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Chinese EVs Go Global: Western and Japanese Automakers Face Pricing Challenge

published: 2023-06-05 9:30

Chinese EV manufacturers, after a period of considerable growth and consolidation in their home market, are now setting their sights globally. Their key advantage? Affordability.

China is the world’s largest EV market, and its domestic brands have given American automakers like Ford and GM a run for their money, consistently delivering high-quality vehicles at comparatively lower prices. Today, these brands are no longer content with just competing at home—they’re making inroads into Europe, hoping to leverage the region’s shift towards a greener economy and potentially upset long-standing market trends.

Back in the US, Chinese manufacturers are waiting in the wings and ready to claim their piece of the American market as Biden encourages a national shift toward EVs. Companies such as Geely and NIO are reportedly developing plans to establish sales channels stateside. However, the constant specter of trades disputes and political friction between China and the US raises questions about the potential acceptance and success of Chinese vehicles on American soil.

In light of these developments, it’s worth revisiting the automotive narrative of the 1970s. It was during this era that Toyota, the Japanese automotive titan burst onto the American scene with their affordable, fuel-efficient vehicles. This bold move not only challenged established US brands but also marked the genesis of Toyota’s ascension to market leadership. Fast forward to 2022, and Toyota has managed to topple GM to clinch the title of top-selling car brand in the US. South Korean automakers have also tried to emulate this strategy by consistently chipping away at Ford and GM’s market share with their economical, value-for-money offerings. This historical perspective helps underscore the potential impact of emerging Chinese brands on the global automotive stage.

In contrast to the affordability of Chinese EVs, GM is discontinuing production of its cheapest model, the Chevy Bolt EV. (Source: Chevrolet)

 “Is it possible for Chinese companies to do what others have done before, only now with electric vehicles? The answer is absolutely,” says Bill Russo, former Chrysler CEO. “Who doesn’t want affordable vehicles?”

Let’s take a moment to highlight the recent developments in China’s EV market. The already acclaimed Wuling Hongguang Mini EV is now being joined by another breakthrough—BYD’s newly unveiled compact EV, the Seagull. Priced at a mere CNY 95,800 (US$13,600), the Seagull is poised to give competition to established models like the Toyota Vios and the Volkswagen Polo.

However, the allure of the Seagull goes beyond its affordable price. The vehicle offers a stunning range of up to 400 km per charge, placing it in the same league as more expensive counterparts. Furthermore, it’s equipped with modern comforts such as a heat pump air conditioning system, along with advanced technologies including blade batteries and a state-of-the-art 3.0 e-platform chassis. For safety and convenience, it also features 40 kW fast charging capability and comes fitted with four airbags.

This compelling blend of affordability and performance has been swiftly recognized by consumers, leading to an impressive 10,000 orders placed within a day of its launch.

While penetrating the US market presents a significant challenge, China’s low-cost EVs are casting their gaze globally

And it’s a sight that warrants caution from European, American, and Japanese automakers. This new generation of Chinese EVs brings more to the table than just affordability. After decades of learning to reduce production costs, Chinese manufacturers have discovered the sweet spot—the perfect balance of low prices and high quality in EV production. However, two substantial hurdles loom large on the horizon.

Firstly, the issue of durability often gets called into question and a main concern for why the global community has yet to fully trust Chinese automotive brands. Vehicles aren’t merely electronic devices (though they are becoming increasingly similar), and factors such as vehicle reliability and post-sales service significantly influence customer confidence. Only time will reveal whether these Chinese EVs can truly rise up to the occasion.

The second concern is of a political nature. Present circumstances dictate that Chinese EVs targeting the US market must face a preliminary hurdle of a 27.5% import tariff. Furthermore, EVs and batteries not domestically manufactured in North America are ineligible for a US$7,500 tax rebate. Consequently, an EV priced at US$20,000 in China could see its price soar beyond US$35,000 in the US.

While Chinese automakers are exploring ways to establish factories in North America, it’s easier said than done. Even if they successfully set up production, the costs will be vastly different from those within China, thereby impacting their competitive edge.

Nevertheless, outside of the US, these budget-friendly Chinese EVs could potentially reshape a century-old automotive landscape. Armed with their compelling cost-performance ratio, they stand ready to make impressive breakthroughs into international markets.

 (Image Source: BYD)

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