Chinas EV Surge: Key Industry Changes and Future Trends

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This issue covers key developments in Chinas electric vehicle landscape. We start with a strategic analysis of China’s automotive industry, highlighting production capacities and emerging trends. Notably, EV sales in China have surpassed combustion vehicles for the first time—a landmark achievement.

We also dive into Nio's "chicken-egg dilemma" and Chinas challenge to EU EV tariffs at the WTO. Discover why Stellantis is partnering with Leapmotor, Cherys plan to open an EV factory in Kenya, and how Tesla faces growing competition from Chinese innovators. Additionally, we explore new market entrants like Meizu’s DreamCar MX and Foxconn’s launch of EV manufacturing in China.

Enjoy reading and stay ahead with China EV Pulse!

Chinas Automotive Industry: A Strategic Analysis of Production Capacities and Future Trends

A recent study by ANP Management Consulting GmbH in Beijing highlights the intricate dynamics and regional distribution of automotive production capacities in China. The analysis, led by Peter Nagel, Managing Partner at ANP, and Bi Lei, Head of ANP's China Analysis Team, reveals significant insights into the structure and challenges faced by the Chinese automotive sector.

Key Findings:

1. Production Concentration: The top 15 Original Equipment Manufacturers (OEMs) in China control 60 % of all automotive factories, indicating a high market concentration.

2. Regional Dominance: The provinces of Guangdong, Jiangsu, and Zhejiang host 32.5 % of all production facilities, with central provinces also playing a crucial role. In contrast, the western and northern regions are less represented in the production landscape.

3. Capacity Distribution: The average production capacity per plant is 173,620 units, with a median of 150,000 units.

4. Shifting Market Leaders: Traditional automakers like Great Wall Motors and Geely Auto lead in the number of production sites, but electric vehicle manufacturers such as BYD are rapidly gaining ground. Notably, BYD has surpassed Tesla as the worlds largest EV manufacturer and continues to expand its capacity.

5. Positive Correlation: A strong positive correlation (0.89) exists between the number of factories and the total production capacity of a manufacturer.

Among the top Chinese automotive manufacturers, Geely Auto leads with an annual production capacity of 2.68 million units spread across 13 factories. Great Wall Motors follows closely, with a capacity of 2.008 million units produced in 14 facilities. Meanwhile, BYD is rapidly closing the gap, with a capacity of 1.82 million units from its 8 factories, reflecting its significant growth in the electric vehicle (EV) sector.

Outlook

As Chinese manufacturers, including these top players, increasingly focus on international markets, especially in Europe and Southeast Asia, the global automotive industry may face new challenges. This expansion could heighten competition and create tensions with established global automakers. Additionally, the industry is anticipated to enter a phase of significant consolidation, where smaller and less efficient manufacturers may struggle to survive amidst the intensifying competition and shifting market dynamics.

Nio's Chicken-Egg Dilemma

Nio recently unveiled its EL8 electric SUV during the Media Experience Days in Cologne, marking its latest attempt to establish a presence in Europe. As Nios new flagship model for the European market, the EL8 is the sixth vehicle the Chinese startup has brought to the region in just two years. However, with prices starting at €82,900, plus monthly battery rental fees, the EL8 is clearly not designed for the mass market.

This raises a critical question for Nio: should the company focus on expanding its infrastructure—such as battery swap stations and service hubs—before driving up sales?

For Europe, particularly in Germany, the answer appears to be yes. Christian Wiegand, Head of Marketing & Communications at Nio Germany, emphasized that establishing a solid infrastructure is the priority. Only then will Nio look to ramp up its sales efforts in the region.

This strategy reflects the vision of Nio founder William Li, who has also highlighted the importance of infrastructure in past discussions. Despite low sales numbers in Germany—just 32 vehicles sold in July 2024—Nio seems committed to its long-term strategy, supported by strong performance in its home market, which allows the company to maintain stable prices in Europe.

