中國EV的崛起及影響-The rise of Chinas EV sector and its implications for the world

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20231

Economicwatch

TheriseofChina’sEVsectoranditsimplicationsfortheworld

JoneLorenteSalaberria/LeXia

April2023

ThesurgeofChina’sEVmarketisreshapingtheglobalmarket

Theautomotiveindustryiscurrentlyundergoingasignificanttransformationwherethegrowthofelectricvehicles(EVs)isplayingacrucialrole.Theglobaltrendofdecarbonizationandsustainabilityhaspromptedthegovernmentsandautomotivemanufacturersworldwidetoreducetheircarbonfootprint.Consequentially,EVsemergeasaviableandattractivesolutiontothechallengeofclimatechange.Moreandmorecountrieshavedeployedpolicyinitiativestoencouragetheadoptionofthesevehicles.

AccordingtotheInternationalEnergyAgency(IEA),globalEVsaleskeepgrowingrapidlyinrecentyears,withapproximately6.6millionEVssoldin2021,doublingthefigureofthepreviousyear.Bloomberg'sNewEnergyFinance(BNEF)reportalsoindicatesthatEVsalesaresettoincreaseto56millionby2040,representingapproximately58%ofglobalpassengercarsales.

ChinahasemergedasagloballeaderintheEVmarket.Itsdomesticmarketisthelargestoneintheworld.AsreportedbyChinaAssociationofAutomobileManufacturers(CAAM),Chinasoldapproximately6.9millionEVsin2022.ItsdominanceinthemarketisinpartduetoanationalstrategythatprioritizesthedevelopmentandadoptionofEVs.TheChinesegovernmenthasimplementedpolicyinitiativestosupporttheproductionandpurchaseofEVs,suchastaxexemptions,subsidies,andinvestmentsincharginginfrastructure.Additionally,foreignautomakers,suchasTesla,havebeenallowedtobuilduptheirfactoriesinChina.

However,China'sdominanceinthesectorisnotlimitedtoitsdomesticmarket.ThecountryhasalsobecomeamajorexporterofEVs,withasignificantmarketshareinEVexports.

ThisreportaimstoprovideanoverviewofChina'sEVmarketanddrawitsimplicationsfortheglobalautomotiveindustry.Throughtheanalysisofvariousdatasources,includingsalesfigures,marketforecasts,andpricingtrends,wewillexaminethekeyfactorsthathaveledtoChina'sfastriseintheEVmarket.

ElectricrevolutioninChina’sdomesticautomarket

China’sdomesticEVmarketgrewexponentiallysince2019,withsalesincreasingsignificantlyinthefollowingyears.AsreportedbyChinaAssociationofAutomobileManufacturers(CAAM),Chinasoldapproximately6.9millionEVsin2022,whichrepresentsasubstantialincreasefrom2021,whenChinasoldaround3.3millionEVs.Incontrast,salesofnon-EVpassengercarsinChinahavebeenrelativelystagnantinrecentyears,withsaleshoveringaround20millionunitsperyearsince2019(Figure1&2).Thisrapidgrowthisexpectedtocontinueinthecomingyears,withtheIEAandBNEFforecastingthatChinawillaccountforaround40%ofglobalEVsalesby2030.

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20232

Figure1.SIGNIFICANTINCREASEINEVSALESINRECENTYEARSINCHINA

8mn7mn6mn5mn4mn3mn2mn1mn0mn

400%350%300%250%200%150%100%50%0%-50%

2020-Q1

2020-Q2

2020-Q3

2020-Q4

2021-Q1

2021-Q2

2021-Q3

2021-Q4

2022-Q1

2022-Q2

2022-Q3

2022-Q4

2023-Q1*

Restof

passengercar

EVYoYgrowth

EV

Numberofelectricvehiclesvsrestofvehiclessold,andEVsalesgrowth(%).Source:BBVAResearchbasedondatafromChinaAssociationofAutomobileManufacturers(CAAM)

Figure2.CHINAWASTHECOUNTRYTHATMOSTEVsREGISTEREDIN2021

China

Europe

UnitedStates

Others

2.28Mn

0.63Mn

0.58Mn

3.33Mn

1mn

0mn

3mn

2mn

4mn

Numberofelectriccarregistrationsintheworldin2021.

