HOW CHINA BECAME THE WORLD'S LEADING AUTOMOTIVE POWERHOUSE

The motor show that opened in Beijing in 2024, where China demonstrated just how far ahead it is of German, Japanese and American car manufacturers on the road to an electric future.

In Asia, we don’t waste time dithering over every little thing; we just get on with it!

Yes, in Asia we move forward; we move forward very quickly and pragmatically.

This way of looking at things is a philosophy that is quite incomprehensible to most Westerners, who like to waste time criticising, opposing and, more often than not, hindering the essential advances of technology and the future.

For example, in Switzerland, there’s talk of an ‘energy transition’ and developing renewable energy… But everything is done to prevent developers from building.

In Switzerland, there’s a lot of talk… but nothing is set to change in terms of spatial planning; the only things being done are pedestrianising streets and removing parking spaces…. Brilliant and so effective…. In reality, it’s a nightmare…

Anyway, let’s get back to Asia and China. Since 2024, China has established itself as the country making the fastest progress in the energy transition and has become the world leader in electric car manufacturing.

I think things will progress very well in this direction in Asia, even though I am not at all in favour of an ‘all-electric’ approach, as charging stations and supply will be very problematic on a very large scale, especially in Europe.

On the other hand, by diversifying between combustion-engine and electric vehicles without pitting them against each other, we will achieve balanced and sustainable mobility solutions.

Alain Farrugia

Chinese cars: faster, better and cheaper

The Chinese aren’t just winning on price.

They outstrip their Western competitors in the number of models and the speed with which they bring new developments into production. Chinese cars are packed with features – from avatars and social media integration to karaoke and autonomous driving.

At this year’s Beijing Motor Show, 278 models are on display, including 117 new ones. There are already over a hundred manufacturers on the market, including two dozen major players, with the rest being start-ups.

Competition and variety are only increasing: last year, for example, smartphone market leaders Huawei and Xiaomi began producing electric cars.

It was around this time that the American company Apple shelved its Apple Car project.

Chinese companies, where engineers work according to the 9-9-6 schedule generally accepted in the country (from nine in the morning to nine in the evening, six days a week), have managed to shorten the development-to-implementation cycle to between one and a half and two years, compared to three or more. Western car manufacturers are not yet able to do this: at last year’s Munich Motor Show, Volkswagen promised to reduce the current 4.5-year timeframe for bringing new models into production – but not for all of them.

Due to a loss of momentum, variety and price competitiveness, Western manufacturers have lost the market. First to the Chinese, then to the rest of the world.

Volkswagen used to dominate in China, and German brands like Mercedes, Audi and BMW were always seen as luxury. Those days are fast fading.

Last year, the share of foreign car brands’ sales in China fell below 50% for the first time and is declining rapidly: it now stands at 48%, down from 57% two years ago.

The world leader in electric car production

The stakes are particularly high given that China is the world’s largest car market. And it is determined to bid farewell to the internal combustion engine, even though it still produces petrol and diesel cars, notably for export to poorer countries and Russia, which has deprived the population of direct access to Western automotive products by launching a full-scale war in Ukraine.

In April, just before the opening of the Beijing Motor Show, the Chinese car market reached a symbolic milestone. More than 50% of new cars turned out to be electric (either fully electric or plug-in hybrids).

Image caption: Volkswagen ceded its leadership in the Chinese market to BYD as early as 2022, but hopes to maintain a market share of around 15% over the next decade.

China is a global leader in electrification. According to projections for 2024, the share of electric cars in China will be 45%, whilst in Europe it will be 25% and in the United States just 11%, predicts the International Energy Agency (IEA).

This is partly due to state support, the availability of chargers and consumers’ desire for something new. But the main reason is price. Due to fierce competition in a market that is still relatively young, manufacturers are waging a fierce price war, burning through capital and selling cars at a loss.

As a result, more than half of electric models cost roughly the same as their petrol and diesel counterparts. In the West, electric cars, as in the past, are a luxury rather than a means of transport. Their prices are higher than those of traditional cars fitted with internal combustion engines.

The Chinese are capitalising on this. The largest car manufacturer, BYD, sells the Atto 3 crossover on the domestic market for $20,000, and in Germany for $40,000. In March, the company unveiled the Seagull EV (Honor Edition) saloon, for which it is asking just $10,000 in its home country and in Latin America. It will sell the same car for $20,000.

Cars of the future – in the West; cars of the past – in Russia

Image caption: China exported 1.2 million electric vehicles last year, 80% more than in 2022, according to the International Energy Agency (IEA).

The Chinese are not afraid of trade barriers or competition from other countries. The US already imposes tariffs of 27.5% on imports of Chinese cars, and Europe is determined to protect its market, but has not yet done so.

As a result, imports of Chinese cars into Europe doubled last year and, in the coming years, according to the European Commission, the share of electric cars assembled in China (including Tesla) will double to reach nearly 20%, if no restrictions are introduced.

China is aggressively conquering the global market. Last year, it exported 1.2 million electric vehicles, 80% more than in 2022, according to the International Energy Agency (IEA).

Overall, exports rose by 58% to 4.9 million cars, enabling China to overtake Japan as the world’s leading exporter. A year earlier, China had overtaken Germany.

In addition to the boom in electric car production, export growth was facilitated by the unexpected emergence of a new lucrative market for older Chinese models: Western cars are no longer being imported into Russia due to the war in Ukraine and sanctions.

