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BYD e6 battery electric taxi in Shenzhen, China Foton BJEVCA-N1 battery electric bus in Beijing, China E-bikes with an estimated fleet of 120 million in early .The electric vehicle industry in China is the largest in the world, accounting for around 58% of global production of electric vehicles (EVs)[1] and more than 1.5 million exports in .[2] In , CAAM reported China had sold 9.05 million passenger electric vehicles, consisting 6.26 million BEVs (battery-only EVs) and 2.79 million PHEV (plug-in hybrid electric vehicles).[3] China also dominates the plug-in electric bus and light commercial vehicle market, reaching over 500,000 buses (98% of global stock) and 247,500 electric commercial vehicles (65% of global stock) in ,[citation needed] and recording new sales of 447,000 commercial EVs in .[3]
Plug-in electric vehicle (BEV and PHEV) sales were 37% of the overall automotive sales in China in , with BEVs and PHEVs having 25% and 12% market share respectively. This is a significant increase from , when plug-in electric vehicles accounted for only 6.3% of total sales.[4] The plug-in market in China was dominated by Chinese companies, with BYD Auto and SAIC Motor occupying the top two spots, and 5 out of the top 7 spots.[5]
The battery industry is closely related to the EV industry as batteries constitute around 1/3 of the cost of EVs[6] and around 80% of lithium-ion batteries in the world are used in EVs.[7] The industry also has significant Chinese presence, with major players including world's largest CATL, BYD, CALB, Gotion, SVOLT and EVE Energy.[8]
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Plug-in electric vehicle (BEV and PHEV) sales was 15% of the overall automotive sales in China in .[9] NEV adoption rapidly increased to a record 28% in March , and according to BYD chairman Wang Chuanfu could reach 35% by end of , exceeding the government goal of 20% by .[10] The plug-in market in China was dominated by Chinese companies, with BYD Auto and SAIC Motor occupying the top two spots, and 5 out of the top 7 spots.[5]
It is difficult to estimate the comparative size of EV companies in China as foreign companies such as Tesla and VW have significant sales and manufacturing in China, while Chinese companies such as BYD have significant overseas sales. Some Chinese companies also have foreign-based subsidiaries such as Geely, which owns Polestar and Lynk & Co.
According to Bloomburg, there were 500 Chinese electric car manufacturers in China in . After fierce competition, only 100 manufacturers remained by .[11] According to Wired, as many as 300 manufacturers, both domestic and international, were offering eclectic vehicles in China in .[12]
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Tesla opened its first "Gigafactory" outside the United States in Shanghai, China, in . Giga Shanghai was the first automobile factory in China fully owned by a foreign company, and was built in less than 6 months, becoming Tesla's main export hub.[13] In November , total production was 56,965 vehicles and capacity was estimated to be nearing 700,000 vehicles per year, becoming the largest of the Tesla factories.[14] There is an expansion planned to increase capacity to up to 1.1 million in , and possibly 2 million in the future, becoming the company's largest plant by far.[15]
Volkswagen manufactures electric vehicles in China through joint ventures such as Volkswagen Anhui (formerly JAC-VW), SAIC-VW (Anting), FAW-VW (Foshan), producing vehicles based on the Volkswagen MEB platform. Capacity is expected to reach a total of 1 million by , around 20% of Volkswagen's total automotive production in China.[16][17]
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As of at least , the Chinese EV industry is in a strong competitive position in the developing world market, including southeast Asia.[18]:&#;58&#;59&#; Many southeast Asian countries have made policy Changes in an effort to attract investment from Chinese automakers.[18]:&#;59&#;
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BYD Auto Co., Ltd. is the automotive subsidiary of the Chinese multinational BYD Co Ltd,[19] headquartered in Xi'an, Shaanxi Province.[20] It was founded in January , following BYD Company's acquisition of Qinchuan Automobile Company in .[21] The company produces cars, buses, trucks, electric bicycles, forklifts and rechargeable batteries. The current model range of automobiles includes electric vehicles, plug-in hybrid vehicles and petrol engine vehicles.
It is the fourth largest plug-in electric vehicle (BEV and PHEV) company and fourth largest BEV company in the world, with 9.1% and 7% global market share respectively in .[22] The company is undertaking rapid expansion, with sales hitting over 100,000 per month in March , and is expecting to sell between 1.5 million to 2 million plug-in EVs in , around 3 to 4 times the volume in , possibly overtaking current world leader Tesla.[23]
The company also has a battery division, which is the world's fourth largest producer of EV batteries with a market share of 14.4% as of January .
