Global Courant
BEIJING – In August, Wang Chuanfu, CEO and founder of BYD, detailed the difficulties the Chinese auto giant, which started out as a maker of mobile phone batteries in 1995, faced when it shifted to electric vehicle production about two decades ago ( EVs).
He spoke at a press conference on August 9 to mark the production of its five millionth new energy vehicle – two years after BYD took thirteen years to reach the one million mark in May 2021. New energy vehicles also include vehicles powered entirely by batteries, as well as hybrids, which also have traditional combustion engines.
“Some people said that BYD has embarked on vertical integration to save costs. In fact, we were forced to do vertical integration,” he said, referring to the company’s notable advantage in producing its own chips and batteries – the most expensive parts of an electric car.
BYD’s growth reflects the expansion of the industry in China, which was the world’s largest EV market for eight consecutive years in 2022, when 6.8 million EVs were sold in China.
As the country attempts to become an automotive powerhouse, consumers have been switching to electric vehicles in droves. The vehicles are now ubiquitous in China, especially with more mass-market friendly options costing 100,000 to 200,000 yuan (S$18,600 to S$37,300), a market segment previously dominated by traditional combustion engine models.
Established brands, from Geely and GAC Aion to newer entrants such as Leapmotor and Hozon, have achieved new sales milestones in 2023, even as the market appears to be heading towards consolidation after years of cut-throat competition.
But the sector is now under scrutiny: the European Commission said earlier in September that it will investigate whether punitive duties should be imposed to protect European manufacturers from a ‘flood’ of cheaper Chinese electric vehicles, which it says have unfairly benefited from state subsidies.
“Europe is open to competition, but not to a race to the bottom,” European Commission President Ursula von der Leyen said earlier in September in her annual State of the Union address to the European Parliament. Chinese-made electric cars sold in Europe are typically 20 percent cheaper than locally produced electric cars.
Analysts said that while government incentives have paved the way, the rapid rise of China’s EV companies is also due to factors such as supply chain advantages and strong market competition – including from abroad.
Mr Tu Le, managing director of Beijing-based consultancy Sino Auto Insights, said state subsidies played a key role in getting the emerging EV and battery sector and charging infrastructure off the ground in 2009.
Subsidies also encouraged startups to enter the market, but sales only picked up in 2020 after Tesla built a factory in Shanghai and delivered its first Chinese-made Model 3 in 2019, which excited consumers, he said .
“This benefited companies like NIO, BYD, XPeng, Li Auto and others, so they should get quite a bit of credit for the exploding sector in 2020 and beyond,” he told The Straits Times.