Sales of Chinese cars in Russia have soared by more than 500% over the past year and exceeded 800,000 units, according to Chinese statistics. Unlike Western car manufacturers before the Great War, the Chinese are not going to localise their production and make the most of direct sales without competition.

Shifting from the West to China, Russia has become dependent on the world’s second-largest economy. However, unlike the West, China is not seeking to share technology, invest in the manufacturing sector or purchase oil and gas at a competitive market price.

Consequently, despite the boom in electric cars in China and the surge in car exports to Russia, the electric revolution is bypassing Russia. If Russia emerges from its isolation, it will have to catch up with the global automotive industry.

Because of the war, Russia is not only lagging behind in terms of technology, production and infrastructure (charging points, showrooms, repairs), but it is also losing revenue, as it earns most of its money by selling oil abroad, where its main buyer is China. And electrification is undermining demand for oil.

In 10 years’ time, one in two cars sold worldwide will be an electric car, predicts the IEA. This will reduce demand for oil by around 10 million barrels a day – roughly the amount currently consumed by all US transport.

China, world leader in the energy transition

China, once considered the world’s biggest climate polluter, has left the rest of the world far behind when it comes to renewable energy. Journalist and author David Wallace-Wells cites impressive figures that illustrate the rapid growth of China’s capacity. “China is rolling out various green energy technologies at an astonishing pace, exceeding analysts’ forecasts every year,” explains Wallace-Wells. The rest of the world is also making progress, but much more slowly.

In 2019, China installed around a quarter of the global solar capacity added that year. By 2023, 62% of the world’s installed solar capacity had been installed by China – that is more than all other countries combined.

Between 2019 and 2023, China increased its installed capacity eightfold, whilst the rest of the world did not even double its capacity.

The same situation applies to wind power

Together, all the G7 countries – the United States, Canada, France, Germany, Italy, Japan and the United Kingdom – installed in 2023 barely a quarter of the new capacity that China commissioned during the same period:

The same applies to electric vehicles

In 2023, China sold 54% of all electric vehicles produced worldwide:

China is also the leader in production

Share of global production in 2023: China, 90% for solar cells and wafers* and 60% for wind turbines:

The ball is now in the US and European court

Journalist and climate specialist David Wallace-Wells recalls:

“Just a few years ago, Western climate diplomats were complaining that climate measures taken in rich countries would be rendered meaningless if Chinese President Xi Jinping – whose country alone produces nearly a third of all emissions – did not play ball. Even today, people in rich countries argue that there is a mismatch between the local costs and the global benefits of investing in climate protection. So we might as well ease off a bit.”

Meanwhile, China is moving much faster than the US and Europe. British economic historian Adam Tooze stated on Substack:

“It is misleading to speak of a ‘global’ energy transition, because in reality, there is one country that dominates the entire dynamics of the energy transition: China.”

In December 2020, President Xi announced the target for China to generate at least 1,200 gigawatts of renewable energy by 2030. The country recently achieved this target, in July 2024. Solar energy accounted for 58% of this, with wind energy making up the remaining 42%.

These comparisons must take population size into account

With its 1.4 billion inhabitants, China still emits almost three times as much CO2 as the United States and far exceeds other countries. But on a per capita basis, the situation is different, as the 2023 figures suggest:

Impact on the carbon footprint

By replacing partly obsolete coal-fired power stations, China is saving a significant amount of CO2. According to the IEA, China has avoided 487 megatonnes of CO2 emissions simply by building new wind turbines. By way of comparison, all the wind energy in the rest of the world has saved only 343 megatonnes.

In the field of electric vehicles too, China has helped avoid 22 megatonnes of emissions, more than the United States (15 megatonnes) or the EU (14 megatonnes).

After pushing China to act, tariffs are now being imposed on it

Just ten years ago, the US and its allies would have been considering how to encourage China – then, and still today, the world’s largest emitter of CO2 – to join the West in the race to phase out coal, oil and natural gas. But today, the US is imposing tariffs on green technologies from China in order to protect American industries – a sign, according to Wallace-Wells, that the US is losing the race not only on price, but also on the pace of green energy adoption.

The US government has described the ‘Inflation Reduction Act’ passed by Congress as ‘the world’s largest ever investment in clean energy technologies’.

In the race for this future-oriented technology, however, China has a commanding lead. It currently produces almost twice as many solar panels and electric vehicles as global demand. This is why prices have plummeted. To counter this dumping of excess capacity, the US and the EU are imposing high ‘punitive tariffs’ on Chinese solar modules and electric vehicles. This tariff policy makes solar energy and electric vehicles more expensive for American and European consumers, despite their own massive subsidies.

As far as climate targets are concerned, David Wallace-Wells sees the taxation of Chinese electrical products as a “worrying danger”: China could pull out, reduce its support for the green industry and thus allow many producers to go bankrupt in China. Just as China deliberately burst its own property bubble. The engine of global green change could stall even further.

Thus, the energy transition is currently, to a large extent, a Chinese project. Even if progress is being made globally, the gap between China and the rest of the world is now immense. The future of global climate policy will depend largely on China’s ability to remain a leading player or to withdraw.

Sources:

https://bonpourlatete.com/actuel/la-chine-championne-du-monde-de-la-transition-energetique

https://www.bbc.com/afrique/articles/c254vv75dqqo

https://www.rts.ch/info/monde/14667067-le-secteur-des-energies-renouvelables-explose-en-chine.html