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SAIC Motor Corp., Ltd. (formerly Shanghai Automotive Industry Corporation) is a Chinese state-owned automobile manufacturer headquartered in Anting, Shanghai. Founded in ,[24] it is currently the largest of the "Big Four" state-owned car manufacturers of China, namely: SAIC Motor, FAW Group, Dongfeng Motor Corporation, and Changan Automobile, with car sales of 5.37 million, 3.50 million, 3.28 million and 2.30 million in respectively.[25]
The company produces and sells vehicles under its own branding, such as Maxus, MG, Roewe, Baojun (under SGMW), Wuling (under SGMW), Feifan, as well as under foreign-branded joint ventures such as SAIC-Volkswagen and SAIC-General Motors. In , domestic-branded cars took 52% of sales.[26][27] It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Feifan.
It is currently a Fortune Global 100 company, ranked 60 on the list. Including SGMW, it is also the third largest plug-in electric vehicle (BEV and PHEV) company and second largest BEV company in the world, with 10.5% and 13% global market share respectively in , selling under brand names such as Wuling, Baojun, Maxus, MG, Roewe and Feifan.[22]
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Great Wall Motor Co., Ltd. (GWM)[28] is a Chinese privately owned automobile manufacturer headquartered in Baoding, Hebei. Founded in , it is currently the eighth largest automobile manufacturer in China, with 1.281 million sales in .
The company produces and sells vehicles under its own branding, such as GWM, Haval, WEY, TANK, POER, ORA. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as ORA.
Named after the Great Wall of China, the company is China's largest producer of sport-utility vehicles (SUVs) and pick-up trucks.[29] In , it was the third largest Chinese plug-in electric vehicle manufacturer in the Chinese market, with 4% of market share, selling under brand names such as Ora and Haval.[5]
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Guangzhou Automobile Group Corp., Ltd. (GAC Group) is a Chinese state-owned automobile manufacturer headquartered in Guangzhou, Guangdong. Founded in , it is currently the fifth largest automobile manufacturer in China, with 2.144 million sales in .
The company produces and sells vehicles under its own branding, such as Trumpchi, Aion, Hycan as well as under foreign-branded joint ventures such as GAC-Toyota, GAC-Honda, GAC-FCA (Jeep) and GAC-Mitsubishi. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Aion and Hycan.
In , it was the fourth largest Chinese plug-in electric vehicle manufacturer in the Chinese market, with 4% of market share.[5] It sold over 20,000 units of EVs in March .[5][30]
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Zhejiang Geely Holding Group Co., Ltd (ZGH), commonly known as Geely, is a Chinese multinational automotive company headquartered in Hangzhou, Zhejiang. The company is privately held by Chinese billionaire business magnate Li Shufu. It was established in and entered the automotive industry in with its Geely Auto subsidiary.[31] Geely Auto is currently the seventh largest automobile manufacturer in China, with 1.328 million sales in .
The company produces and sells vehicles under its own branding, such as Geely Auto, Geometry, Maple, Zeekr, under foreign-located subsidiaries, such as Volvo Cars, Polestar, Lynk & Co, Proton, Lotus as well as commercial only vehicles under the London EV Company, Ouling Auto and Yuan Cheng Auto (Farizon Auto) brands. It also produces electric vehicles under some of the previously listed brandings, including dedicated EV brands such as Geometry, Maple, Zeekr and Polestar.
