China leads world in electric vehicles

December 15, 2022 10:47
Photo: Reuters

In automobiles using combustion engines, China has always trailed the developed countries. Its most important manufacturers are joint ventures with foreign makers.

But it has not made the same mistake with electric vehicles, the cars of the future. It boasts the world’s largest manufacturer, BYD, which sold 230,427 units in November. In the second quarter of this year, BYD overtook Tesla as the world’s top maker and has extended its lead since. It plans to build one or two manufacturing plants in Europe.

BYD’s net profit for the first nine months of 2022 rose to 9.31 billion yuan, an increase of 281 per cent over the same period last year. Its combined sales of pure electric and hybrid plug-in vehicles rose 250 per cent in the period to 1.2 million units. It has been able to reduce costs per vehicle thanks to these high sales and a broader range of products than its EV competitors.

At the end of November, BYD announced that next year it would launch its vehicles in Mexico, aiming for sales of up to 30,000 units by 2024. Mexico is a major producer of vehicles and has set a target for EVs to reach 50 per cent of total production by 2030.

China is the world’s largest market for EVs, due in part to government support. Industry forecasts say that sales in China in 2023 will reach 8.4 million units, an increase of 30 per cent from 2022.

Even more important in the EV battle, China dominates the market for the batteries that account for 40 per cent of the value of an electric car. The world’s largest manufacturer is Contemporary Amperex Technology Co (CATL), which has its headquarters in Ningde, Fujian.

Founded in 2011, it specialises in the manufacture of lithium-ion batteries for electric vehicles and energy storage systems. In 2021, it produced 96.7 Gigawatt-hours (GWh), accounting for 32.6 per cent of the world total of 296.8 GWh.

In August, CATL announced that it would build a battery plant in Debrecen, eastern Hungary, with an investment of 7.3 billion euros. The site, CATL’s second in Europe, covers 221 hectares and has a planned capacity of 100 gigawatt hours (GWh) per year, making it the largest in Europe. It will supply Europe’s major automakers, nearly all of which are already its customers. CATL already has a production base in Erfurt, Germany.

Creating 9,000 jobs, the Debrecen plant is Hungary’s largest-ever single foreign investment. The European Union aims to end the sale of vehicles using combustion engines by 2035.

China is aggressively investing in batteries for electric cars in Europe. According to Benchmark Minerals, it will by 2031 have 322 GWh of production capacity in Europe, ahead of South Korea with 192 GWh, followed by France and Sweden.

European companies have fallen behind. Thomas Schmall, head of technology at Volkswagen, said that the new world, the electric vehicle, would be defined clearly by battery costs. “Our start block is 100 metres behind the Chinese. We need to run faster, we need a higher speed level than them, which is hard if you see how fast they are moving,” he said.

CATL is a supplier of batteries to VW and Mercedes Benz.

Another trump card for China is that it controls more than 60 per cent of the world’s lithium refining capacity, according to research firm Gavekal Dragonomics. It is lithium carbonate and lithium hydroxide that are used to make batteries for EVs.

In terms of reserves, China has less than six per cent of the estimated global reserves of lithium. Argentina, Chile and Bolivia together account for about 56 per cent of global reserves. Countries around the world are aggressively investing in exploration and extraction of this essential material. But most lithium has to be sent to China for processing.

Prices have soared because of the fierce demand. The spot price of processed lithium carbonate this year has reached 542,000 yuan, up from below 40,000 yuan in November 2020. Chinese firms have been aggressively buying raw material from South America, despite the rising prices, to meet the strong demand for EVs in China.

The outlook for China’s EV makers looks good. They have outpaced their competitors in Europe, the United States and Japan.

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A Hong Kong-based writer, teacher and speaker.