TANK, POER, ORA. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as ORA.
Named after the Great Wall of China, the company is China's largest producer of sport-utility vehicles (SUVs) and pick-up trucks.[37] In , it was the third largest Chinese plug-in electric vehicle manufacturer in the Chinese market, with 4% of market share, selling under brand names such as Ora and Haval.[7]
Guangzhou Automobile Group Corp., Ltd. (GAC Group) is a Chinese state-owned automobile manufacturer headquartered in Guangzhou, Guangdong. Founded in , it is currently the fifth largest automobile manufacturer in China, with 2.144 million sales in .
The company produces and sells vehicles under its own branding, such as Trumpchi, Aion, Hycan as well as under foreign-branded joint ventures such as GAC-Toyota, GAC-Honda, GAC-FCA (Jeep) and GAC-Mitsubishi. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Aion and Hycan.
In , it was the fourth largest Chinese plug-in electric vehicle manufacturer in the Chinese market, with 4% of market share.[7] It sold over 20,000 units of EVs in March .[7][38]
Zhejiang Geely Holding Group Co., Ltd (ZGH), commonly known as Geely, is a Chinese multinational automotive company headquartered in Hangzhou, Zhejiang. The company is privately held by Chinese billionaire business magnate Li Shufu. It was established in and entered the automotive industry in with its Geely Auto subsidiary.[39] Geely Auto is currently the seventh largest automobile manufacturer in China, with 1.328 million sales in .
The company produces and sells vehicles under its own branding, such as Geely Auto, Geometry, Maple, Zeekr, under foreign-located subsidiaries, such as Volvo Cars, Polestar, Lynk & Co, Proton, Lotus as well as commercial only vehicles under the London EV Company, Ouling Auto and Yuan Cheng Auto (Farizon Auto) brands. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Geometry, Maple, Zeekr and Polestar.
The group sold over 2.2 million cars in .[40] The company sold over 17,926 plug-in electric vehicles in January .[41]
In , Chinese EVs and ranges (average 500 km and 100 kWh, trend to 1,000 km in the lead position):[42]
The battery industry is closely related to the EV industry as batteries constitute around 1/3 of the cost of EVs[8] and around 80% of lithium-ion batteries in the world are used in EVs.[9] It is estimated to be worth around $30 billion and expected to grow to around $127 billion by ,[43] with demand expected to reach Gwh by . Globally, manufacturing capacity is expected to increase to more than 5,500 GWh by , including 3,000 GWh of capacity announced by Chinese manufacturers to date.[9]
As of , total demand of the market was 296.8 GWh, over double of the amount in .[10] As of Q1 , LFP type battery market share reached 24.1%,[44] with Chinese manufacturers holding a near monopoly,[8] and is expected to rise further to surpass NCM type batteries in .[9]
Contemporary Amperex Technology Co, (CATL) is a Chinese battery manufacturer and technology company founded in that specializes in the manufacturing of lithium-ion batteries for electric vehicles and energy storage systems, as well as battery management systems (BMS).[45] With a market share of 32.6% in , CATL is the biggest lithium-ion battery manufacturer for EVs in the world, producing 96.7 GWh of the global 296.8 GWh, up 167.5% year on year.[46][47] The company has a manufacturing capacity target of >500 GWh by and >800 GWh by .[48]
Companies listed include all battery manufacturers, some of which may not be involved in EV battery manufacturing.[48]
E-vehicles use only electric motors and gearboxes, and have few parts requiring maintenance. Compared to traditional vehicles and excluding the battery, they are cheaper and easier to build.[55] However, building battery with sufficient capacity and discharge-cycles is a challenge.
BYD Company is a Chinese company that builds rechargeable batteries using a new technology that, according to the company, makes them safer than other lithium-ion models. In , it became the world's leading small battery company and is one of the world's largest manufacturers of rechargeable batteries. It is emerging as a leader in the technology sector.
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Tianjin Lishen Battery Joint-Stock Co. Ltd. is another China based battery manufacturer. The company has a partnership with Coda Automotive, a California based company, to develop a Coda electric vehicle and ultimately, batteries for use in electricity generation. The focus of the latter will be to provide energy storage for wind and solar energy generation.
In , the government battery subsidies fell by 30% and Chinese EV sales dropped.[56] [57]
While the shape of this industry is still emerging, electricity generation and the infrastructure to deliver energy appear to be the areas with the highest potential and relevancy to manage future energy use. According to consulting group Oliver Wyman, "some utilities are already engaging a specific area of the value chain, setting priorities for near-term, medium-term, and long-term initiatives. They have begun to model different market and business impact scenarios, with the goal of identifying the biggest upsides and pitfalls."[58]
Utilities have begun to develop focused strategies in areas where they are well positioned to serve the electric-vehicle value chain. At the moment, a variety of business design ideas are competing to shape the new marketplace. China has invested a great deal into this fundamental component of the value chain, and some of the principal facilitators are as follows:
An electricity provider, year-end , the Company finished approximately six billion kilowatt-hours of on-grid electricity, and had an attributable installed capacity of 1.5 million kilowatts, including 1.4 million kilowatts of thermal power and 100,000 kilowatts of hydropower.