The group sold over 2.2 million cars in .[32] The company sold over 17,926 plug-in electric vehicles in January .[33]
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Chinese major EV venture brands sales Year Nio Xpeng Neta Leapmotor Li Seres 11,348 482 1,206 - - - 20,565 16,608 11,212 1,000 1,000 - 43,728 27,041 15,509 10,266 33,457 - 91,429 98,155 69,674 43,121 90,491 - 122,486 120,757 152,073 111,168 133,246 76,180 160,038 141,601 127,496 144,155 376,030 106,703[
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The battery industry is closely related to the EV industry as batteries constitute around 1/3 of the cost of EVs[6] and around 80% of lithium-ion batteries in the world are used in EVs.[7] It is estimated to be worth around $30 billion and expected to grow to around $127 billion by ,[34] with demand expected to reach Gwh by . Globally, manufacturing capacity is expected to increase to more than 5,500 GWh by , including 3,000 GWh of capacity announced by Chinese manufacturers to date.[7]
As of , total demand of the market was 296.8 GWh, over double of the amount in .[8] As of Q1 , LFP type battery market share reached 24.1%,[35] with Chinese manufacturers holding a near monopoly,[6] and is expected to rise further to surpass NCM type batteries in .[7]
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Contemporary Amperex Technology Co, (CATL) is a Chinese battery manufacturer and technology company founded in that specializes in the manufacturing of lithium-ion batteries for electric vehicles and energy storage systems, as well as battery management systems (BMS).[36] With a market share of 32.6% in , CATL is the biggest lithium-ion battery manufacturer for EVs in the world, producing 96.7 GWh of the global 296.8 GWh, up 167.5% year on year.[37][38] The company has a manufacturing capacity target of >500 GWh by and >800 GWh by .[39]
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Companies listed include all battery manufacturers, some of which may not be involved in EV battery manufacturing.[39]
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Rank Company Market share % ()[
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1 CATL 36.8 2 BYD Company 15.8 3 CALB 4.7 4 Gotion 2.4 5 EVE Energy 2.3 6 Sunwoda 1.5[
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E-vehicles use only electric motors and gearboxes, and have few parts requiring maintenance. Compared to traditional vehicles and excluding the battery, they are cheaper and easier to build.[46] However, building battery with sufficient capacity and discharge-cycles is a challenge.
BYD Company is a Chinese company that builds rechargeable batteries using a new technology that, according to the company, makes them safer than other lithium-ion models. In , it became the world's leading small battery company and is one of the world's largest manufacturers of rechargeable batteries. It is emerging as a leader in the technology sector.
Tianjin Lishen Battery Joint-Stock Co. Ltd. is another China based battery manufacturer. The company has a partnership with Coda Automotive, a California based company, to develop a Coda electric vehicle and ultimately, batteries for use in electricity generation. The focus of the latter will be to provide energy storage for wind and solar energy generation.
In , the government battery subsidies fell by 30% and Chinese EV sales dropped.[47] [48]
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While the shape of this industry is still emerging, electricity generation and the infrastructure to deliver energy appear to be the areas with the highest potential and relevancy to manage future energy use. According to consulting group Oliver Wyman, "some utilities are already engaging a specific area of the value chain, setting priorities for near-term, medium-term, and long-term initiatives. They have begun to model different market and business impact scenarios, with the goal of identifying the biggest upsides and pitfalls."[49]
Utilities have begun to develop focused strategies in areas where they are well positioned to serve the electric-vehicle value chain. At the moment, a variety of business design ideas are competing to shape the new marketplace. China has invested a great deal into this fundamental component of the value chain, and some of the principal facilitators are as follows:
An electricity provider, year-end , the Company finished approximately six billion kilowatt-hours of on-grid electricity, and had an attributable installed capacity of 1.5 million kilowatts, including 1.4 million kilowatts of thermal power and 100,000 kilowatts of hydropower.
The Company develops, manufactures and sells software and hardware products serving the power industry, and also provide system integration services. It also provides software and hardware services and system integration services for things such as power grid dispatching automation products, electricity market commercial operating systems, and electrical control automation products.
This company is primarily engaged in research, development, manufacture and distribution of automation, protection and controlling products for electric power systems. Specifically, it provides power grid and power generation equipment, transformers, electrical systems, power distribution network products, electrified railway products and direct current (DC) power distribution systems.
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China has promoted the development of the electric vehicle (EV) industry through a series of encouraging policy measures to reduce petroleum fuel consumption and greenhouse gas emissions. Still, the market for electric cars is small. Against this backdrop, the Chinese government began phasing out EV subsidies in with the goal of eliminating them by . In recent years, the Chinese government has introduced a series of incentive policy measures to promote the development of the electric vehicle industry, such as consumer subsidies, various tax exemptions, toll-free, charging infrastructure construction, research and development grants, etc. (R & D) electric vehicle manufacturers.[50] In February , China approved a joint venture between subsidiaries of BMW and Mercedes-Benz. They would work on building a rapid charging network in the country.[51]
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When it comes to the electric vehicle (EV) market, China is leading the charge ahead of traditional automotive juggernauts like Germany and Japan. The country&#;s new EV sales grew by 82 percent in , comprising nearly 60 percent of global EV purchases. This greatly surpasses that of the United States, Norway and other Scandinavian nations that were early adopters of EVs.
