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The Electric Vehicle Revolution Will Come From China, Not the U.S.

Sales of electric vehicles are growing much faster in China than in the U.S., Europe, or Japan

An electric taxi manufactured by the Chinese firm BYD. Photo: Mic / CC / Wikimedia Commons

The electric vehicle revolution is coming, but it won’t be driven by the U.S. Instead, China will be at the forefront.

My research on electric vehicles (EVs), dating back a decade, convinces me that this global transformation in mobility, from petroleum-fueled vehicles to electric ones, will come sooner than later.

The shift is already happening in China, which is the world’s largest automobile market, with 23 million cars sold in 2018. As Western countries approach peak car ownership, there are still hundreds of millions of Chinese families that don’t own a car at all—much less two or more cars.

Many of them are buying electric cars. By 2015, electric vehicle sales in China had surpassed U.S. levels. In 2018, Chinese sales topped 1.1 million cars, more than 55% of all electric vehicles sold in the world, and more than three times as many as Chinese customers had bought two years earlier. U.S. electric vehicle sales that year were just 358,000. China’s electric car market is growing much faster than electric vehicle sales in Europe, the U.S., Japan, and the rest of the world combined.

A key element of an electric vehicle’s price is the cost of its batteries— nd China already makes more than half of the world’s electric vehicle batteries. Battery prices continue to fall; industry analysts now suggest that within five years it will be cheaper to buy an electric car than a gas- or diesel-powered one.

Forecasts predict that the Chinese will be producing as much as 70% of the world’s electric vehicle batteries by 2021, even as the demand for electric car batteries grows.

Huge government backing

China has a fledgling, but ambitious, automobile industry. It has never been able to match the efficiency and quality of established automakers at making gas-powered vehicles, but electric vehicles are easier to build, giving Chinese firms a new opportunity to compete.

The Chinese government, therefore, has chosen to highlight electric vehicles as one of 10 commercial sectors central to its “Made in China” effort to boost advanced industrial technology. Government efforts include using billions of dollars to subsidize manufacturing of electric vehicles and batteries, and encouraging businesses and consumers to buy them.

The government is also aware that electric vehicles could help solve some of China’s most pressing energy and environmental concerns: Massive air pollution chokes its major cities, national security officials are worried about how much oil the country imports, and China is now the nation contributing most to global climate change emissions.

Many new companies have emerged

Scores of Chinese auto-making companies have formed to profit from these subsidies. A major player is BYD, which stands for “Build Your Dreams,” headquartered in Shenzhen. More than a decade ago, billionaire investor Warren Buffett bought about a quarter of the company for $232 million—a share that is now worth more than $1.5 billion.

The company’s initial plans to export vehicles to the U.S. proved premature and fizzled. BYD instead started to focus mainly on the Chinese auto market, as well as building electric buses for the global market, which it now dominates.

If BYD’s electric car plans falter, though, there are plenty of other Chinese firms ready to pick up the slack.

Further support from the government

In addition to the government subsidies to ensure BYD and its competitors have lots of customers, new government regulations are kicking in. The Chinese government now requires all automakers who sell in China, whether domestic or foreign firms, to make a certain percentage of their sales electric, through a complex crediting formula. The mandate will get stricter over time, perhaps requiring each company to make at least 7% of their sales electric by 2025.

Major foreign car companies have large investments in China and can hardly afford to abandon the market. Volkswagen, for example, now sells 40% of its output in China, which is a main reason the company is pushing hard to develop electric vehicles.

China’s domestic automakers have largely not yet engaged in the export market. Electric vehicle industry analyst Jose Pontes says there are three reasons for their reluctance: First, the Chinese market is big enough to absorb their current production. Second, many car companies in China are utterly unknown in the West, so customers would be wary of buying from a strange brand. And third, their cars do not yet comply with strict safety regulations in the U.S. and Europe.

However, all of those obstacles can be overcome with time and money. It’s possible Chinese electric car companies could enter the low- to middle-income market in the West, as Volkswagen did 60 years ago.

If, or when that happens, inexpensive, efficient electric cars may spread through the West from China, surpassing Tesla and other American and European electric vehicle efforts. Only Western government attempts to protect domestic automakers with tariffs and other trade barriers could derail this development.The Conversation

Jack Barkenbus is a visiting scholar at the Vanderbilt Institute for Energy & Environment, Vanderbilt University. This article is republished from The Conversation under a Creative Commons license. Read the original article.

