What’s inside Chinese electric cars and why do they cost less? Promoting green vehicles, which are among Xi Jinping’s eco-sustainable goals, Chinese automakers have benefited from a series of government incentives that are not widely appreciated outside the Great Wall. The ecological transition comes at a high cost for everyone: industry, consumers and governments (China and the West)

Tesla was also the queen of electric car sales in 2023. But Elon Musk’s company is in danger of losing its crown. Its rival BYD may soon wear this. While the Chinese giant surpassed Tesla in electric vehicle sales with 526,409 units in the last quarter of 2023, the US automaker’s sales of 484,507 units is a historical result that underlines China’s power in electric vehicle sales. New Energy Vehicles, namely electric and plug-in hybrid cars. Of course, if you look at the full year 2023, Tesla remains the world leader with sales of 1.82 million units versus BYD’s 1.6 million electric vehicles, primarily in China (+21.9 percent in 2023).

A dream come true (all in Chinese)

Dozens of innovative local brands have emerged in China in recent years, competing with foreign manufacturers who are struggling to adapt. BYD’s growth is therefore impressive and disrupts the sleep of its rivals. The Chinese company closed 2023 worldwide with sales of 3.02 million units (+62 percent compared to 2022), including 1.6 million electric and 1.4 million plug-in hybrids. And BYD finds its strength right within the confines of the Great Wall of China: The Chinese giant produces batteries on-site for cars, mobile phones, buses, trains and solar panels.

Short circuit of Chinese electric car

A climb that started a while ago. BYD entered the automotive industry only in 2003, after being in the mobile phone battery market for about 10 years. As the name suggests (BYD is an abbreviation for: Build your dreams, build your dreams), the company is the realization of the dream of its founder Wang Chuanfu, who wanted to become the number one green automotive manufacturer. A goal achieved in a short time. BYD finds the key to successLocal resources are used in the production of lithium batteries. China has the advantage of having a dominant position in the raw materials required for battery production: Beijing produces 77 percent of the world’s battery cells (compared to 7 percent for Europe as a whole) and alone controls 58 percent of lithium refining, 65 percent of cobalt refining and 35 percent of nickel.

These elements contribute to another factor, according to Bernstein analysts: BYD batteries are among the cheapest batteries in the world and also have almost the highest energy density, which means better performance in cars. Considering that batteries make up about 40 percent of the cost of an electric vehicle, this is an attractive feature for buyers.

Benefits of the Chinese government that few people like

The Shenzhen company, which promotes green vehicles that fall under Xi Jinping’s eco-sustainable goals, has benefited from a series of government incentives that have worried Brussels. Thanks to state subsidies – this is the thesis of the European Commission – companies can significantly reduce production and assembly costs and offer cars to the market at lower prices than competing manufacturers. Beijing also provides incentives to buyers. When Tesla’s decision to increase the prices of its cars a year ago triggered a race to the bottom in electric cars, the Chinese government unexpectedly decided to extend the period to provide tax breaks on new vehicle purchases until 2027. Beijing’s measures have alarmed the European Commission, which has launched an anti-subsidy investigation into electric vehicles from China and is considering the introduction of tariffs to limit damage to European industry (results due next November).

What worries the community manager is the constant granting of Chinese government subsidies, which has led to an average price difference of 20 percent between electric cars made in China and those produced by other brands in China. The price list is clear. While BYD’s Atto 3 model, the cheapest of the Shenzhen company, is sold for 38 thousand euros in Europe, the price of Volvo’s Polestar 2 is around 50 thousand euros, and the price of Tesla Model 3 is around 43 thousand euros. It should be noted that Model 3s for the European market are assembled primarily at the Gigafactory in Shanghai (and thus not actually American).

According to Commission forecasts, Chinese brands such as BYD, Nio and Xpeng captured 8 percent of the European electric car market in 2023, up from 4 in 2021, and could reach 15 percent in 2025. In the coming years, thanks to the move of some Chinese companies that are already thinking about how they can tackle the tasks being worked on in Brussels. While giant BYD is already turning its attention to Mexico to appeal to American consumers, it signed an agreement with Hungary for the construction of a facility in the town of Szeged in the south of the country.

The uncertain future of the automotive industry

Now the future of the global automotive industry is at the center of the subsidy fight between the USA, the EU and China. Currently, Germany has prevailed, despite the opposition of many European countries, by receiving the green light from the Commission to invest 902 million euros of public funds for the construction of a battery factory for electric vehicles, which will be fully operational from 2026. In response to criticism from EU bloc countries, German Vice-Chancellor Robert Habeck stated that “the real competition we face is not between Germany or Italy or Denmark and the Netherlands, but between the EU and China or the USA.” . The reference goes to Washington, which initiated this initiative.law to reduce inflationIt’s a massive subsidy plan aimed entirely at creating an electric car supply chain in North America (not Chinese) in line with Canadians and Mexicans.

100% European car battery speaks Italian but Germany bought it

The possibility of Chinese automotive companies expanding into the USA and Europe is warning Western governments. However, many analysts reassure Washington and Brussels by underlining the possibility that Chinese automotive groups will lose the state support they have in China if they produce electric cars outside the Great Wall. The ecological transition comes at a high cost for everyone: industry, consumers and governments (China and the West).