Analysts explain how China EV sector can navigate protectionist backlash, subsidy rollback

China’s largest EV segment did two big things last year. First, China conquered Japan as the world’s largest auto supplier, thanks in part to cheap Chinese EVs. And secondly, EV giant BYD briefly acquired Tesla the best seller in the world of battery electric vehicles in the last quarter of 2023. (Tesla since he also took first place.)

But the threat of a flood of cheap EVs is taking its toll on foreign governments. The European Union launched a policy of anti-subsidy investigation against the Chinese EV industry last year, which may lead to higher prices for Chinese EVs. The US-which sees Chinese cars a A national security threat– warns that “the amount of energy” in China could disrupt global markets.

But at the Fortune Innovation Forum in Hong Kong last week, Roger Atkins, founder of Electric Vehicles Outlook, an EV specialist, said that previous car manufacturers had found a way to deal with safety.

“We’ve been there before,” Atkins said. “Japan had its export threat to the US and Europe back in the 1970s and 1980s. The Europeans and the Americans invested in tariffs, and then the way the Japanese went was to put factories in those areas. ”

Atkins then pointed to BYD’s new plant in Hungary as an example of how the Chinese carmaker is expanding globally. (BYD is rebuilding factories in Thailand and Braziland is thinking of making new ones in Indonesia and Mexico.)

Christopher Beddor, deputy director of China research at Gavekal, saw parallels with the Beijing-led campaign to promote solar and wind power industries. “China is slowing down on industrial policy,” he said.

“The central leadership will say: We want to go after other companies. Everyone is looking at this, it is done in a campaign plan,” he said later.

Beijing has now become concerned about the scope of the plan, with one official in early January promising to take “powerful methods” to cancel new EV projects that did not meet their needs.

This push-and-pull is part of China’s industrial playbook, Beddor said. “[Officials] go forward, [then] sometimes, there is awareness [they’ve] go too far. They pay it back,” he said.

Beijing began offering tax and infrastructure incentives in early 2010, helping to promote more than 500 EV companies at a time. This number is down to about 100 companies.

China is now withdrawing its support for the sector, which could lead to a revival of the sector as EV companies, many of which have never made a profit, exit the market.

However, Paul Gong, head of automotive research at UBS, said at the Forum last week that there was “fierce competition” in the sector – among them. basics, automakersand modern giants– It has been good for business.

Due to market competition, “Chinese automakers have lowered EV prices in comparison [internal combustion engines],” he said. “This market has brought new things [and] good game.”

BYD and Tesla

Gong, at the Summit last week, also discussed the differences between BYD and Tesla, both vying for the position of the world’s top EV seller.

After the teardown of the Tesla Model 3 five years ago, Gong said the UBS team was “surprised at how far ahead Tesla was in terms of technology leadership.” However, a similar explosion of the BYD car, just a few years later, revealed that the company’s technological prowess was approaching that of Tesla.

“There is little difference [in] technology, but different fundamentals,” he said. Tesla prioritized high speed and autonomous driving, while BYD focused on space and 5G connectivity, he continued.

However, Gong noticed a big difference: the BYD car, similar to the Model 3, was reduced by 15% compared to production at Tesla’s Shanghai Gigafactory.

Unlike Tesla, BYD produces its own battery, Blade Battery, and therefore does not have to rely on an external supplier such as CATL or LG Energy Solutions. (The battery can make up 40% of the cost of an EV.)

“We were surprised at how quickly BYD worked,” Gong said.



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