14 Comments

  1. Eric Habegger | | #1

    Tesla's build out of its new Giga factory in China is said to be less than 6 months from producing new model 3s for the China market. If the author can't even include that simple fact what is he doing editorializing here?

    1. User avater
      Dana Dorsett | | #2

      Tesla's Chinese battery capacity is dwarfed by other players, and while it has a popular cache' in China as a luxury brand, the Model 3 already has stiff domestic competition in that market. Tesla may have built the world's first gigafactory (for Matsushita/Panasonic's lithium ion batteries, but it's by no means THE dominant world market leader- there are many large companies competing for the Asian battery & electric car markets.

      If anything a mention of Tesla in this article might have been deemed marketing or promotion of Tesla over the competition. The car company they did mention,. BYD is the world's largest EV maker (WAY ahead of Tesla in total cars sold, even beating out Nissan's lifetime Leaf sales) are just one of several surging electric car vendors in China. The notion that Tesla is going to just take over (at a higher price point than the domestic vendors) would be just silly, as if BMW building cars in the US means they're rolling right over Ford's American market share or something. It's a luxury brand that will still have it's Chinese fans (Rolex, anyone? How about Timex?), but the Chinese EV market is much much bigger & broader than what Tesla is offering.

      FWIW: The romantic lead character in a popular Taiwanese television series on NetFlix drives a Tesla. I don't know for sure but I think it was a paid product-placement. :-)

      1. Eric Habegger | | #3

        Tesla does not do any paid advertising as far as I know. There is much anti Tesla sentiment in this country from the fossil fuel industry and also from the major ICE car manufacturers. I think it makes much more sense that the reason Tesla's Giga factory 3 in China wasn't mentioned here was because it didn't fit with the author's thesis. The author seems to want to induce fear that the Chinese are coming for us but it is inconvenient to say that the Chinese will have a Tesla factory wholly owned by Tesla right in their country. To me they seem much more open minded in doing that than the fear mongering so rampant now in this country about the Chinese eating our lunch.

        Also, it would be good if you could add some references for your many assertions. Not saying they aren't correct. but how would I know if you don't provide references?

        1. John Clark | | #4

          I admit that I have a huge problem with Tesla because people fawn all over the technology in their vehicle but fail to understand that the technology itself is a money loser which is why competitors aren't using it in their EV's.

          Building a Tesla competitor is easy when you don't ever have to show a profit.

          1. Jaccen | | #6

            "understand that the technology itself is a money loser which is why competitors aren't using it in their EV's."

            Respectfully disagree.

            https://www.reuters.com/article/chrsyelr-ceo-evs/fiat-chrysler-ceo-please-dont-buy-fiat-500e-electric-car-idUSL1N0O71MS20140521

            "Decrying the federal and state mandates that push manufacturers to build electric cars, Marchionne said he hoped to sell the minimum number of 500e cars possible.

            'I hope you don’t buy it because every time I sell one it costs me $14,000,' he said to the audience at the Brookings Institution about the 500e. 'I’m honest enough to tell you that.'"

            Current ICE manufacturers build great ICE vehicles. That does not mean they make great BEV vehicles. Tesla's technology is better than the competitors. Better "mileage" and aging being 2 examples.

            https://pbs.twimg.com/media/D5WNWLIXsAA2fAd?format=jpg&name=small

            https://www.engadget.com/2018/04/16/tesla-battery-packs-live-longer/

            The Nissan Leaf is famous for degrading much faster.

            I would argue the technology is not the reason for Tesla's financial problems. Tesla needs an equivalent of SpaceX's Shotwell to temper Musk. Management is more of an issue (ie. stressing automation, etc.).

            The big question is on Tesla's margin per vehicle. If they can pull that off, they're great. If they cannot, someone will be able to buy the company's resources at a significant discount in the future.

            http://teslaweekly.com/tesla-model-3-profit-target-is-5x-higher-than-average-ford-vehicle/

            https://finance.yahoo.com/news/tesla-model-3-cost-28-130325041.html

          2. John Clark | | #12

            @Jaccen,

            Tesla vehicles are sold at a loss to the consumer consequently it doesn't matter how "good" their technology is. Other automakers try to reduce their losses on their sacrificial EV's because they're actually constraint by how much of a quarterly loss they can take (They really can't take a loss btw).