Source:BBVAResearchbasedondatafromInternationalEnergyAgency

ChinatakestheleadinglobalEVmarket

Theglobalelectricvehiclemarkethaswitnessedafastgrowthinrecentyears,inparticularduringtheperiodof2019-2022(Figure3).TheglobalmarketisdominatedbytheAsia-Pacificregion,whichaccountsformorethanhalfofthetotalEVsalesintheworld;followedbyEuropeandNorthAmerica.

OverthesameperiodChinasuccessfullyexpandeditsmarketshareintheglobalsales,increasingfromlessthan30%in2019to41.5%in2022.Thatbeingsaid,EVsalesofChinaandEuropewere1.7and1.5millionin2019respectively.However,China′sEVsalesincreasedto6.9millionin2022,comparedto4.9millioninEurope.InthisareaJapanandKorealagfarbehind.TheircombinedEVsalesin2022werestillclosetothe2019levelinChina.2.3millionEVsweresoldinNorthAmericain2022,representinga148%growthfrom2019butstillaccountingforasmallershareofglobalEVmarket.(Figure4)

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20233

Figure3.CHINAWASTHEGLOBALEVTOPSELLERIN2022

16mn

14mn

12mn

10mn

8mn

6mn

4mn

2mn

0mn

2019202020212022

Europe

SouthAsia

NorthAmerica

GreaterChina

MiddleEast/Africa

Japan/KoreaSouthAmerica

EVsalesintheworldbyregion2019-2022(millions).

Source:BBVAResearchbasedondatafromS&Pglobalvehicledemandtracker

Figure4.CHINA’SINCREASEINSALESWASTHELARGESTAMONGMAINPLAYERS

SouthAmerica

Europe

MiddleEast/Africa

GreaterChina

Global

SouthAsia

NorthAmerica

Japan/Korea

382%

302%

285%

228%

197%

148%

138%

38%

0%

100%

300%

200%

500%

400%

EVsalesgrowthbetween2019and2022(%).

Source:BBVAResearchbasedondatafromS&Pglobalvehicledemandtracker

Apparently,theEVmarketisexperiencingafastergrowthinChinathaninothercountries.Lookingahead,themarketshareoftheUSandotherregionsareexpectedtopickupinthecomingyears.However,Chinaisexpectedtoremainthetopsellerandisprojectedtosell16millionunitsby2030(Figure5).WhileEuropeisalsoexpectedtoincreaseitssales,thegrowthrateisanticipatedtobelower,withsalessurpassing8millionunitsby2030.TheUnitedStates,whichhasthusfarbeenlaggingbehind,isexpectedtoexperienceasignificantsurgeinsalesandreach6millionunitsin2030,stillsignificantlylowerthanthesalesinChinaandEurope.

Figure5.CHINAISPOISEDTOMAINTAINITSPOSITIONASEVsMAINSELLER,EVENIFTHEU.S.GAINSGROUND

60%

50%

40%

30%

20%

10%

0%

20232024202520262027202820292030

China

U.S.

Europe

Japan

Others

GlobalEVunits’saleforecast(%).

Source:BBVAResearchbasedondatafromBloombergNEF

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20234

CATLBYD

LGEnergySolutionsPanasonic

SKOnSamsungSDI CALB Guoxuan SunwodaSvolt

Other

What’sinChina’sformulaofsuccess

China'ssuccesscanbeattributabletoanumberoffactors.First,thecountryhasanationalstrategytopromotethedevelopmentanduseofEVs.ThetraditionalautomotivesectorwasalreadysaturatedbythetimeChinabegantomakeeffortstoparticipateinitasearlyasinthe1990s.AlthoughChinastillhadadifficulttimetocatchupwithothermoreestablishedplayersinthemarket,suchastheUS,Japan,andGermanyatthebeginningstage,itsawanopportunitytogainacompetitiveadvantagebyfocusingonthedevelopmentoftheEVmarket.Undertheumbrellaofthisnationalstrategy,theChinesegovernmentimplementedvariouspolicytoolsincludingtargetedsubsidies,taxexemptions,aswellasotherincentivestopromoteEVadoption.

