In recent years, supported by green policies implemented by various countries and driven by capital's pursuit of new energy vehicles, the global automotive industry has been undergoing a vigorous transformation towards electrification. Chinese electric vehicle (EV) manufacturers have emerged as rising stars in this new race, rapidly becoming the world's major producer and exporter of EVs.
According to data from the General Administration of Customs of China, the country's automobile exports reached 5.221 million units in 2023, an increase of 57.4% year-on-year. Japan's total exports in 2023 were approximately 4.3 million units, and China officially surpassed Japan to become the world's largest automobile exporter last year. Looking at the brand export sales rankings for 2023, the total export sales reached 3.83 million units, a year-on-year increase of 62.7%, with the export volume of new energy vehicles reaching 1.04 million units, an increase of 430,000 units. In the Chinese new energy vehicle market brand export volume in 2023, Tesla ranked first with 3,440,780 units, followed by BYD and MG, both with export volumes exceeding 200,000 units.
The rise of Chinese EV manufacturers extends across the entire industry chain, from lithium mines, power batteries, and component supply to vehicle production. Compared to foreign EVs, Chinese manufacturers also maintain their strong traditional advantage, i.e., low prices. From the current development trend, Chinese EV manufacturers are beginning to establish a certain degree of systematic advantage in the international market.
However, there has been a significant shift in the global situation of the development of EVs. In the previously enthusiastic markets of the United States and Europe, which once vigorously promoted new energy vehicles, there has recently been a major slowdown in the EV industry.
At the corporate level, the German automaker Mercedes-Benz recently announced the abandonment of its goal to achieve selling EVs exclusively by 2030 and delayed the expected realization time of its sales plans for electric and plug-in hybrid vehicles. Ford Motor also made comprehensive adjustments to its previous electrification strategy, postponing several billion dollars of investment plans for new EVs, reducing EV production volumes while lowering profit margin targets. Rivian Automotive, a U.S. electric vehicle startup once dubbed as "Tesla's rival," announced a 10% workforce reduction due to ongoing losses and suspended production for several weeks to adjust its production strategy. Renault terminated the IPO listing of its EV business, Ampere, due to the sluggish capital market. Another significant development is that Apple recently terminated its EV project, signaling the failure of its plans after ten years and an investment of USD 10 billion. Additionally, Waymo, Google's self-driving project, discontinued its in-house EV model, Firefly, due to high manufacturing costs and fragile manufacturing capabilities.
Behind the adjustment of major enterprises' strategies lies the shift of industrial policies by relevant governments, as well as a trend of weakening demand for EVs. Subsidy policies for EVs in many countries have come to an end. For example, Germany ceased subsidies for EVs starting from mid-December 2023, while the UK and Sweden terminated their subsidy policies in 2022. Furthermore, sluggish market demand has also hindered the electrification process. Geopolitical factors have also posed obstacles to the export of Chinese EVs. On February 29 this year, U.S. President Joe Biden initiated an investigation into China-made EVs, attempting to curb the development of Chinese EVs. On March 1, U.S. Secretary of Commerce Gina Raimondo bluntly likens EVs to “smartphones on wheels” and they pose a security threat. She stated that “these vehicles are connected to the internet. They collect huge amounts of sensitive data on the drivers — personal information, biometric information, where the car goes”, adding that “it doesn’t take a lot of imagination to figure out how a foreign adversary like China, with access to this sort of information at scale, could pose a serious risk to our national security and the privacy of U.S. citizens”.
When Chinese EV manufacturers were just solidifying their position in the global market, governments and the automotive industry in Europe and the U.S. decided to retreat from the industry, which was a significant blow to these Chinese manufacturers. Some radical social media accounts in China immediately resorted to conspiracy theories, likening the sudden Western retreat to the "Star Wars" program during the Cold War, which dragged the Soviet Union into an arms race and ultimately contributed to its downfall.
Analyses that resort to conspiracy theories are not taken seriously by researchers at the ANBOUND. Conspiracy theories flourish because they make shallow individuals believe they have insight into the world's secrets. In our view, it is unlikely that there is a grand Western-designed and coordinated "conspiracy" in the field of new energy vehicles, which many countries and numerous companies have vigorously promoted and invested in. It is improbable that such a conspiracy exists solely to lure the Chinese government and Chinese enterprises into a "trap". If that were the case, Tesla in the U.S. would have been the first to fall into that "trap."
However, the collective withdrawal of European and U.S. governments and automotive giants from the EV sector is not a trivial matter. For Chinese companies that have made substantial investments and established industrial chains in this sector, it is necessary to consider the conditions after significant changes in the international situation and market environment, as well as the subsequent impacts.
Firstly, it is crucial for these companies to closely monitor changes in the situation and understand the nature and extent of the withdrawal of the European and U.S. industries from the EV sector. China's EV industry is already a massive presence. Whether the withdrawal of European countries and the U.S. merely delays the transition to electrification or marks a complete exit from the EV sector, reverting to the path of fuel vehicles, remains to be tracked and observed. Countries' genuine concern about climate change and its influence on industrial policies have been significant drivers of the automotive industry's transition to EVs. If Europe and the U.S. no longer prioritize political correctness and choose not to pursue EVs in the future, it will have a long-term impact on the Chinese EV industry.
Secondly, the withdrawal of Europe and the U.S. should prompt a reconsideration of China’s policies regarding the new energy vehicle industry. In the past, EVs were considered to be the absolute priority in terms of technological pathways in China, with fiscal subsidies focused on it. Now it seems that when the EV industry grows larger, policy considerations are not as simple as they once were. According to statistics released by the country’s Ministry of Industry and Information Technology, from the inception of the policy in 2010 to 2020, subsidies for new energy vehicles have exceeded RMB 152.1 billion, covering at least 3.17 million vehicles. According to statistics from the China Passenger Car Association (CPCA), from 2017 to 2021, the country cumulatively issued subsidies of RMB 127.5 billion for new energy vehicles, benefiting 4 million vehicles. In reality, such fiscal subsidies are a form of policy arbitrage. However, new energy vehicles cannot rely on policy-driven subsidies indefinitely. As subsidies become increasingly unsustainable in various countries, the EV sector will inevitably face significant adjustments.
Thirdly, the sustained high growth of EVs is unlikely to continue. ANBOUND’s founder Kung Chan has been predicting since the second half of 2023 that EVs will enter a downturn starting in 2024. At the ANBOUND 2024 Trends Symposium, Chan reiterated his judgment on the downward trend of EV development. Currently, in the market and social aspects, inherent problems in the EV sector are increasingly exposed. There are some practical issues in the technological direction of this. For example, current power batteries are primarily lithium-based, but lithium batteries have serious safety issues. Additionally, while EVs have zero carbon emissions during use, they are not necessarily the best choice for low-carbon vehicles when considering their entire life cycle. Furthermore, the widespread adoption of EVs will also bring enormous pressure on battery recycling, leading to pollution problems that are expected to arise soon.
Final analysis conclusion:
The withdrawal of Europe and the U.S. from the electric vehicle sector is not a matter of "conspiracy theory", but rather the result of various factors such as inherent problems in the development of the industry becoming increasingly apparent, the inability to sustain fiscal subsidy policies, and skepticism from the traditional automotive industry. When Europe and the U.S. begin to retreat, the Chinese electric vehicle industry appears even more prominent. The Chinese electric vehicle industry and companies are currently facing a major decision in this regard.