            Telsa investors give the company a pass in this regard. They operate their automotive division like a charity.

        2. Jaccen | | #5

          Guess it depends on NEV vs. BEV.

          https://qz.com/1581833/in-2019-byd-will-finally-sell-more-evs-than-fossil-fuel-cars/

          https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0107/ltn201901071262.pdf

          https://en.wikipedia.org/wiki/List_of_electric-vehicle-battery_manufacturers

          I wasn't opposed to Japanese cars when they were poo-poo'd (80's), Korean cars when they were poo-poo'd (00's), or Chinese cars as they are now poo-poo'd (20's). As long as they meet North American safety standards, have parts available, and are reasonably priced--I welcome the competition.

          "You adapt, evolve, compete or die."

        3. User avater
          Dana Dorsett | | #7

          >" I think it makes much more sense that the reason Tesla's Giga factory 3 in China wasn't mentioned here was because it didn't fit with the author's thesis. "

          Seriously? It couldn't possibly be that it's because Tesla is currently only a bit-player in booming Chinese EV maker, eh? This yearTesla isn't even making the top 10 in the Chinese EV market in unit sales:

          https://cleantechnica.com/files/2019/06/China-EV-Sales-May-2019.png

          https://cleantechnica.com/files/2019/06/China-EV-Sales-Jan-May-2019.png

          https://cleantechnica.com/2019/06/20/china-ev-sales-report-foreign-brands-shine-in-cooling-market-may-2019/

          So WHAT if they build a factory in China to maybe crawl up that ladder a few rungs!?! According to the May 2019 sales figures Tesla's best-selling model in China (Model 3) is only pulling a ~2% market share, whereas at least four of the 13 better sellers are made by BYD. BYD's best seller in May sold than 3x Tesla's best seller. It's not even close.

          >"Also, it would be good if you could add some references for your many assertions. Not saying they aren't correct. but how would I know if you don't provide references?"

          While I'm not averse to linking to online information sources (and often do), it doesn't take much effort to look up any of the assertions you may be wondering about on the internet. Note, "...it would be good if you..." to do just that, since I cood b rong (offen am) and I'm open to correction from credible sources.

          [edited to add]

          See- it looks like I was wrong! It's a Chinese, (not Taiwanese) TV production where the romantic male lead drives a Tesla:

          https://www.netflix.com/title/81087124

          You get a peek of his car behind them on the front picture for episode 24:

          https://occ-0-775-621.1.nflxso.net/art/453a9/e35a4db9c12fd15bf8b22edfdfb2dd88886453a9.jpg

          In many Asian TV shows the company logos get blurred out unless the product placement fee was paid, or if a competitor with a similar product has also paid for product placement.

          1. Eric Habegger | | #8

            Dana, you are moving the bar from what the original article said. It said China is coming for us with electric vehicles and that they are hugely ahead of us there. Jaccen linked to references that said the opposite. Tesla's technology is superior to other electric car manufacturers, including those in China. Also, a link he provides shows that Tesla is the most prolific manufacturer of electric vehicles in the world. Your attempt to shift the argument to combined BEV "and" ICE cars is very dubious.

            It seems very clear to me the real motivation for the author writing this article. He is worried for the American ICE car manufacturers. He should be. While Tesla has been providing a march on them for the last ten years they have been hiding their head in the sand. Tesla has a superior electric car. They are developing charging infrastructure that will eliminate most of the distance anxieties of electric cars along with already having vehicles with the most driving ranges. The writer and you are completely ignoring all this.

            Tesla has stolen a march on ALL the other electric vehicle makers and the excuse that China needs to be legislated against seems to be a thin excuse. One gets the feeling the author would have very much liked to have said that Tesla should be legislated against because its another effete West Coast tech company that is turning the heavy manufacturing in the Midwest into a dinosaur. He can't say that though because Tesla is an American firm. So he makes a straw man out of China hoping the current political climate in this country gives him cover. People can be so miserably manipulated in this country by the current winds of fashion.

          2. Deleted | | #9

            “[Deleted]”

  2. Deleted | | #10

    “[Deleted]”

  3. Michael M | | #11

    BYD: "Have you seen their car?" ...
    https://www.youtube.com/watch?v=tx-Ys0O29OQ

    Tesla Disrupts Different ...
    http://tesla.dauger.com/disrupts/different.html

    ( Model 3 owner, best car in the world. )

  4. Peter L | | #13

    I don't drink the Elon Musk Kool-Aid and so I will never buy or own a Tesla. The US government has given him $5 Billion in government money for his projects. That's tax payer money going to fund his wacky Willy Wonka projects. Those who worship at the Musk altar are doomed to their fate.

