China drives global EV adoption with cheap cars
Last week’s Global EV Outlook 2024 by the International Energy Agency (IEA) confirmed China remains the global leader in electric car sales, and that its manufacturers’ cheap models are helping other countries catch up in the race.
The annual report suggests the Asian giant has achieved the holy grail of clean technologies: making them less expensive than the polluting products they are trying to displace. It found that over 60% of the electric cars sold in China last year were already cheaper than their average combustion engine equivalent.
Conversely, in Europe and the US – the two other regions where the EV market is developing at pace – electric cars are 10-50% more costly. Globally, average prices last year remained high as two-thirds of available models were large cars, pick-up trucks, or SUVs.
Ultimately, the price tag is the main factor that convinces consumers to make the switch, followed by a reliable network of charging stations.
“When exactly price parity is reached is subject to a range of market variables, but current trends suggest that it could be reached by 2030 in major EV markets outside China for most models,” says the IEA.
Looking at 2024, China’s electric car market share could reach up to 45% in 2024, compared to 25% in Europe and over 11% in the US. This increase is being driven by competition among manufacturers, falling battery and car prices, and ongoing policy support.
Overall, electric car sales are estimated to reach 17 million in 2024, or over a fifth of all cars sold worldwide.
In 2023, global sales of electric cars jumped by 14% year-on-year to 14 million, representing 18% of all cars sold. The first quarter of 2024 already saw a 25% jump in sales compared to the same period last year.
The report states EVs are overtaking internal combustion engines (ICEs) at an exponential rate: over 250,000 electric cars were sold every week in 2023, while just a decade ago it would have been the total annual figure.
China’s EV power extends globally
Chinese carmakers produced more than half of all electric cars sold worldwide in 2023, despite accounting for just 10% of global sales of cars with ICEs.
And it is thanks to the cheaper Chinese models, coupled with government subsidies, that some countries in Asia and South America are boosting EV adoption – which has been hindered by a lack of small and affordable models in emerging markets and developing economies.
For example, Thailand quadrupled its EV registrations to 90,000 last year, reaching a 10% global market share.
“This is all the more impressive given that overall car sales in the country decreased from 2022 to 2023,” says the report. “New subsidies, including for domestic battery manufacturing, and lower import and excise taxes, combined with the growing presence of Chinese carmakers, have contributed to rapidly increasing sales.”
China’s BYD is capitalising on this growth with plans to invest $500 million to produce 150,000 vehicles annually in Thailand. The Southeast Asian country wants to become a major EV manufacturing hub for domestic and export markets, hoping to attract $28 billion in foreign investment before 2027 through incentives.
Thousands of miles away, Brazil is importing cheaper Chinese models by BYD, Great Wall and Chery International, while developing domestic production. In 2023, car sales tripled to 50,000 units in the country, achieving 3% of the global market share.
According to the IEA, road transport electrification in Brazil could bring “significant climate benefits” given its largely low-emissions power mix. However, its EV rollout has been hampered by a long-standing national prioritisation of ethanol-based fuels, which in the 1970s were identified as a key tool to maintain energy security in the face of oil shocks.
Nonetheless, the government last year launched the Green Mobility and Innovation Programme, which provides tax incentives for low-emissions road transport technology. Expected to attract investments of more than BRL 19 billion ($3.8 billion) by 2028, the programme has led to a surge of unique hybrid ethanol-electric models.
BYD and Great Wall want to manufacture locally and plan to sell both fully electric and hybrid ethanol-electric models. BYD invested $600 million in its first plant outside Asia and partnered with energy group Raízen to develop charging infrastructure. The country is also attracting EV investment from General Motors, Hyundai and Stellantis.
Yet, Chinese companies are also eyeing the opportunity to penetrate markets with a lower EV uptake such as Africa, Eurasia and the Middle East. In these regions, electric cars account for less than 1% of total car sales.
BYD is plugging the gap in Uzbekistan, where it has set up a joint venture with UzAuto Motors in 2023 to produce 50,000 EVs/year. Chery established a partnership with ADM Jizzakh, which has already led to a steep increase in EV sales in the country, hitting 10,000 in 2023.
Local governments and manufacturers play a part
But the merit of global EV adoption is not all down to Chinese carmakers, as many governments are powering ahead with subsidies.
For example, Malaysia and Indonesia, which achieved a global share of 2% each last year, have implemented tax breaks and import duty exemptions and are fostering domestic manufacturing.
Despite its much larger population, India also has a 2% share, with electric car registrations rising 70% to 80,000 last year. Demand has been driven by purchase incentives under the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme, supply-side incentives under the Production Linked Incentive (PLI) scheme, tax benefits and the Go Electric campaign.
However, if the forthcoming FAME III scheme includes a subsidy reduction, as has been speculated recently, future growth could be affected. Local carmakers, such as Tata and Mahindra, have been supported by advantageous import tariffs and are dominating the local market.
Another Asian manufacturer succeeding domestically is Vietnam’s VinFast, which is behind the unprecedented growth of EV sales in its home country. According to the IEA, figures rocketed from under 100 units in 2021 to over 30,000 electric cars in 2023. That led Vietnam to account for 15% of the global electric car market share.
VinFast plans to expand in India and the Philippines, but is also pursuing EV and battery manufacturing in the US, eyeing IRA-driven demand.
In fact, the US IRA regulation has also been supporting manufacturing in Mexico, where electric car registrations climbed 80% to 15,000 last year, for a global market share just above 1%.
The country’s automotive market is already well integrated with North American partners, and benefits from advantageous trade agreements, large existing manufacturing capacity, and eligibility for US EV subsidies. “Chinese carmakers such as BYD, Chery and SAIC are also considering expanding to Mexico,” the report notes.
Ultimately, the IEA reckons that the pace of electric car adoption outside China will determine their global success. With Chinese carmakers rapidly building supply chains across the world, local competitors should ensure they get a piece of the pie.
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Anonymous
Very good overview of the weekly steel market.
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