The Meteoric Rise of Electric Vehicles – Part l

Electric vehicles have been garnering increasing interest among global investors especially given the meteoric rise of Tesla. With China’s focus on becoming carbon neutral by 2060 and growing its leadership in the EV space, it is no surprise that home grown EV makers have emerged to become a disruptive force in the industry. Despite forcing global OEMs to enter the Chinese market via a 50-50 JV structure with local Chinese companies, China arguably still lags behind the foreign players in terms of internal combustion engine (ICE) technology. That is becoming less relevant as we transition into the EV era. It has become imperative for the Chinese leadership that China takes the opportunity to reset and dominate this key sector/technology for years to come, especially with EVs being able to achieve the twin goals of reducing carbon emissions and creating new national champions.

The Chinese EV market is already the largest globally due to a combination of government support, early investment in the space, license plate restrictions on internal combustion engine (ICE) cars and more stringent environmental regulations. The Chinese auto market comprises of existing joint ventures (JVs) between global (OEMs) and Chinese companies, such as Brilliance Auto (BMW) and Guangzhou Auto (Toyota), global EV players like Tesla (which started ramping up production from its Shanghai plant), domestic champions like BYD and Geely, and also Chinese EV start-ups including Nio, Xpeng and Li Auto, with all three successfully listed in the US market.

Chinese EV makers benefit from a comprehensive and developed value chain domestically. China’s strength in key components such as batteries (including important battery raw materials) and other auto parts like electric motors even convinced Tesla to start production in China in order to enjoy these advantages. Chinese EV makers are also able to capitalize on favourable government policy, consumer readiness to embrace EVs, and access to lower cost parts by virtue of being in China. We will examine a few of the manufacturing capabilities of key EV players in our next video.