Electric cars help China no longer 'fall behind' internal combustion engine car powers

Japanese or German cars is a familiar question for car enthusiasts. One side bows to the power and speed of German engines, while the other admires the reliability and value for money of a Japanese car.

For decades, the two countries have taken turns occupying the position of the world's top auto exporter. But the dominance of Germany and Japan is coming to an end as China, the world's largest automaker, is also on track to surpass a series of big names in exports.

China shows a leap in the number of car exports.

Just a few years ago, China’s efforts to expand overseas were stalled. In 2015, China exported fewer than 375,000 cars a year, less than India and about as much as Germany and Japan export in a month. But since 2020, things have changed.

China exported nearly 1.6 million cars in 2021. By 2022, the figure was 2.7 million. International sales are expected to rise further in 2023. Customs data shows the country shipped nearly 2 million cars in the first six months of the year, or more than 10,000 a day.

The country's fledgling auto industry is largely exported to poorer countries, but now many Western consumers are buying Chinese-made cars for the first time.

Exports to Australia tripled year-on-year in the first half of 2023 to more than 100,000 cars; sales to Spain increased 17-fold to nearly 70,000 cars.

But many of these cars are Western brands. Tesla, the American electric car company, will account for 10% of exports in 2022, for example. Also making up a large share of exports are cars branded as MG, originally a British brand, and Volvo, a Swedish carmaker now owned by Chinese companies.

Germany and Japan are the leading countries in exporting internal combustion engine vehicles, while China holds the number 1 position in exporting electric vehicles.

Electric vehicles have played a key role in China’s surge in auto exports. Despite its enormous manufacturing prowess, the world’s second-largest economy has never mastered the internal combustion engine, a complex engine with hundreds of moving parts that is difficult to assemble.

Simple mechanics, easy manufacturing

The advent of battery-powered vehicles, which are mechanically simpler and easier to manufacture, has helped China catch up with traditional car giants.

Over the 10 years from 2009 to 2019, Beijing invested about 676 billion yuan (100 billion USD) in electric vehicle technology and rose to take the world's leading position.

Battery-powered vehicles now account for a fifth of car sales in China and a third of exports. In Japan and Germany, only 4% and 20% of exports, respectively, are electric vehicles.

Chinese cars are increasingly appearing in high-income markets.

The war has also boosted Chinese exports to Russia. As soon as the Russia-Ukraine conflict broke out in February 2022, most Western automakers halted operations in Russia. Their departure allowed Chinese companies to take market share.

According to the analysis firm Autostat, in the first half of 2023, Russia imported nearly 300,000 Chinese cars worth $4.5 billion, a six-fold increase compared to 2022. In July 2023, Chinese cars accounted for nearly 80% of imported cars in this market.

AlixPartners, a consultancy, estimates overseas sales of Chinese-branded cars could reach 9 million units by 2030, double Japan's exports by 2022.

While these domestic brands are still relatively unknown in the West, they tend to be relatively cheap—on average, a “Made in China” car is about 40% cheaper than a German-made one—making them easy to gain popularity in emerging markets like Brazil.

But while China’s electric car makers are making big sales, few are actually making money, experts say, because the industry is heavily subsidized by the state and this cannot last forever.

(According to TheEconomist)

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