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Sebastian Henßler
February 25, 2025

Welcome to the latest edition of the China EV Pulse Newsletter!

In this issue, we delve into the relentless ascent of China's automotive industry and its strategic maneuvers in the face of mounting global challenges. From BYD's triumph over Tesla in electric vehicle production to the proactive shift of Chinese automakers towards emerging markets amidst rising tariffs, we explore how these firms are reshaping the global automotive landscape.

We also unpack a revealing study on European market perceptions, where steep discounts are expected by consumers before considering Chinese EVs. Despite the pricing challenges and higher EU tariffs, Chinese brands like MG and BYD are making significant inroads in terms of market share and brand recognition.

Furthermore, we analyze a critical report on Europe's vulnerability due to its heavy dependence on Chinese-controlled battery supply chains. With China's dominance in battery materials production and the strategic economic risks for Europe, we highlight the urgent need for regional self-reliance in battery technology.

Join us as we uncover these pivotal developments that are not only defining the competitive dynamics of the automotive industry but also setting the stage for a new era of global energy independence.

Happy reading!

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Content

Tariffs Won’t Stop China’s Auto Market Takeover

Once dismissed as low-quality, Chinese automakers have rapidly transformed into global industry leaders. BYD has overtaken Tesla as the largest producer of fully electric vehicles, and China has surpassed Germany and Japan as the world's top car exporter.

In 2023, Chinese auto exports surged to 4.7 million units—three times the volume of 2020—and could reach 7.3 million by 2030. While Chinese EVs are gaining traction in Europe, most exports still consist of internal combustion vehicles, particularly in emerging markets. Meanwhile, domestic competition in China has intensified, with local brands now accounting for 60 percent of sales, driving aggressive price wars and pushing manufacturers to expand abroad.

Faced with rising tariffs in the EU and the U.S., Chinese automakers are focusing on Southeast Asia, Latin America, the Middle East, and Africa, where they already hold a growing market share. Local production is also accelerating—BYD and other brands are establishing plants in Brazil, Hungary, Indonesia, and Turkey.

By 2030, overseas production could reach 2.5 million vehicles per year, with half built in Europe. While China’s government may regulate expansions to protect domestic capacity, its automakers are reshaping the global industry, challenging Western brands to defend their positions in key markets.

Study: European Buyers Expect Big Discounts on Chinese EVs

Chinese automakers face a major challenge in Europe: potential customers expect steep discounts before considering a purchase. A study by Escalent found that brands like BYD and MG would need to lower prices by nearly 30 percent to attract buyers. While 10 percent discounts were sufficient for some, particularly in Italy and Spain, an average reduction of 27 percent was deemed necessary to make Chinese brands competitive.

Despite this, manufacturers like MG and BYD often price their vehicles on par with or above European rivals. Higher EU tariffs on imported Chinese EVs further widen the price gap. Nonetheless, sales of Chinese brands in Europe grew by 15 percent in 2023, reaching 368,213 units.

Beyond pricing, trust remains a key barrier for Chinese brands. Consumers still favor vehicles from Europe, the U.S., Japan, and South Korea, citing China’s relatively young automotive industry as a concern. Only MG and BYD ranked among the 25 most recognized car brands in Europe.

However, strategic marketing and product development are rapidly increasing brand awareness. According to Escalent CEO Mark Carpenter, shifting price strategies and aggressive branding could reshape the European auto market faster than expected, posing a growing challenge to established manufacturers.

China’s Grip on Battery Supply Puts Europe at Risk

A new study by Fraunhofer FFB and the University of Münster highlights China’s overwhelming dominance in the lithium-ion battery supply chain, from raw material extraction to battery production. The research reveals that China not only controls domestic operations but also owns key production assets abroad. No other region holds comparable influence over the entire supply chain, making Europe almost entirely dependent on imports. With mineral resources like lithium, cobalt, nickel, and manganese concentrated in a few countries, Europe's reliance on external sources poses a strategic challenge for its electric vehicle ambitions.

China produces more than 98 percent of lithium iron phosphate (LFP) cathode materials, further deepening Europe’s dependency on Chinese supply chains. As Fraunhofer FFB’s Professor Simon Lux warns, this reliance exposes Europe to economic risks in case of geopolitical tensions or trade restrictions. The study also details global ownership structures, showing that while the U.S. has a significant stake in lithium mining, China dominates nickel and cobalt production, particularly in Indonesia and the Democratic Republic of the Congo. Europe, in contrast, holds minimal influence over lithium extraction.

In response, Europe and the U.S. are accelerating efforts to secure critical resources through foreign acquisitions. Countries like Australia, Indonesia, and the DRC have become battlegrounds for control over lithium, nickel, and cobalt supply. Despite these efforts, China remains the dominant player, controlling 86 percent of Indonesia’s nickel production and nearly half of the world’s cobalt refining. Europe lags behind, relying on limited projects such as Portugal’s Baroso Lithium, which accounts for just 0.4 percent of global lithium production.

To reduce dependence on China, the study suggests investing in domestic refining capabilities, forging strategic resource partnerships, and strengthening circular economy initiatives through recycling. As global competition for battery materials intensifies, the ability to secure a stable supply chain will be critical for Europe’s electric vehicle industry. Without decisive action, the region risks falling further behind in battery production and EV market competitiveness.

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Sebastian & team | China EV Pulse

📸 Image Credits (in order of appearance): Tada Images / Shutterstock

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