According to a report by the International Energy Agency, over half the electric cars on roads worldwide are found in China. The country also accounted for 35 percent of global electric car exports in . Indeed, Chinese EV giant BYD sold more EVs than Tesla in the fourth quarter of and reported a 62 percent increase in EV sales for the year, while fellow automaker Geely experienced an uptick of 18 percent.
How did China get to this point? What did Chinese automakers do differently, and what can companies looking to scale up their innovations learn from this approach? A sizeable internal market and favourable government policies set the stage for this speedy rise. However, other nations have implemented similar policies, yet haven&#;t been as effective in accelerating market adoption.
Here are three key lessons from the growth of China&#;s EV sector. They revolve around identifying opportunities in adjacent industries, encouraging operational solutions and doubling down on core technology.
1. Identify opportunities in adjacent industries
China began its EV drive later than the US. Although both countries had similar policies to incentivise companies and consumers, Chinese companies did not play the game directly.
Tesla pursued a &#;big banner&#; approach, with CEO Elon Musk leveraging the media to establish the brand as an EV pioneer. This strategy facilitated Tesla&#;s entry into the California market and the swift development of a robust national and global fanbase. In contrast, Chinese automakers BYD and Geely adopted a more discreet approach. They flew under the radar, conducting quiet experiments during their early stages.
They kickstarted their EV development by focusing on adjacent industries &#; namely, electric buses and motorcycles &#; instead of targeting the automotive industry head-on. These vehicles may be less visible than cars, yet they present unique challenges that are ripe for automakers to address and helped both brands fuel their EV manufacturing strategies.
For instance, buses are heavier and carry more passengers than commercial sedans. Additionally, most buses run for about 18 hours each day, meaning they have greater battery power and storage requirements. More powerful batteries also take longer to charge.
By targeting this adjacent industry, BYD began pushing the boundaries of battery technology as early as . It then used electric buses as its entry product into North American markets. It began by selling electric buses as fleet vehicles in , eventually supplying them to the Los Angeles Metro system. BYD electric buses are now prevalent in South American markets.
Geely operates within another adjacent industry that presents different challenges: motorbikes, which require lighter and more portable batteries than cars. Experimenting in this area allowed the company to become a leading producer of battery technology.
By taking an indirect path, BYD and Geely innovated on the two extreme ends of battery technology, which is core to EV production.
2. Encourage operational solutions
Another reason for the success of China&#;s EV market is that early innovators &#; including BYD and Geely &#; collaborated with local groups to overcome operational hurdles. Government policy may accelerate the adoption of new technologies, but it does not solve existing operational challenges and often introduces new ones.
For instance, many European countries, such as the Netherlands, were quick to implement various registration tax incentives and rebates in order to encourage EV adoption. But research found that interest in purchasing full EVs remained very low among taxi drivers. A possible explanation could be the operational challenges of full EVs, which include the short driving range and long charging time. These concerns have tended to overshadow the environmental benefits and other strengths of EVs, like having a quieter engine and not requiring regular oil or battery changes.
How did China overcome these operational hurdles? A similar policy was established by the Chinese government in . It offered subsidies for the purchase of hybrid and full EVs as well as buses across 10 cities, including Beijing and Xi&#;an. Beyond this, Chinese EV brands worked closely with taxi companies to devise operational solutions that would improve core battery technologies. As an example, EV companies didn&#;t merely map out the locations for charging stations, but also tested various scheduling options for battery charging that matched the current performance level of fully electric and hybrid vehicles.
EVs equipped with the best battery technology can run for up to eight hours in the inner city. In China, taxi companies operating electric or hybrid vehicles typically have two fleets of cars &#; one for morning and one for evening. The morning shift typically ends around 6 pm to 7 pm, after the workday but before the rush of people heading out for the evening. This enables the morning fleet to be charged after 8 pm, avoiding the window of heavy industrial power consumption. The evening fleet returns for charging around 2 am to 3 am, which also falls within the period of lower power consumption for a city&#;s grid.