Second,Chinadidn’tmakecarsbehindcloseddoors.ThesubsidieswereinitiallytargetedatChinesemanufacturersbutwereextendedtoforeignmanufacturersin2018,includingTesla,whichestablisheditsGigafactoryinChina.Thismodificationwasofgreatimportancesinceitincreasedcompetitionbetweenbothlocalandforeignmanufacturers,drivingthegrowthofEVsinChina.

Lastbutnotleast,China'ssuccessintheEVmarketisalsobasedonitstechnicalbreakthroughsinrelatedareas,particularlythedevelopmentofbatteries.ChinesebatterymanufacturersareleadingtheglobalEVbatterymarketnow,withthelion’sshareofthemarket(Figure6).In2022Chinasold60%ofbatteriesintheworld.WiththeincreasingdemandforEVs,ChinesemanufacturershavebeeninvestingheavilyinthedevelopmentofEVbatterytechnology,resultinginsignificantcostreductionsandimprovementsinbatteryperformance.

Figure6.MORETHAN60%OFGLOBALEVBATTERYSALESAREDOMINATEDBYCHINESECOMPANIES

37.1%

13.

12.3%

6%

7.7%5.9%

5.0%

0%

8.

4

2.8%1.7%

1.3%

7%

0%

China

5%

10%

KoreaJapan

15%

20%

25%

30%

35%

40%

GlobalEVbatterymarketshareasofNovember2022YTD(%)

Source:BBVAResearchbasedondatafromBloomberg

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20235

ChinaisalsoaglobalEVexportpowerhouse

China’ssuccessintheEVmarketisnotjustconfinedtoitsdomesticmarket.NowithasasignificantpresenceintheglobalEVexportmarket,reflectingChina’sstrategyinthesector(Figure7&8).

Figure7.CHINA’SSHAREINGLOBALPASSENGERCARSEXPORTSWASMINIMALIN2022…

Globalexportsvalueshare:passengercars(HS8703)(%).

Source:BBVAResearchbasedondatafromTrademap

Figure8.HOWEVER,INEVEXPORTS,ITLEADSALONGSIDEGERMANY

Globalexportsvalueshare:EV(HS870380)(%).

Source:BBVAResearchbasedondatafromComtrade

In2022,thetotalvalueofChina'sEVexportsreached24millionUSD,makingitthesecondlargestexporterofEVs,justbehindGermanywhoseexportsamountedto26millionUSD.WhileGermany’sexportsgrewatanaverageof89%from2019to2022,China′sgrowthachievedanaverageannualrateof292%overthesameperiod.

InthisrespectTesla’sGigafactoryinShanghaicontributedtoalot.Otherforeign-brandjointventuresalsoplayedasignificantroleinboostingChina'sEVexports.Indeed,manyinternationalcompanieshaveestablishedjointventureswithlocalChinesemanufacturers,allowingthemtotakeadvantageofChina'sextensivesupplychainandcompetitivepricingtogainafootholdintheworld'sEVmarket.Lookingahead,ChinacouldevenbeatGermanytobecomethetopEVexporterifsuchafastpaceistobemaintained.

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20236

Figure9.GERMANYHASBEENLEADINGEVWORLDEXPORTSINVALUE,CHINASPIKEDIN2022

30,000mn

25,000mn

20,000mn

15,000mn

10,000mn

5,000mn

0mn

Belgium

2019

China

Germany

2020

Japan

UnitedKingdom

2021

UnitedStatesofAmerica

2022

Restoftheworld

GlobalEVexportsvalue(USDbn)

Source:BBVAResearchbasedondatafromComtrade

Chinesestate-ownedcarmakersdominatedomesticEVmarket

China'sEVmarketisdominatedbyafewChinesekeyplayers,manyofwhicharestate-ownedenterprises(SOE).BYDAuto,GAC(SOE)andSAICMotor(SOE)arethetopthreeEVmanufacturersinChina,followedbyTesla(Figure10).

Figure10.CHINAISBYFARTHEMAINSUPPLIERFOREVINAPAC

Rest

NEXTEV(Nio)LixiangGeely

Chang'anSAICFAWDFM

Tesla

SAIC,WulingGAC

BYD

1

,161,480

120,

13

165

5,303

232,626240,129

254,81734

3

8,094

50,875

441,674

458,061

680,617

1,590,263

0200,000400,000600,000800,0001,000,0001,200,0001,400,0001,600,0001,800,000

OtherChina

UnitsofEVsalesinAPAC.

