According to UBS analyst Paul Gong, the efficient control of the supply chain and a cost edge in batteries will make Chinese electric cars more attractive to overseas customers, especially in Europe. Gong predicts that a handful of Chinese EV leaders, particularly BYD, will expand their production footprint globally, with Europe being a top priority.
The European market’s size and the surging adoption rate of electric vehicles (EVs), which is expected to reach 100% of sales by 2035, will serve as a catalyst for Chinese EV makers’ global expansion. UBS forecasts that Chinese-made cars will control 33% of the global market by 2030, up from 17% in 2022. In contrast, established international automakers, such as Volkswagen and Toyota, will see a significant decline in market share, falling to a combined 58% of global automotive sales by 2030. Elon Musk’s Tesla is expected to hold an 8% market share that year, quadrupling its current 2% share.
In a UBS teardown report, it was found that BYD’s pure electric Seal sedan has a production advantage over Tesla’s Model 3 assembled in mainland China. The report indicates that the cost of building a Seal is 15% lower than that of the Model 3. Additionally, in Europe, the Seal has a sustainable 25% cost advantage over its rivals, even when trade barriers such as tariffs are considered.
However, these expansion plans come amidst an investigation by the European Commission into anti-subsidy concerns regarding Chinese-made EVs. The investigation could result in tariffs higher than the standard 10% rate, posing a potential challenge for Chinese automakers. If punitive tariffs are imposed, it could disrupt the global automotive industry, as Beijing may retaliate against European automakers that have been well received by Chinese consumers.
In summary, Chinese EV manufacturers, led by companies such as BYD, are looking to expand their reach beyond mainland China, particularly in Europe. The cost advantage and control of the supply chain gives them an edge in the global market. However, challenges such as the European Commission’s investigation into anti-subsidy concerns and potential trade barriers may affect their expansion plans.
Definitions:
– EV: Electric Vehicle
– UBS: Swiss Bank UBS AG
Sources:
– Original article by Gregor Stuart Hunter, South China Morning Post, January 31, 2023