Latest on China's EV industry: https://sc.mp/wbx67 China is now the world’s largest automotive and electric vehicle (EV) market. Sales of electric cars made in the country also account for about 60 per cent of the global total. Behind the industry boom is the Chinese government’s long-term commitment to promoting industrial self-reliance and sustainability. But with policies favouring EV carmakers about to expire, fierce competition has put pressure on their profitability. Chinese carmakers…
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00:00 When you request a taxi or a Y-Share in China these days, you are likely to be picked up
00:06 by an electric vehicle or EV with a distinctive green license plate.
00:15 When you get in one, you see all sorts of fancy gadgets.
00:18 This one has a small AI robot on the dashboard that responds to your commands and sits to
00:25 massage your back.
00:27 And when you are running low on charge, you don't have to plug in and wait.
00:32 Many stations can swap out batteries in a few minutes.
00:57 Over the past decade, the number of EVs in China has grown to more than 20 million.
01:05 And now, the carmaker selling the most EV globally is not Tesla, it's China's BYD.
01:12 So how did China make that happen in such a short time?
01:17 Is China in the fast lane to dominate the global EV market?
01:21 And most importantly, can the Chinese industry keep up the pace of rapid growth?
01:33 The phrase "one dollar超车" meaning to overtake on a ban is commonly used in Chinese
01:40 media to describe how the country's carmakers achieve dominance in the EV market.
01:47 But while that sounds like sudden acceleration, China's EV boom was many years in the making.
02:00 In the late 20th century, the country's auto industry was dominated by cars designed by
02:07 foreign brands and manufactured through domestic joint ventures.
02:11 By the early 2000s, it was clear that even after a decade of trying to catch up, developed
02:17 countries still had a major lead over China when it came to internal combustion engines.
02:24 Leaders in Beijing realized that they need a completely new approach to bypass the West's
02:30 lead in legacy technology.
02:33 In 2001, the government included the development of new energy vehicles in its five-year plan.
02:41 The government's primary national planning document.
02:45 Authorities gave 880 million yuan to universities and domestic carmakers to support the development
02:53 of EV technologies.
02:56 Then starting from 2009, the Chinese government set up 25 pilot cities to subsidize new energy
03:03 vehicles.
03:05 The following year, China also started subsidizing the production of private passenger electric
03:11 vehicles, sometime by as much as one-third of the cost.
03:17 Its goal was for each city to have 1,000 electric vehicles in operation by the end of 2012.
03:24 But the results of the program were disappointing.
03:28 By 2013, the nation only had 27,000 new EVs on its roads.
03:35 Most of them were buses, taxis, and other public vehicles.
03:40 Only about 4,400 were private passenger cars.
03:44 Even with subsidies, some cities only had 150 EVs running by the time the program ended.
03:52 The dismal outcome was linked to a limited range of vehicle models and early technologies
03:58 that were not able to satisfy real-world operating needs.
04:04 There is no breakthrough in the sense that it's very expensive at that time.
04:09 It's around two to three times higher than the conventional vehicles because you see
04:15 batteries are very expensive.
04:17 And the infrastructure needed to charge EVs was minimal.
04:22 Still, authorities continued to double down on EV development, only with more refined
04:28 and targeted strategies.
04:31 Additional advancements allowed the government to narrow its focus on plug-in vehicles and
04:36 ditch conventional hybrids.
04:39 The central government's 12-5-year plan included an increased research budget for
04:44 EVs and a vow to build and sell half a million plug-in EVs by 2015 and two million by 2020.
04:54 The government also committed an additional 4 billion yuan in special funding to develop
05:00 new vehicle models and key components such as batteries.
05:05 Authorities also expanded the number of cities taking part in the New Energy Vehicle Pilot
05:10 Program from 25 to 88.
05:13 But China's EV strategies were not just about subsidies and favorable government policies.
05:20 In 2015, several carmakers were found to have cheated the government out of some 1 billion
05:27 yuan worth of subsidies.
05:30 Authorities also began to realize that subsidies alone would not be enough.
05:36 Officials decided that they needed a foreign catfish to push local carmakers to swim faster.
05:46 In 2017, Shanghai's municipal government started providing numerous incentives for
05:53 US EV maker Tesla to build a factory in the city.
05:58 It was a win-win arrangement.
05:59 The Shanghai factory is now Tesla's most productive plant.
06:03 It also put the American company's Chinese competitors under pressure to catch up with
06:09 Tesla in everything from affordability to technology.
06:14 But now, Tesla is trying to keep up with its Chinese counterparts such as BYD and Li Auto.
