Reinvestigation: Where do Chinese NEVs' competitive advantages come from?

HEFEI/PARIS, April 10 (Xinhua) -- In addition to the EU's mandate for customs registration of electric vehicle (EV) imports from China and potential retroactive tariffs, the United States and Britain are also preparing to conduct so-called anti-subsidy investigations or national security risk investigations into China's EV.

China's EV exports face headwinds.

This is because relevant countries are pursuing protectionism and trade barriers in the name of "fair competition" and "national security," which violates the principles of market economy and WTO rules.

It also reflects the growing competitiveness of China's new energy vehicle (NEV) industry.

During a recent field visit, Xinhua reporters found that Chinese NEVs' competitive advantages depend not on subsidies, but on supply chain integrity and industrial concentration, full market competition, and rapid technology upgrade promoted by the super-large market.

China's NEVs not only provide diversified choices for global consumers, but also help more countries achieve green and low-carbon transformation and sustainable development.

The first-mover advantage of China's auto industry in the transition to new energy is driving the transformation of the global auto industry.

SUPPLY CHAIN INTEGRITY, INDUSTRIAL CONCENTRATION

With the most complete industrial system, China's manufacturing industry ranks first in the world for more than a decade.

In the new energy industry, China has a full industrial chain covering material research and development, engineering design, manufacturing and final assembly, forming a number of auto industry clusters that conform to the country's "dual circulation" development pattern, which takes the domestic market as the mainstay while allowing domestic and international markets to reinforce each other.

Some regions in China, such as Hefei City in Anhui Province, have established a complete industrial and supply chain system for the rapidly developing NEV industry.

Hefei hosts six complete vehicle manufacturers, including state-owned enterprises, private enterprises and foreign-invested enterprises.

One of the main reasons why those vehicle companies choose Hefei is that the local industrial chain correlates with the automobile industry strongly, with a high production capacity of display screen, chip, artificial intelligence, battery and other related products.

Dubbed as a capital of new energy, Changzhou City in east China's Jiangsu Province has a quite competitive NEV industrial chain due to its power battery.

Data showed that the industrial chain integrity of power batteries in Changzhou has reached 97 percent, ranking first in China, while the output accounts for 20 percent of the country's total.

The industrial chain and supply chain strengths in NEVs and the construction of supporting infrastructure such as charging facilities provide strong support for the growth of Chinese NEVs.

In February 2022, the cumulative production of NEVs in China exceeded 10 million units, and in July 2023 it exceeded 20 million units. It took 27 years to go from the first to the 10 millionth vehicle; and only 17 months to go from the 10 millionth to the 20 millionth vehicle.

China boasts most abundant application-oriented research and development talents, said Qin Lihong, co-founder and president of Chinese EV maker NIO, adding that the country is attracting more and more people to engage in NEV research and development.

In 2023, German carmaker Volkswagen Group settled its largest research and development center outside its German headquarters in Hefei.

"With our 'In China, For China' strategy, we are fully integrating ourselves into China's industrial ecosystem," Chairman and CEO of Volkswagen Group China Ralf Brandstatter said in an interview with Xinhua.

A recent commentary by foreign media said that a total ban on Chinese science and technology does not conform to the free market principle, adding that Chinese competitors can be good for the West, just as Germany's Volkswagen did not open a huge research and development center in Hefei for no reason.

LARGE MARKET, RAPID TECHNOLOGY UPGRADE

China's NEV industry has been a highlight of the global auto industry, with its huge market size and strong growth potential.

Data from the China Association of Automobile Manufacturers shows that in 2023, China's NEV production and sales increased by 35.8 percent and 37.9 percent year-on-year respectively. The sales accounted for nearly 65 percent of total global NEV sales. China has been the world's top producer and seller of NEVs for nine years in a row.

China's huge consumer market provides a favorable environment for the research and development and upgrade of NEV technology. Meanwhile, due to the higher level of acceptance among Chinese consumers of vehicle intelligence and new technologies, many automotive companies are prioritizing the launch of new products and technologies in the Chinese market.

Compared with traditional cars, NEVs are more electrified, intelligent, internet-connected and digitalized. China's NEV industry featuring innovative thinking and innovation capabilities has achieved leapfrog development, and made continuous progress in core technologies through nearly two decades of practice.

BYD has a special "technical fishpond" that contains various technologies to meet market demand, said Wang Chuanfu, chairman of BYD, China's leading NEV manufacturer.

Thanks to intelligent technology such as autonomous driving and intelligent cockpit, China's NEV products have been recognized by the market.

Globally, Chinese enterprises have shown advantages in mass production and upgrade speed, with faster and more efficient innovation cycles.

Chinese vehicles are "simply good cars and people buy them," Mathias Miedreich, CEO of Umicore headquartered in Belgium, was quoted by the London-based Financial Times as saying.

Chinese Minister of Commerce Wang Wentao said Sunday that Chinese EV manufacturers' rapid development is a result of constant tech innovations, a well-established supply chain system and full market competition, not subsidies.

The accusations of "overcapacity" by the United States and Europe are groundless, he said.

Wang also noted that the development of China's EV industry has made an important contribution to the global response to climate change as well as green and low-carbon transformation.

DIVERSIFIED CHOICES, BOOSTER OF AUTOMOBILE TRANSFORMATION

Relying on technological innovation and excellent quality developed through competition in the global market, Chinese NEVs are highly popular in Europe.

Chinese-made electric cars will capture a quarter of the EU market in 2024, up from 19.5 percent in 2023, Europe's clean transport campaign group Transport and Environment (T&E) said in a recent study.

T&E projects that Chinese brands could reach 11 percent of the EU's EV market in 2024 and 20 percent in 2027.

"Tariffs won't shield legacy carmakers for long," said Julia Poliscanova, senior director for vehicles and emobility supply chains at T&E.

Trade protectionism almost always distorts market relations, which is ineffective and costly, said an article recently published on the German business news magazine WirtschaftsWoche.

An increasing number of Chinese automobile brands, especially EV brands, are entering Britain and British consumers are open to that, said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders in Britain.

The incoming Chinese brands are good for both UK consumers and the industry, the British motor industry leader said, explaining that the entry of these brands to the UK market stimulates competition, which in turn promotes innovation.

In the "battery valley" in northern France, Chinese enterprises actively join local projects to produce electric vehicles and batteries, a partnership widely appreciated by a region keen on green re-industrialization.

With four "gigafactories" announced in three years, the "battery valley" is interested in "taking on strengths from all countries, including Chinese players who have gained a real lead in battery and electric vehicle technology so that we can also benefit from their know-how," said Yann Pitollet, CEO of Nord France Invest.

In February, Volkswagen agreed to carry out strategic technical collaboration with Chinese automakers XPeng to develop two intelligent connected vehicle models for the Chinese market.

Brandstatter said cooperation with XPeng helps them accelerate research and development, improve efficiency and optimize cost structure.

Rob de Jong, head of the Sustainable Mobility Unit at the United Nations Environment Programme, said that China is a leader in electrification and the promotion of EVs. He hoped that China will share its experience with the world, especially the Global South, and its technology to improve the affordability of EVs around the world.