The Company develops, manufactures and sells software and hardware products serving the power industry, and also provide system integration services. It also provides software and hardware services and system integration services for things such as power grid dispatching automation products, electricity market commercial operating systems, and electrical control automation products.
This company is primarily engaged in research, development, manufacture and distribution of automation, protection and controlling products for electric power systems. Specifically, it provides power grid and power generation equipment, transformers, electrical systems, power distribution network products, electrified railway products and direct current (DC) power distribution systems.
China has promoted the development of the electric vehicle (EV) industry through a series of encouraging policy measures to reduce petroleum fuel consumption and greenhouse gas emissions. Still, the market for electric cars is small. Against this backdrop, the Chinese government began phasing out EV subsidies in with the goal of eliminating them by . In recent years, the Chinese government has introduced a series of incentive policy measures to promote the development of the electric vehicle industry, such as consumer subsidies, various tax exemptions, toll-free, charging infrastructure construction, research and development grants, etc. (R & D) electric vehicle manufacturers.[59] In February , China approved a joint venture between subsidiaries of BMW and Mercedes-Benz. They would work on building a rapid charging network in the country.[60]
In the European Union raised tariffs on EVs imported from China following an anti-subsidy probe, prompting China to lodge a complaint with the World Trade Organization.[61]
In , the United States and Canada imposed a 100% tariff on all EVs imported from China.[62]
Electric vehicles (EVs) have emerged as the sole growth area in the automotive market, amid a decline in overall car sales since their peak in . As the world transitions towards a sustainable future, the EV market is expected to foster innovation and drive growth in one of the economy's crucial sectors. China stands at the forefront of this transformation with its thriving EV industry, offering foreign companies a plethora of opportunities driven by government incentives, environmental regulations, favorable policies, and technological innovation.
We discuss investment prospects in China’s EV industry from a supply chain perspective in this industry brief.
Enterprise search data show that China has more than 600,000 existing NEV-related enterprises. The year saw 239,400 newly added enterprises, an increase of 40.34 percent year-on-year. China’s new energy vehicle market has been developing rapidly in recent years, with growing market participants and competition in the industry. Major industry players include BYD Auto, Tesla China, SAIC-GM-Wuling, Aion, and Changan Automobile. These five players have more than 50 percent market share combined.
Globally, China holds a dominant position in the EV supply chain, with over three-quarters of the world’s battery production capacity. The battery is among the most important components of an EV and accounts for 40 percent of the vehicle’s total price. Moreover, China houses more than half of the world's processing and refining capacity for lithium, cobalt, and graphite, which are essential materials for making EV batteries. Specifically, China boasts 70 percent of the global production capacity for cathodes and 85 percent for anodes.
China benefits from its inherent supply chain advantages, lowering costs in logistics, labor, and land management. Moreover, the large EV market enables economies of scale. Compared with Western markets in the US and Europe, China's EV manufacturing industry has a cost advantage of 20 percent.
On June 21, , China unveiled a substantial RMB 520 billion (US$72.3 billion) tax incentive package spanning four years. This package is designed to offer tax breaks for EVs and environmentally friendly vehicles. Notably, it provides a complete exemption from purchase tax for NEVs purchased in and , with savings of up to RMB 30,000 (US$4,170) per vehicle. From to , the exemption will be halved and capped at RMB 15,000 (US$2,078). The goal of this initiative is to stimulate growth in the automotive industry, especially in light of sluggish auto sales.
Many regions have also introduced local initiatives. For instance, Shenzhen released the "Guidelines for Financial Support to the High-Quality Development of New Energy Vehicle Industry Supply Chain" in . This proposal aims to enhance cross-border financial services to support NEV enterprises. Similarly, Shanghai issued the "Implementation Plan for Accelerating the Development of New Energy Vehicle Industry (-)" to drive the growth of the NEV industry in their region.
Currently, in China, the distribution of the NEV industry is similar to that of the traditional automobile sector, with a concentration in key areas such as Beijing-Tianjin-Hebei, the Yangtze River Delta, the Pearl River Delta, and the central region.
The upstream industry involves the supply of raw materials and components for vehicle manufacturing. It encompasses extraction of minerals, namely lithium and cobalt, and manufacturing of major parts, including power battery, drive motor, and electronic control system. Most of these minerals are concentrated in a few countries, including the Democratic Republic of Congo, Argentina, Chile, and Australia. The dispersion and concentration of these key materials make the global supply chain vulnerable and susceptible to disruptions caused by developments linked to geopolitics, shifts in trade alliances, and corporate consolidation.
China currently holds a prominent position in this stage, accounting for 75 percent of global lithium-ion battery production and 70 percent of cathode capacity. It stands as the leading refiner of battery metals globally and currently hosts a significant share of battery cell manufacturing capacity, anode, and electrolyte production as well as battery component manufacturing.