This new schedule, designed jointly by Chinese EV automakers and taxi companies, not only addresses the battery constraints of EVs, but also helps reduce the pressure on and flatten the consumption curve of a city&#;s power grid.
3. Double down on core technology
Historically, European and American automakers have had a strong foothold on the core technology for combustion engines. The Chinese automotive industry fell significantly behind both regions, as well as Japan, in this area. But in , Chinese automakers estimated that battery costs would make up between 30 to 40 percent of the total manufacturing cost of a fully electric vehicle. This meant that there was a window of opportunity for newcomers to leapfrog the competition by focusing on the technology that powers this central component.
Chinese companies collaborated broadly &#; with other automakers and technology companies &#; to strengthen their capabilities in terms of EV manufacturing. For instance, at the beginning of its EV journey, BYD shifted from manufacturing mobile batteries (it supplied both Nokia and Motorola) to making automotive batteries through Yadi Electronics, now part of BYD. Additionally, it set up a new automotive division in by acquiring Qinchuan Machinery Works, a small car manufacturing company.
BYD then collaborated with powerhouses Daimler and Toyota to gain knowledge on EV manufacturing in exchange for sharing its own insights into battery manufacturing technologies. The company works closely with Foshan Plastics Group on optoelectronics (electronic sensors that detect and control lights). BYD has also partnered with Chinese tech behemoth Baidu to scale up the software capability and service capacity of its EVs for the mass market, including equipping BYD EVs with Baidu Map and intelligent driving software.
Similarly, Geely leapt at the chance to set up an ecosystem encompassing everything from low-orbit satellites to smart hardware to collect and monitor data to help improve EV battery performance. It partnered with Baidu, which builds the cloud-based software that controls its vehicles, on a joint venture (Jidu Auto) that aims to produce intelligent EVs.
Acquisitions also formed a key component of Geely&#;s strategy. It acquired Australian automatic transmission manufacturer Drivetrain Systems International &#; which supplies the likes of Chrysler, Maserati and Ford, among others &#; as well as Volvo, Lotus and other automakers. Additionally, Geely has partnered with five more automakers on other joint ventures.
Crucially, Chinese EV players enjoy proximity to many critical raw material supplies, including 70 percent of the global production of rare earth elements &#; central components for battery production. This means that Chinese battery companies hold a pivotal position in the supply chain, granting them strategic advantages for innovating new battery technologies and leverage in negotiations with suppliers beyond batteries.
Through these partnerships and acquisitions, Chinese automakers have supercharged their development of peripheral components for EVs and accelerated their go-to-market speed. This approach to ecosystem building allowed BYD and Geely to orchestrate complementary assets quickly and effectively around their core focus &#; battery technologies. This facilitated their rise as two of China&#;s leading EV manufacturers.
What&#;s next for China&#;s booming EV industry?
Chinese companies have fuelled the acceleration of their country&#;s EV sector and have developed a deep understanding of what is needed to move the industry forward. Meanwhile, despite rising EV adoption, European automakers seem to have a hard time transitioning from internal combustion engine (ICE) cars to a more balanced portfolio of ICE, hybrid and EV. A leading automotive executive attending one of my classes even commented, &#;Our only job is to deliver our quarterly sales numbers [of traditional cars]. Someone else is dealing with innovation and mobility in the headquarters somewhere.&#;
Looking ahead, the next challenge for Chinese EV companies is global expansion. However, having the core ingredients &#; strong battery technology, a firm hold over the battery supply chain and operational advantages &#; doesn&#;t guarantee they will remain a market leader in EV production.
Ultimate success lies beyond the product itself. Chinese EV companies need to repeat the same approach outlined above to learn about the global market &#; be it channels, competition, consumer behaviour or infrastructure. For instance, both the US and Europe are tightening EV subsidies to benefit only local manufacturers. Can Chinese EV companies build local manufacturing or assembly plants, too? What benefits would that bring?
Many European markets are still building charging infrastructures. Can Chinese EV companies effectively participate in this process? Tesla, for example, had to collaborate with local body shops in France for EV repairs. Can Chinese EV companies build post-sales service networks in the US and European markets? Experimenting with more operational solutions will surely help China drive EV adoption even further.
This is an adaptation of an article published in HBR.
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