Source:BloombergNEF

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20237

1.BuildYourDreams(BYD)AutoCo.LtdisaChineseautomakerthathasgainedsignificanttractionintheEVmarket.Itsold1.6millionelectricvehiclesintheAsia-Pacificregionin2022.BYDstarteddevelopingrechargeablebatteriesin1995andhasaverticallyintegratedmodelcreatingmostpartsofthevehicle,whichgivesitanimportantadvantageoverothercarmakersthatneedtobuybatteries.

BYDisnowfocusingintheexternalmarket.IthasalreadyheadquartersandaftersalesinEurope(NetherlandsandUK),andbuiltitsfirstbusfactoryinEurope(Hungary)in2017.ItnowconsiderstoestablishitsfirstcarfactoryinEurope,andshortlistedGermany,France,Spain,PolandandHungary.

TheChinesecarmakerisalsobuildingitsfirstEVproductionlinein

SoutheastAsia,inThailand.

InLatinAmericaithasalreadybuiltanelectricbusfactorysince2015inBrazil.ItwantstomoveforwardtobuildsomecarfactoriesandbatteryproductionplantsbytakingadvantageofBrazil’smineralresources.

2.GACMotorisaChineseautomobilemanufacturingcompany,whoseparentcompany,GuangzhouAutomobileGroupCo.(GACGroup)isstate-ownedenterpriseandproducescarsforothercarmakersasMitsubishi,ToyotaorHonda,amongothers.However,GACMotorisnotspecializedinelectricvehicles.ItsEVarm,GACAionhasbeenfocusedinChina.ThecompanyhasR&DcentersinMilan,LosAngelesandSiliconValley,toenhanceproximitytotheglobalmarket.ItscombustionlineshaswiderpenetrationinMiddleEastandLatinAmerica.GACMotorhasnotannouncedanyEVglobalsalesobjectivesyet.Itsoverseaexportsin2022wereonly89,000units,includingbothcombustionandelectricvehicles.

3.SAICMotorCorporationisastate-ownedenterpriseanditisChina’sbiggestcarmaker.Thecompanyproducesawiderangeofvehicles,includingelectricvehicles,undervariousbrandssuchasMG,Roewe,Maxus,IMMotors,RisingAutoandjointventuressuchasSAICGM’s,WulingorVolkswagen.In2022,SAIC

sold713thousandNEVofwhich458thousandunitscamefromitsjointventureSAIC-GM-Wuling,andtherest

throughitsnewNEVmarquesRisingAutoandIM,andSAIC-GMandVolkswagenjointventure.

Thecorporationintendsto

sell1.5million

new-energyvehiclesacrosstheworldin2023.

OthernotableelectricvehiclemanufacturersinChinaincludeTesla,whichhasasignificantpresenceintheChinesemarketandhasbeensuccessfulinEVstoChineseconsumers.Additionally,ChinesebrandssuchasDongFeng,FAW1,GeelyorChang’anallhavetheambitionstoleveragetheirexpertiseandsupplychainsto

developtheirownNEVproducts.Forexample,Chang’ansetitsownEVsalestarget

of1millionunitsby2025.

FastchangingEVcostenablingChinatodisruptthemarket

OneimportantdrivingfactorofEVmarketgrowthisitscostrelativetotraditionalgasolinecars.Ingeneral,theaveragepricesofEVsandgasolinecarshavebeenchangingovertimeandvarybyregion.

InChina,thegapbetweentheaveragepricesofEVsandgasolinecarsnarrowedfrom2015andwasinvertedin2018(Figure11).TheaveragepriceofEVshasbeenlowerthantheaveragepriceofgasolinecarsinrecentyears.In2022,theaveragepriceofagasolinecarinChinawas€23,805,whiletheaveragepriceofanEVwas€22,830.ThismaybedueinparttogovernmentsubsidiesforEVsinChina,butalsoreflectsthecostreductionofEVs.However,

batterypricesincreased7%

in2022,drivenbyrisingcostsformaterialsincludingcobalt,nickelandlithium.Surgingbatterydemandhasnotbeencoveredbynewsupplyinminerals.Theshifttolower-costlithiumironphosphate(LFP)batteries,whichcontainnonickelorcobalt,couldavoidtheadverseimpactofhigherbatterypricesonEVprices.