    Speaking of green house gasses. His SpaceX creates a lot of carbon dioxide when burnt. 440 tonnes to be exact, each time it launches to space, which has a 34 percent carbon content. SpaceX rockets are projected to burn approximately 4,000 tonnes of fuel per year, which creates enormous carbon greenhouse gasses. For what? So we can one day live on Mars? More Willy Wonka lunacy.

    1. Jaccen | | #14

      Food for thought. By the IMF estimates, the US has given fossil fuel companies $649 billion per year (2015 cited). That report takes into account "trickle down" items such as healthcare, etc. However, Congress itself states that $4.7 billion per year is "given" to fossil fuel companies in the form of lack of taxation:

      https://www.imf.org/en/Publications/WP/Issues/2019/05/02/Global-Fossil-Fuel-Subsidies-Remain-Large-An-Update-Based-on-Country-Level-Estimates-46509
      https://fas.org/sgp/crs/misc/R44852.pdf

      Subsidizing the cost of fossil fuels has happened quite a bit:
      https://en.wikipedia.org/wiki/Deep_Water_Royalty_Relief_Act
      https://en.wikipedia.org/wiki/United_States_biofuel_policies

      The other car companies also receive quite a few subsidies:
      https://www.goodjobsfirst.org/subsidy-tracker
      https://subsidytracker.goodjobsfirst.org/prog.php?parent=ford-motor
      https://subsidytracker.goodjobsfirst.org/prog.php?parent=fiat-chrysler-automobiles
      https://subsidytracker.goodjobsfirst.org/prog.php?parent=general-motors

      Should all subsidies to manufacturers end? If yes, with the subsidies gone and the cost of fuel rising due to lack of subsidies--would ICE vehicles have the same economic advantage? If no, why complain about the amount one car company got compared to the others when it's a similar amount? Far less if you take into account the bailouts.

      To be clear, there are plenty of other electric vehicles. Technology-wise, Tesla's are the best in both "mileage" and battery resiliency. They are one of the worst when it comes to servicing your vehicle and CEO PR. The wonders of a free market make it easy to choose many other players. Or other fuel sources, for that matter.

      In regards to the carbon imprint of SpaceX, yes, they do have a carbon imprint.

      For comparison:
      "According to figures from German nonprofit Atmosfair, flying from London to New York and back generates about 986kg of CO2 per passenger."
      https://www.theguardian.com/environment/ng-interactive/2019/jul/19/carbon-calculator-how-taking-one-flight-emits-as-much-as-many-people-do-in-a-year

      Rank Airport 1 Airport 2 Distance (km) 2017 passengers
      "49 United States New York-JFK London-Heathrow 5562 2,972,817"
      Assumption: those that left NY for London all returned.

      986kg/passenger * 2,972,817 passengers * 1t/1000kg = ~2,931,198 t of CO2 for the NY/Heathrow flight path alone.

      Assumption: 440t per launch (see Peter L comment)

      "Rockets from the Falcon 9 family have been launched 77 times over 9 years..."

      77 * 440t = 33,880t for all Spacex launches.
      https://en.wikipedia.org/wiki/List_of_Falcon_9_and_Falcon_Heavy_launches

      SpaceX is not solely about Mars travel. It serves as an alternative to the Soyuz for restocking the ISS (see prev. link), it launches satellites for the military/intelligence agencies (see prev. link), it is helping launch the next GPS constellation (see link below), and it plans to launch an internet service called Starlink (see link below).
      https://www.gpsworld.com/tag/spacex/
      https://en.wikipedia.org/wiki/Starlink_(satellite_constellation)

      It's already profitable and looking to increase its competitiveness by entering the telecommunications business. It's launch costs are considerable less than its competitor which saves the American tax payer millions of dollars. Many consider running an ISP to be a profitable business venture.

      https://www.huffpost.com/entry/time-warner-cables-97-pro_b_6591916
      https://www.investopedia.com/ask/answers/060215/what-average-profit-margin-company-telecommunications-sector.asp

      Happy capitalism and all (aka vote with your dollar and buy what you want). But crunch some numbers for comparison.

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