BYD, a prominent electric vehicle manufacturer in China poised to surpass Tesla in global EV sales, released a video earlier this year that sent shockwaves through the automotive industry. The video encouraged Chinese EV manufacturers to “challenge traditional norms and establish new world-class brands.”
This prospect is not unattainable. One significant advantage for Chinese EV manufacturers as they expand globally is their control over the supply chain, enabling them to maintain cost competitiveness. For instance, BYD owns the entire supply chain for its EV batteries, spanning from raw materials to the final battery packs, and designs its own semiconductors.
This cost advantage has created anxiety among established players in the auto industry, spurring them to seek solutions as Chinese cars gain traction in markets such as Europe, Southeast Asia, Australia, and beyond.
The CEO of Addionics, Moshiel Biton, highlighted the prevailing sentiment among automakers: “What we hear from carmakers today is, ‘We don’t need longer range, we want lower costs.'” Similarly, Vincent Pluvinage, CEO of OneD Battery Sciences, noted that during recent meetings with European carmakers, the consistent theme was “‘Reducing costs is now more important than anything else.'”
Earlier in the year, Bill Ford Jr., executive chairman of Ford Motor, issued a warning about China’s rapidly evolving EV industry, expressing that U.S. automakers are not fully prepared to compete against them. Despite subsidies in the Inflation Reduction Act providing some protection, Ford emphasized the need to be ready for the eventual entry of Chinese EVs into the American market.
In May, Ford CEO Jim Farley identified the Chinese as the primary competitors in the emerging electric vehicle landscape, stating, “The Chinese are going to be the powerhouse.” This sentiment aligns with the projection that 2023 could mark the year China surpasses Japan as the world’s leading car exporter.
Despite occasional challenges, such as a recent recall of an inexpensive Great Wall China EV in Australia, the perception of Chinese EVs has transformed. Elon Musk, CEO of Tesla, acknowledged the competitiveness of Chinese EVs, a significant shift from his earlier skepticism about BYD cars in 2011.
Several other Chinese EV makers, including Nio, Xpeng, and Li Auto, are gaining prominence. In Europe, affordable Chinese EVs have already entered the market, with BYD’s Dolphin hatchback priced nearly 30% below the VW ID.3 hatchback.
Looking ahead, even more affordable Chinese EV models, such as BYD’s Seagull priced at around $11,000, could disrupt overseas markets. Automakers are increasingly focusing on affordability, recognizing the need to compete with Chinese manufacturers, according to Andy Palmer, chairman of Brill Power.
Tesla, acknowledging the need for affordability, plans to produce a 25,000-euro ($26,893) car at its Berlin factory. Elon Musk, speaking at the Dealbook summit, praised China’s manufacturing prowess and suggested that Chinese automakers might indeed “demolish the old legends.” He even entertained the idea that the top 10 car companies could include Tesla followed by nine Chinese counterparts.