China Challenges EU Tariffs on EVs at WTO

China has formally appealed to the World Trade Organization (WTO) over the European Unions imposition of provisional tariffs on Chinese electric vehicles. These tariffs, which took effect in July, are seen by China as unjust and lacking both factual and legal basis, according to the Chinese Ministry of Commerce.

The tariffs were introduced following an EU investigation that concluded Chinese EV manufacturers benefit from significant state subsidies, giving them an unfair competitive advantage in Europe. The EU’s tariffs are manufacturer-specific, with SAIC facing the highest rate of 37.6%, while Geely and BYD are subject to 19.9% and 17.4%, respectively. These tariffs add to the existing 10% duty, resulting in total tariffs as high as 48%.

In response, China is not only seeking WTO mediation but is also considering further escalation, including a formal complaint against the EU. Chinese officials argue that the EU’s actions violate WTO rules and harm global cooperation in combating climate change.

Meanwhile, the EU Commission remains confident that its measures comply with WTO regulations, and it plans to continue its investigation, which could lead to permanent tariffs. The dispute highlights rising tensions in global trade, particularly as other countries like the USA and Canada consider or have already implemented similar measures against Chinese EVs.

Headline Roundup

💡 EV Sales in China Surpass Combustion Vehicles for the First Time

In July, electric vehicles and plug-in hybrids captured a record 50.7% of China’s auto market, surpassing traditional combustion engines for the first time. This shift marks a 37% year-over-year increase in NEV sales, driven by strong government incentives. Despite an overall 3.1% decline in total car sales, China sold 1.73 million vehicles in July, with continued support expected to further boost the NEV market.

💡 Why Stellantis Partners with Leapmotor

Stellantis is bringing the first Leapmotor models to Europe, raising concerns about potential brand cannibalization within its 14-brand portfolio. However, CEO Carlos Tavares is focused on profitability and views the partnership with the Chinese startup as a strategic move. Despite Leapmotor’s relatively small presence, Tavares sees an opportunity to leverage Stellantis' distribution network to introduce Leapmotor’s EVs in Europe, targeting younger, tech-savvy consumers. The collaboration is also part of a broader strategy to strengthen Stellantis' position in key markets like Southeast Asia, India, and South America, while gaining valuable technology expertise from Leapmotor, particularly in infotainment and connectivity.

💡 Chery to Open EV Factory in Kenya

Chery is investing $20 million to open an electric vehicle (EV) factory in Kenya, in partnership with Afrigreen Automobile Limited. The factory, set to begin operations next month, will produce 5,000 to 6,000 EVs annually, including the Chery Omoda E5 SUV. This move could significantly boost Kenya's EV market and create up to 3,000 jobs, while potentially lowering EV prices by reducing import taxes.

💡 Tesla Faces Increasing Pressure from Chinese EV Innovators

Tesla is under pressure as Chinese EV makers, like BYD, outpace it in innovation, developing new models 30% faster, according to a report by the ITIF. While Tesla has been slow to update its vehicle lineup, Chinese companies refresh their models every 1.3 years, contributing to Tesla’s declining sales, particularly in China. To stay competitive, Tesla must ramp up its technological innovation.

💡 Meizu Joins the EV Market with DreamCar MX

Following in the footsteps of Huawei and Xiaomi, Chinese smartphone maker Meizu is entering the electric vehicle market. At ChinaJoy 2024, Meizu announced plans to launch its first car, the DreamCar MX, later this year. Produced by Geely, the EV will feature the Flyme Auto system, integrating Meizu’s mobile technology. This move continues the trend of smartphone manufacturers branching into the automotive sector, intensifying competition with Xiaomi, which recently began producing its own EV.

💡 Foxconn Begins EV Manufacturing in China

Foxconn, known for its massive iPhone factory in Zhengzhou, has started building a trial production facility for electric vehicles in the city. The facility will serve as a hub for producing EVs for global car brands, as Foxconn expands its business beyond smartphones. This is part of a broader strategy to diversify into new sectors, including semiconductors and robotics, with a total investment of one billion yuan (128 million euro).

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Sebastian & team | China EV Pulse