Chinese domination of the electric vehicle market worries beyond the automotive sector

Tuesday April 23, the American car manufacturer Tesla indicated that its profits had fallen by 55% between the first quarter of 2023 and 2024. Its revenues are down 9% and its sales by 8.5% year-on-year.

• Once the world’s leading manufacturer of electric cars, Tesla was relegated to second place for the first time during the last quarter of 2023, falling behind China’s Build Your Dreams (BYD).

• Although BYD has experienced meteoric growth in recent years, Tesla remains the world’s leading manufacturer when production figures are reported for the year.

• In the first quarter of 2024, BYD’s sales fell 43%, while Tesla’s sales contracted 20%, making this relegation a short interlude.

However, long-term dynamics leave little doubt about China’s domination of the electricity market. Last year, 38% of cars sold in China were electric, compared to 22% in the Union and 9.5% in the United States. The growth of the Chinese domestic market (+9 percentage points between 2022 and 2023), dominated by Chinese manufacturers, will continue to support the sales of BYD and other Chinese manufacturers: Aion, Wuling, Li Auto, etc.

• The growth of the Chinese electric sector is based on a strong argument: cars produced in China are on average 50.37% less expensive than those produced in the United States. Five years earlier, in 2018, the price gap was 30.57%.

• Tesla announced significant price reductions on several of its models sold in the United States, Europe and China last weekend.

• While these reductions will allow the American manufacturer (whose market share in China fell to 6.7% in the last quarter of 2023, down 3.8 percentage points since the first quarter) to be more competitive, they will further reduce its margins — and therefore its profits.

The clash between Chinese and American manufacturers for domination of the global electric market does not only concern the automobile industry, but touches on issues of industrial and digital sovereignty and will be decisive for the electrification of uses required by the energetic transition.

The United States and the European Union are increasingly concerned about the surpluses generated by the Chinese electric car market, subsequently dumped on their markets.

• On October 4, 2023, the Commission launched an anti-subsidy investigation into imports of electric vehicles from China.

• During her trip to China in early April, US Treasury Secretary Janet Yellen declared that the United States “will not accept a new wave of cheap Chinese products that flood global markets and harm businesses and to American workers.

Brussels and Washington criticize China in particular for having attracted foreign investments, required the creation of joint ventures and then hindered the sale of foreign goods and products on the Chinese market.

• At the same time, the Union and the United States accuse Beijing of having granted massive subsidies to its national manufacturers, creating a large surplus on international markets. In European ports, Chinese electric cars are now piling up by the tens of thousands.

• If the European Union imposes tariffs as a result of its investigation, it will limit Chinese producers’ access to one of the largest markets and will likely lead to similar measures in other countries, such as the United Kingdom. United.

In his second speech from the Sorbonne, Emmanuel Macron clearly identified the over-subsidisation operated by China and the United States as a risk “that Europe will experience decline”. Beyond the extraction and assembly of the batteries powering electric cars, Chinese manufacturers are twice as agile as Europeans: it takes 24 months for BYD to go from idea to mass production of one model, compared to 50 months for Mercedes-Benz.