The midstream industry covers the vehicle manufacturing process. China is a major player in this industry stage, with a robust manufacturing ecosystem in place for electric cars, commercial vehicles, and special-purpose vehicles. Supportive government policies and investments have contributed to the rapid growth of the automotive manufacturing industry, making China a leading force in the global electric vehicle market.
The downstream segment of the EV supply chain comprises charging services and after-market services. This includes charging equipment infrastructure, automobile finance, insurance, trading, automobile repair and maintenance, and automobile dismantling and recycling. In recent years, the number of EV charging piles in China has been steadily increasing. Private charging piles are growing at an even faster rate compared to public charging piles. However, there is still a significant gap between the current number of charging piles and the market demand, leaving ample room for further development in the charging infrastructure. According to industry researchers, in , China had a total of 1,751,000 charging piles—874,000 private charging piles and 807,000 public charging piles. By September , the number of publicly owned charging piles rose to 1.044 million units.
With the accelerating pace of digitization and electrification, automobile products, as well as its operation and consumption, have changed dramatically. Specialized components, such as battery, power semiconductor devices, chips, system software, video sensors, LIDAR, etc., have become integrated sections of the supply chain. The automotive industry is transforming from a traditional manufacturing-assembly industry to a technology-intensive industry.
In fact, EV companies work with a flatter and more flexible supply chain system, with a faster pace of product iteration, to adapt to market changes. Significantly, Tier-2 and Tier-3 suppliers can now directly supply new car manufacturers like Tesla, bypassing traditional Tier-1 companies. This has led to a rapid integration of these manufacturing and service suppliers into the automotive sector. Internet giants, such as Baidu, Tencent, Alibaba, as well as electronic communications giants like Huawei and Xiaomi, are making their way into the field of new energy vehicles and intelligent driving cars through various means. These trends impact how traditional automotive enterprises operate.
For example, BMW AG announced in that it will be procuring large cylindrical batteries for its upcoming generation of electric vehicles (EVs) from CATL and EVE Energy (a Tier-2 Chinese battery supplier). This collaboration signifies the growing trend of automakers partnering with battery manufacturers to produce batteries specifically for their own vehicles.
However, such an ideal case may not always work out. Tier-2 and Tier-3 producers face significant challenges to remain competitive in the EV market. This is because established battery incumbents like CATL can offer preferential pricing due to their large-scale operations. Further, while there is a growing demand in China, the pace of capacity expansion seems to be outstripping actual demand, resulting in oversupply and forcing producers into fierce competition. As a result, it becomes crucial for these producers to find customers in non-China markets.
Chinese battery suppliers venturing into overseas markets also hope to service the supply shortages in Europe and the US, besides establishing production facilities near OEM clients. In , the total number of NEV exports reached 679,000 units, showing a significant year-on-year increase of 1.2 times. The demand outlook for the overseas market remains promising, driven by the accelerated shift of global automakers towards EVs and the ongoing lag in battery supplies. Leading Chinese suppliers are expected to maintain their technological and cost advantages over their global counterparts.
Further, the price surge of battery-grade lithium carbonate has pushed up the manufacturing costs of vehicle manufacturers. The fast growth of global demand for EVs, batteries, and materials may even drive up the price of EVs, not to mention the volatility resulted from a concentrated supply chain.
These supply chain issues are compounded by hindering regulatory developments. One major obstacle is the shortage of chips, due to the CHIPS and Science Act, which has significantly impacted the entire automotive industry. Tight control over semiconductor chips have resulted in insufficient production and a structural imbalance, thereby driving up the production costs for vehicles. In addition, competing legislation, such as the Inflation Reduction Act (IRA), aiming to strengthen the supply chain in the US, may bar Chinese companies’ direct investments in the US market.
Under China’s latest Negative Lists for Foreign Investment Access, there are no special restrictions on foreign investors to invest in the EV industry. That is to say, foreign investors can build wholly foreign owned enterprises (WFOEs) in specific areas of the EV supply chain, such as EV auto parts, batteries, chargers, and related industries. For example, Tesla's success with its Gigafactory in Shanghai showcases the impact of increased foreign competition in China's EV market. WFOEs encourage technological transfer and innovation. Yet, with the rise of Chinese domestic companies and challenges in the global supply chain structure emanating from geopolitical factors, foreign enterprises are advised to carefully consider market entry.
Another approach that foreign companies can adopt is to establish joint ventures with Chinese partners. Joint ventures enable collaboration in multiple areas, such as manufacturing, technology development, and distribution. This can involve forming alliances for specific projects, sharing research and development efforts, or jointly exploring new business opportunities.
Further, foreign companies can invest directly in Chinese EV startups, manufacturers, or related infrastructure projects. Investors can also engage in technology transfer agreements with Chinese partners, sharing technological expertise, patents, or licensing agreements to facilitate the development and production of EVs in China. Such collaboration can help foreign companies gain access to the Chinese market while benefiting from local manufacturing capabilities.
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