06:21 Beijing also managed to refine its subsidization program.
06:25 EV subsidies were linked to vehicle performance, so manufacturers got more money for cars that
06:31 could travel further with less electricity.
06:35 Officials also kept rising the minimum driving range that all electric vehicles had to provide
06:41 before carmakers could get subsidies.
06:43 Meanwhile, the overall amount of subsidies offered kept shrinking year after year.
06:50 The incentives are not limited to domestic carmakers.
06:54 Foreign players like Tesla also benefit.
06:57 The Chinese subsidies get cleared relatively early.
07:01 It kick off relatively early.
07:04 And it adjusted into the latest trends to promote the technology evolution.
07:10 Instead just focus on the volume.
07:12 And of course some other benefits including the waive of the purchase tax, which is still
07:17 levied at 10% on the ICE cars and on the EV that is zero.
07:23 There are also favorable licensing and road access policies for EVs in cities like Beijing
07:28 and Shanghai.
07:29 EVs can get a registration number right away, while traditional petrol cars must enter a
07:36 lottery to get new plates.
07:39 After the foundations were laid, production and sales of EVs took off in China.
07:46 The rapid growth of EV production also helped turn around China's slowing auto sector.
07:52 In 2023, its automobile exports surpassed Japan, making China the world's largest automobile
08:00 exporter.
08:01 I think China realized that rather than continuing to put money in an old industry, maybe it
08:06 was worth putting money in a new industry.
08:09 China's EV sales figures were below 1 million in 2017.
08:14 By 2023, sales volume has surged to 9.5 million, with more than 70% of the vehicles made by
08:22 Chinese car makers.
08:24 But selling more cars does not mean making more profit.
08:28 China's BYD is currently the world's largest EV maker, but its profitability remains far
08:34 behind rival Tesla because of the American giant's bigger profit margins.
08:39 As of the third quarter of 2023, Tesla's per car profit was $5,330.
08:48 For BYD, the figure at the time was only $1,460.
08:55 And the post-COVID economic slump in China has not made things easier for car makers.
09:01 Multiple Chinese auto manufacturers have been reporting plunging delivery numbers.
09:06 Then in January 2023, Tesla started slashing prices in the Chinese market.
09:13 Other Chinese EV makers such as BYD soon followed suit, and it quickly turned into a price war.
09:21 The acceleration performance is different.
09:23 And also the, say, the electronic auto driving autonomous is different.
09:33 But the basic performance, that means the driving range, right now the commercial electric
09:39 vehicle is more or less the same.
09:41 It's around 400 kilometers per charge.
09:43 That is sufficient, actually.
09:45 It's sufficient.
09:46 So, right now, they compete one another based on price.
09:51 For the domestic one, it is always a competition.
09:55 It is so easy to have so many entrepreneurs that are willing to explore the opportunities.
10:03 So the competition is always fierce.
10:06 That has prevented some car makers from profiting, for sure.
10:11 Only a handful of domestic market leaders like BYD and Ni Auto have been profitable
10:18 enough to further cut prices to squeeze out competitors.
10:23 So where do Chinese car makers look for more sales and profit?
10:27 Overseas.
10:28 And tapping foreign markets tops the to-do list of many Chinese car makers as they fight
10:34 for their survival.
10:35 However, is it that easy to sell EVs to other countries?
10:40 Manufacturers are experiencing the need of going overseas because otherwise prices will
10:47 continue to come down.
10:48 To me, it's about realizing that they need to increase their production overseas.
10:54 And they are already on this mindset.
10:57 But I think this mindset will accelerate.
10:59 But there are already many hurdles on the way.
11:03 Last year, the US passed a climate bill putting a focus on breaking the Chinese supply chain
11:09 for electric vehicles.
11:10 The European Union also opened a year-long subsidies probe into EVs made in China last
11:17 October.
11:18 Actually, China's EV exports previously was mainly driven by the large demand in European
11:27 markets.
11:28 But since last year, we've seen a lot of Chinese brands trying to expand in emerging markets
11:36 such as Southeast Asia and Middle East and South America.
11:44 In March 2024, Premier Li Chang offered strong support for China to stay on course to an
11:51 EV future.
11:52 He told the political elites and lawmakers at the annual two sessions that Chinese firms
11:58 now account for more than 60% of the world's electric vehicle output and sales.
12:05 And he vowed to boost consumption of new energy vehicles.
12:10 After more than 20 years of overtaking on the band, China's car makers are once again
12:16 trying to steer their way through a critical time.
12:19 It remains to be seen whether they will be able to keep up the momentum needed to keep
12:24 thriving on the global stage.
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