May 26, 2024

A revolution in electric vehicles is on the way. However, it will not be fueled through the U.S. In fact, China is at the leading the charge.

My studies of EVs, which span more than a decade, prove that the global shift in mobility, shifting from petroleum-powered vehicles to electric models, is likely to happen sooner rather than later. The transition is already underway in China, which is the world’s biggest automobile market, having 23 million vehicles sold in the year 2018. As Western countries are nearing peak ownership, there are still thousands of Chinese families who don’t have a car, even a car with one or two.

A lot of them are purchasing electric vehicles. In 2015, electric vehicle sales within China had been able to surpass U.S. levels. In the year 2018, Chinese sales topped 1.1 million vehicles, and over 55% more electric cars were sold around the world than three times the number Chinese buyers had purchased two years before. U.S. electric vehicle sales this year were only 358,000.

The most significant aspect of the cost of electric vehicles is the price of its battery – and China is the country that manufactures the majority of the battery cells for electric cars in the world. The cost of batteries continues to drop. Industry analysts are now suggesting that in five years, it will be less expensive to purchase an electric vehicle than a gasoline or diesel-powered one.

The forecasts suggest that the Chinese will manufacture up to 70 percent of the world’s electric car batteries in 2021 when the demand for electric vehicle batteries rises.

Huge government backing

China has the world’s most growing yet very ambitious automobile industry. It hasn’t been capable of competing with the effectiveness as well as the quality of the established automakers in creating gas-powered vehicles. However, electric automobiles are simpler to manufacture, which gives Chinese companies a chance to be competitive.

The Chinese government has decided to focus on electric cars as one of the ten commercial sectors that form the basis of their ” Made in China” initiative to promote modern industrial technology. The government’s efforts include making use of millions of dollars in order to help subsidize the production of batteries and electric vehicles, as well as encouraging companies as well as consumers to purchase electric cars and batteries.

The government is aware that electric vehicles could be a solution to many of China’s greatest environmental and energy concerns: Air pollution is massively suffocating the country in the major cities of China, security officials in China are concerned about the number of oil imports the country is, and China is currently the nation that contributes the most to the global emissions of climate change.

New companies

Numerous Chinese auto-making enterprises have been formed to make money from these government subsidies. One of the biggest players is BYD, which is a reference to “Build Your Dreams,” located in Shenzhen. About a decade ago, the millionaire financier Warren Buffett bought about one-quarter of the company for a price of US$232 million and a stake that now has a value of greater than $1.5 billion.

The initial plans for the company to sell vehicles in the U.S. proved premature and failed. BYD instead began to concentrate mostly on the Chinese automobile market as well as constructing electric buses for the international market, where it currently has a dominant position.

If BYD’s electric vehicle plans fall apart, there are other Chinese companies ready to pick up the pieces.

The 2019 Yuan 360EV from BYD can be described as an electric-only SUV that is available in China. BYD

More assistance

In addition to the federal support to make sure that BYD and its rivals have plenty of customers, new regulations of the government are coming into effect. The Chinese government has now required all automakers that sell in China, regardless of whether they are domestic or foreign companies, to produce a set percentage of their electrical sales by using a complicated crediting system. The requirements will become more stringent in the future, possibly requiring all companies to produce 7 percent of their electrical sales in 2025.

The major foreign car companies have huge investments in China and are unable to afford to leave the market. Volkswagen is one example. Volkswagen is currently selling 40% of its products in China, and this is the primary reason for the company’s striving to create electronic vehicles.

The automakers in China’s domestic market have not yet entered the international market. Industry analyst for electric vehicles Jose Pontes says three factors explain their indifference. First, it is because the Chinese market is large enough to accommodate the current production. Additionally, many car manufacturers located in China are not known in the West, which means that customers would be hesitant to purchase from a brand that is not well-known. In addition, their vehicles aren’t yet compliant with strict safety requirements across both the U.S. and Europe.

But, all of these issues can be overcome with time and cash. Chinese electric car makers could be able to enter the low to mid-income market in the West, similar to what Volkswagen did 60 years ago.

If and when this happens, cheap electric vehicles could be introduced to all of the West from China, overtaking Tesla as well as other American and European electric vehicle projects. Only Western government efforts to protect domestic automakers by imposing tariffs and other trade barriers may stop this progress.

 

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