1:FAWisthesecondofthe"BigFour"state-ownedcarmanufacturersofChina,togetherwithSAICMotor,DongfengMotorCorporationandChanganAutomobile.

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20238

Figure11.CHINESEEVAVERAGEPRICESARELOWERTHANOTHERREGIONS’,ANDLOWERTHANITSGASOLINECARSAVERAGEPRICES

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

20152016201720182019202020212022

ChinaEV

USAGasoline

USAEV

EuropeGasoline

EuropeEV

ChinaGasoline

AveragegasolinecarandEVpricesforChina,USAandEurope(EUR).

Source:BBVAResearchbasedondatafromJATOdynamics

IntheUS,EVshavebeenmoreexpensivethangasolinecarsonaverage,butthegaphasbeennarrowinginrecentyears.In2015,theaveragepriceofagasolinecarintheUSwas€33,560,whiletheaveragepriceofanEVwas€53,325.By2022,theaveragepriceofagasolinecarhadincreasedto€39,000,whiletheaveragepriceofanEVhadincreasedto€62,920.Thisislikelyduetoanumberoffactors,including

lackofgovernmentincentivesfor

EV

adoptionandthehighercostofbatteryproductionintheUS.

InEurope,theaveragepriceofEVshasincreasedfrom€49,680in2015to€55,880in2022.ThisispartlyduetothehighercostofEVproductioninEuropecomparedtootherregions.However,theincreasingpopularityofEVsinEuropeisexpectedtodrivedownpricesinthecomingyearsasmoremanufacturersenterthemarketandproductioncostsdecrease.

GivenmorecompetitivepricesofChineseEVscomparedtothoseproducedinEuropeandtheUSandamoredevelopedbatterysector,wemayseeincreasedpressureonEuropeanandUSautomakerstolowertheirEVpricesinordertoremaincompetitive.BYD,SAIC,andGACMotorareinvestingheavilyintheirbatterybusinessestoincreasetheirproductioncapacity,improvebatterytechnology,andreducecosts.GeelyandNIOhavesetuptheirownbatterysubsidiarieswiththesameobjectives.ThiswillhelpthemtobettercompeteinthegrowingEVmarketandputevenmorepressureonpricesasthesupplyofbatteriesincreases.

TheriseofChina’sEVsectoranditsimplicationsfortheworld/April20239

China’sEVdominancefacingchallenges

ThegrowthofglobalEVmarketisdrivenbyacombinationoffactors,includinggovernmentincentives,advancesinbatterytechnology,andincreasingenvironmentalconcerns.InChina,governmentpoliciesandsubsidieshaveplayedasignificantroleindrivingEVmarketgrowth,makingittheworld'slargestEVmarket.

China'sdomesticEVindustryiswell-developed,withmanyestablishedmanufacturersandanextensivesupplychain.ThishasallowedChinesecompaniestoproduceEVsatacompetitivecost,makingthemattractivetoconsumersfromothercountries.Moreover,foreign-brandjointventuresandforeignbrandsmanufacturinginChinahavealsocontributedtothegrowthofChina’sEVexports.Tesla'sGigafactoryinShanghaiisthebestexampleinthisrespect.

Meanwhile,EVrelatedchallengestoChinaremainfraught.Risingbatterycostsdrivenbyincreasingcostsofmaterialslikecobalt,nickel,andlithium,coulddampenconsumers’demandforEVs.ThegrowingdominanceofChineseEVmakersintheglobalmarketposessignificantchallengesfortraditionalautomakersintheUSandEurope.IthaspromptedtheirgovernmentstounveilsomeprotectionistpolicyinitiativestoweaktheEVsproducedinChina.AsitishappeningintheUS,theauthoritiesdonotprovidetaxincentivestotheEVsthatarenotmadeintheUS,includingtheirbatteries.TheUSgovernmentisalsoseeking

toblocktaxcredits

foranEVbatteryfactorythatFordwantstoestablishbyuseofChineseCATL’stechnology.

Allinall,webelievethatChinawillcontinuetobeoneofthetopplayersinglobalEVmarket,thankstoitssuper-sizeddomesticmarketandwell-establishedtechnologicalcompetitiveness.China’scommitmenttoachieveitsnet-z