Key Takeaways
Chinese automakers’ operational efficiencies, government support, and innovations have propelled it to the forefront of the EV industry.
China surpassed Japan as the largest vehicle exporting country last year and has now commissioned 47 new car-carrying ships to further expand its business.
China has leveraged the West’s adherence to the Paris Climate Accord to increase its dominant position on the production of “green technology,” including electric vehicles and batteries.
The Biden Administration’s regulatory and financial aggression against domestic energy and mineral production while pushing for more “climate-friendly” products is benefitting China.
Biden’s policies of forcing electric vehicles on the American public and domestic auto manufacturers through regulations and standards is playing into China’s hands. China, with few oil and gas resources of its own, has found electric vehicles to be a way to dominate the world’s auto market. China achieved number one ranking in EV sales last year. As with other commodities, Chinese companies have an operating edge on EV production with cheap energy and labor, operational efficiencies and hefty government support. And China controls the bulk of global raw materials, such as lithium, for EV batteries. According to an auto analyst, Chinese EV manufacturers have a structural cost advantage of 25 percent. Now, Chinese automakers and shippers are ordering a record number of car-carrying vessels to support the country’s boom in EV exports, putting China on course to amass the world’s fourth-largest fleet of car-carrying vessels by 2028. China is in the EV game to win it, even though it is U.S. and European climate policies that are creating the demand by adhering to the Paris Climate Accord ignored by China, India and other countries around the world.
Now that China has surpassed Japan as the world’s largest vehicle exporter, it is vastly expanding its shipping fleet to send the vehicles around the globe. According to Reuters, China has 47 car-carrying ships on order, a quarter of all ships globally. Once this armada has been delivered to China, the Chinese controlled car carrier fleet will jump from current 2.4 percent to 8.7 percent of the world total with new trade routes established almost exclusively for Chinese automakers. The increase in orders has mostly benefited Chinese shipyards, which received 82 percent of orders globally. Because Chinese shipyards are also actively building ships for China’s fast-growing navy, the boon to business from EV export ships indirectly aids China’s military buildup.
How China Became Dominate in the EV Market
Chinese automakers are around 30 percent quicker in development than legacy manufacturers. They work on many stages of development at once and they are willing to substitute traditional suppliers for smaller, faster ones. They run more virtual tests instead of time-consuming mechanical ones. And they are redefining when a car is ready to sell on the market.
NIO, one of China’s leading electric-vehicle startups, takes less than 36 months from the start of a project to delivery to customers, compared with roughly four years for many traditional carmakers. The company manufactures cars with latent technology such as a spare chip that allows it to frequently add new features through software updates that is enabling it to gain market share. Zeekr, an EV component of auto manufacturer Geely, can develop vehicles from scratch in as fast as 24 months. It rapidly releases different models ranging from SUVs, multipurpose vehicles, and hatchbacks that all share manufacturing and digital architecture with other Geely brands such as Polestar and Smart.
China’s carmakers are backed by generous government stimulus policies. They are heavily customer focused, emphasizing software and digital technology, from driver-assistance functions to in-car entertainment. The slowdown in demand for electric vehicles is spurring Chinese carmakers to constantly update and release new models. Cars launched last year contributed to 90 percent of China’s passenger-car sales growth. Chinese buyers tend to prefer new or recently released cars, making their cars have a short shelf life. Domestic Chinese EV makers offer models for sale for an average of 1.3 years before they are updated or refreshed, compared with 4.2 years for other global brands.
China controls the market for lithium—a major metal in EV battery production. China dominates lithium processing, controlling nearly half of global lithium production and 60 percent of electric battery production capacity. Its access to lithium deposits currently accounts for less than 25 percent of the world’s lithium resources, but it could account for nearly a third of the world’s supply by the middle of the decade as it ramps up efforts to attract lithium mines. The UBS AG bank expects Chinese-controlled mines, including projects in Africa, to raise output to 705,000 tons by 2025, from 194,000 tons in 2022. China is also responsible for 70 percent of production capacity for cathodes and 85 percent for anodes, which are both crucial components of batteries.
China also controls the bulk of other global raw materials needed for EV batteries, including cobalt, graphite, and nickel. Chinese companies now own most mines in central Africa that produces around 70 percent of the world’s cobalt. Over half of cobalt and graphite processing and refining capacity is also located in China.
China’s Build Your Dream (BYD) EV manufacturer has become the world’s largest maker of electric vehicles in just over a decade. BYD delivered 1.86 million fully electric and plug-in hybrid vehicles in 2022, outselling Tesla’s 1.3 million by 42 percent. BYD’s innovations in battery packs and its founder’s belief in batteries as the dominant power source have been key to its success.
Biden Aids China Through Regulatory Action and Anti-Mining Activity
Biden’s Environmental Protection Agency (EPA) finalized emission standards in late March for light-duty vehicles that would effectively require 67 percent of new models sold to be electric or hybrid by the end of 2032. The regulations are in spite of slowing American EV demand that has led to losses and slowdowns in production for automakers. Several American auto manufacturers have posted huge losses due to EV development and sales, including Ford, which lost $4.7 billion on electric vehicles in 2023, losing nearly $65,000 on each electric vehicles that it sold. General Motors lost $1.7 billion in the fourth quarter of 2023, despite strong profits overall. Biden’s rush into electric vehicles is not allowing U.S. automakers the time to transition to electric vehicles that Americans may want and at a price they can afford.
As noted above, China has broad command over the current EV supply chain due to its control over minerals needed to build batteries required for electric vehicles. The country currently controls 87 percent of the world’s mineral refining capacity, while U.S. attempts to increase its own capacity face obstacles from the Biden administration. As a result, Biden is forcing electric vehicles to be made outside the United States despite throwing tens of billions of tax dollars at them. Biden’s war on mining has made the U.S. almost entirely dependent on China (and a handful of other unfriendly nations) for many of the metals and precious minerals necessary for EV batteries to be produced. China and its partner countries have a near monopoly throughout the value chain.
Chinese electric vehicles have already made large headwinds in the European market, with around 19.4 percent of electric vehicles sold on the continent in 2023 being made in China, which is expected to rise to 25 percent by the end of 2024. The European Union announced in September 2023 that it had launched an investigation over whether to impose punitive tariffs on Chinese electric vehicles due to artificially cheap prices from state subsidies. The EU’s record in this area is not good, however, as Politico recently reported that European solar companies were “hurdling towards extinction” in the face of Chinese dominance of the solar energy market on the continent.
Conclusion
Chinese automakers’ operational efficiencies, government support, and innovations have propelled it to the forefront of the EV industry. China state control over lithium and other critical mineral resources and BYD’s success exemplify the country’s dominance. As the world deliberately transitions toward electric transportation by adhering to the Paris Climate Accord, China has positioned itself as a dominant force in shaping the global landscape of electric mobility. This is happening as China rapidly expands all forms of energy, including coal mining and generation and nuclear power. It is artfully moving the global landscape to areas where it dominates after years of preparing for the transition and away from oil and gas resources where the United States dominates. The Biden administration is promoting China’s domination by pursuing “green” technologies and an unworkable energy transition by adherence to the Paris Accord, even as China ignores them and continues to be the world’s biggest emitter of carbon dioxide, by far.
