How China has become a market leader in EVs globally

Over the past decade, China has swiftly ascended to become the world's largest EV market, commanding half of the global sales of electric passenger cars and over 90% of the sales of electric buses and trucks.

For 2024, Chinese domestic EV sales are projected to hit 11 million units, capturing an impressive 45% market share—growing at 22% YoY.

However, this pales in comparison to 36% growth in 2023 and 90% in 2022; this is also partly due to the government stopping to offer purchase subsidies.

BYD, the largest Chinese EV manufacturer, has also surpassed Tesla to become the largest EV company by volume in the world.

Now, what are the reasons behind Chinese success beyond just government support and subsidies?

• Much faster got to market - Chinese automakers are around 30% quicker in development than legacy manufacturers, industry executives say, largely because they have upended global practices built around decades of making complex combustion-engine cars. They work on many stages of development at once. They are willing to substitute traditional suppliers for smaller, faster ones. They run more virtual tests instead of time-consuming mechanical ones.
• Minimum viable product - companies like NEO release cars with more hardware being used, which means they have more advanced chips, cameras, or sensors than their software can support at the time. For an SUV, they shipped in 2022 with 4 Nvidia chips, where only 3 were being used at that time; with software releases, the 4th one came into use in 2023.
• Reusability—Common software is created that can be used across models, similar to how smartphone OS updates work. All of it is created in-house, which creates better integration, whereas traditional automakers outsource this process.
• Keep launching newer models—While traditional car companies and even Tesla launch one new model every few years, BYD and other Chinese EV companies are continuously launching newer products. BYD launched 19 models over the last 6 years, compared to Tesla's 5 models

• Think and act like startups—A common focus on testing things out in the market, a spirit of quick experimentation, quick decision-making, and other such things make startups compete with incumbents.
• Vertical integration—These companies control the entire production process, from raw materials to finished products, enabling cost efficiency and innovation. BYD's seamless process from lithium mining to semiconductor development and GAC Group’s focus on power batteries and IGBTs (insulated-gate bipolar transistor, a three-terminal power semiconductor device) illustrate this.
• Massive charging infrastructure - China has already established 6.28 million charging stations and 3,460 battery swapping stations, alongside over 10,000 power battery recycling service points.

All of these factors have made EVs a de facto choice for many Chinese consumers. According to a study by JATO Dynamics, a market research company, the average price of EVs has risen from €49,000 to €56,000 in Europe since 2015, while it has escalated from €53,000 to €64,000 in the U.S. Contrastingly, in China, the average price of electric cars has plummeted from a steep €67,000 to €32,000, undercutting the price of gasoline vehicles.

Now, the thing is, with a slowdown in China and very strong competition, EV companies are fighting for prices. Most EVs in China have dropped their prices by 15% over the last year, and this trend doesn’t seem to stop. It means that local Chinese companies are now looking abroad and beginning to focus on the global market.

There are a lot of things we can learn from how China and its EV companies have evolved and grabbed market share, and we can use this knowledge in the way we are building our EV and auto market.

Reference:

1. https://www.wsj.com/business/autos/how-china-is-churning-out-evs-faster-than-everyone-else-df316c71?mod=Searchresults_pos8&page=1
2. https://techbuzzchina.substack.com/p/whats-up-with-part-2-electric-vehicles
3. https://restofworld.org/2024/china-ev-industry-slowdown/?utm_source=rss&utm_medium=rss&utm_campaign=feeds
4. https://www.wsj.com/business/autos/evs-are-splitting-the-auto-world-into-two-made-in-china-or-not-4664753c?mod=business_feat4_autos_pos2