Should we be paying closer attention to Chinese EVs?

Guangzhou feels familiar yet foreign.

The bustling cosmopolitan CBD with glass-sheathed skyscrapers piercing toward the clouds, dense city traffic with cars hustling non-stop, it's not unlike life back home in Singapore.

And yet, look a little bit closer and it's really quite different. I was last in Guangzhou about 10 years ago, and it feels totally different today — as if the city has taken a massive leap into the future far surpassing '10 years'.

That progress is driven by technology, obviously. Like the rest of China, it's just about fully cashless now. Everywhere you go, you are greeted by screens and QR codes, and food delivery can be dropped off in lockers for you to pick up. Digital technology dominates society — so much of life can (and does) occur on a smartphone.

And the cars. Amidst all the brands logos that most Singaporeans will be unfamiliar with, one thing stands out above all - the green and white number plates that indicate new energy vehicles, which include BEVs and PHEVs grouped collectively under the EV umbrella.

They are everywhere. China is by far the largest EV market in the world, accounting for 55 per cent of global EV sales in H1 2023, according to Canalys. And it sure feels like it. Peering outside from our bus, it seems like every other car is electric. Projections have 50 per cent of car sales in China being EVs by 2025. 

And it's not just passenger cars. In Guangzhou, public transport vehicles, including taxis and buses, are all electric. Commercial vehicles are not exempt — electric trucks and minivans can be found as well. And of course, all the scooters, everywhere, darting in and out of the sea of human traffic. Its PMDs to the nth degree.

Perhaps unlike anywhere else (save Norway), China is fully committed to this electric automotive future.

The electric explosion

The rapid and exponential growth of the Chinese EV sector cannot be understated. The country boasts more than half of all EVs in the world, and its 1.8 million public chargers is 8.5 times more than second place (South Korea).

Since the Government started pouring money into EVs starting in 2009, the Chinese EV market has exploded. With new start-ups looking to get into the market, as well as established brands making the switch, there were an estimated 300 EV brands up until a few years ago. That number has whittled down significantly, but the survivors have grown stronger and more dominant.

There is a combination of state and privately-owned companies, and many are now singularly dedicated towards fully electric models. BYD is the largest (and probably most familiar to Singaporeans), but electrification pervades across all brands.

GWM, the largest producer of SUVs and pick-up trucks, has also made a hard pivot to electrification. Since announcing a new energy offensive in March 2023, 14 new energy models have been introduced across its 5 brands. Its new Hi4 plug-in hybrid 4WD powertrain will steadily be rolled out across several of its brands.

GWM's "over-investment in R&D" approach can perhaps be more broadly applied across the entire Chinese industry. The growth of the PHEV market, in particular, is a trend worth paying closer attention to.

The electric effect

This shift towards electrified vehicles does not fundamentally change the day-to-day automotive reality. Guangzhou is still massively crowded, and traffic is expectedly chaotic. With e-scooters weaving in and out of traffic (and mostly ignoring road rules), cars jostling for space with buses and commercial vehicles, it's absolutely hectic.

It is the same kind of urban tarmac chaos you'll find in any other dense city. I was recently in Nepal and it doesn't feel any different. The chaos exists, regardless of what types of vehicles, but precisely because of the basic volume of vehicles. Going electric doesn't make traffic magically vaporise. 

The one significant (and important) difference, of course, is that with a bigger proportion of EVs, it's notably quieter (save the constant horning), and the air is much clearer.

That should matter. The shift to EVs is unlikely to alter most people's road-using behaviours, but it still has important benefits  primarily for the pedestrian.

More relevantly, the fundamental nature of the vehicle doesn't change, even if the means of propulsion has. Vehicles will continue to move people around. What electrification offers is a cleaner, more environmentally friendly mode of doing so. That is the hope.

The cost of growth

Questions still exist around the sustainability of such growth. 

The ballooning Chinese EV market is certainly being buoyed by government subsidies, and subsidies should (must?) eventually end (though extensions to EV subsidies have already been announced through 2027).

The exponential growth seen in China is likely unsustainable. But growth is still growth — that investment in automotive manufacturing is raising the profile of Chinese brands globally. The products, too, have come a long way since the days of being simple imitators.  

And while it is unlikely that this state-driven model will be exactly replicated across other markets (China has a somewhat unique political efficacy), it is worth paying attention to. Legislative impetus has been key to driving EV adoption across most markets, and that also holds true here in Singapore. While we've seen some policies put forth to encourage EV adoption (limited as they may be), additional incentives can accelerate this electric transformation.  

What happens next?

As we're seeing across the globe, and made especially stark in a place like Guangzhou, electrification is not only the future, but it is very much already the present. Yes, the rate of EV adoption will differ from region to region, depending on product availability, infrastructure support, and legislative appetite, but this shift is inevitable.

The upside should not be ignored. Beyond the in-car experience (which we've covered plenty, and will continue to do so), the other elements of the transport eco-system also benefit. Public transportation, heavy polluters due to their high road use, can and will be made cleaner. And the reduction in air and noise pollution is a huge boon for pedestrians.

The Chinese apparatus is a complicated one, but the effects on the broader automotive industry should not be under-appreciated. The power of the Chinese yuan is immense — non-Chinese brands are making great efforts to grow in China, setting up major manufacturing facilities (Tesla's Gigafactory Shanghai is the brand's primary export hub), establishing joint ventures with local manufacturers, and even making market-specific models for China. 

The financial might also extends beyond the end consumer. Several established car brands have now come under Chinese ownership (Volvo and Polestar, Lotus, MG), and who knows if more will come.

But industry-wide implications are present. According to the IEA's Global EV Outlook 2023 report, China is the primary player in the EV supply chain (largely with regards to batteries). Alternatives to lithium-ion batteries are also being explored — around 95 per cent of lithium-iron-phosphate batteries went into cars made in China, and lithium-free battery manufacturing is almost entirely concentrated in China.

Get familiar

While it's easy to have our attention focused on shiny new cars (that's what motor shows are supposed to do), the larger supply chain implication of China's EV dominance will affect all of us.

Beyond the manufacturing processes and economies of scale, the actual cars being produced are not upending the industry in any ground-breaking way, at least from a product perspective. That's perhaps true. But how those products come to be, and what goes into making these cars, that has knock-on effects on the rest of the world. 

China will likely continue to lead the way when it comes to EVs, though its dominant lead may perhaps shrink in time to come. As is abundantly clear from what I saw at Auto Guangzhou 2023, the Chinese brands have no intention of slowing down. It is for the rest of the world to catch up.

So even if the Chinese automotive landscape may feel foreign to us, it's best that we all start getting a little bit more familiar.

This article was first published in sgCarMart.

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