Chinese automakers are making inroads to the U.S. market with low-cost EVs, and engineers should pay attention to what they’re doing right.
~ Cruisin’ down the street in my Raeton CC ~
~ Bye, bye miss American Pie / Drove my Geely to the levee but the levee was dry ~
~ And she’ll have fun fun fun / ‘Til her daddy takes the Venucia e30 away ~
They don’t quite have the same ring to them, do they?
Engineers in North America’s auto industry may soon have new opportunities as China’s massive state-owned automakers seek to expand into this market. According to data from the China Passenger Car Association, overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million in 2022. China is poised to become the world’s No. 2 exporter of passenger vehicles, behind Japan. A report from CarNewsChina.com states that indeed in Q1 2023, China was the world’s leading exporter of vehicles for that quarter, surpassing Japan and Germany.
In addition to Chinese brands owned by SAIC, Chery, Geely, Great Wall Motors, Chang’an and BYD, a few more familiar European brands such as Volvo, MG, Lotus and Volvo subsidiary Polestar are owned by Chinese parent companies. Tesla produces cars at Tesla China for the global market as well, contributing to the nation’s car exports.
The Chinese Passenger Car Association predicted that Chinese vehicle exports will reach four million by the end of 2023.
USA automakers losing to Chinese competitors in the Chinese market
According to a report from Shanghai-based consultant Automobility called State of China’s Auto Market, GM’s car sales in China fell by 20 percent from 2021, while Ford’s declined by 33.5 percent. In China, EVs (including battery EVs, or BEVs, and plug-in hybrid EVs, or PHEVs) are rapidly gaining market share against gasoline-fueled cars, rising to one in three new cars sold in 2022.
China may make the best EVs
A key focus in the Chinese auto market is electric vehicles. As EVs become more popular worldwide, inexpensive Chinese brands such as BYD are challenging Tesla as well as other Korean and American makes in the segment. According to a May 2023 article from Business Insider entitled Say goodbye to the US car market as we know it: Cheap Chinese EVs are coming, U.S. EV sales hit a high of 800,000 vehicles in 2022, while Chinese consumers bought five million passenger EVs in the same period.
China’s dominance in its domestic EV market has its automakers developing a mastery in the space, threatening EV makers in Europe and the USA. According to a May 2023 from Allianz Trade called The Chinese challenge for the European automotive industry, the rapid domestic shift to EVs in the Chinese market has enabled Chinese EV makers to capture the bulk of sales at the expense of European automakers. Chinese automakers have taken this opportunity to scale and are now eyeing the European market.
“With the 2035 phase-out of internal combustion engines (ICE) looming, the automotive sector is on the cusp of a complete shake up, facing a transformation of its supplier base, changing customer needs, competition from new entrants and the reality of a less car-centric society,” reads the report.
European consumers are choosing more EVs than ever, states the Allianz report. This chart shows the growing diversification of new vehicle registrations by fuel type.
Growth on U.S. soil may be more challenging for Chinese carmakers, however.
New tax credits for EV purchases favor made-in-America battery components and vehicles, and a Trump-era import tariff of 27.5 percent remains in effect on Chinese cars. In addition, American consumers may be less likely to support Chinese brands due to political tensions. One company, Geely, may have found a way around this tariff by producing its Link & Co EVs in South Korea.
In 2021, BYD (and any automaker based in China) was excluded from federal transit funding for clean transit vehicles.
Polestar is one Chinese-owned brand selling in the USA, and EV brand Nio plans to enter the country by 2025. According to Business Insider, large Chinese brands such as BYD and Geely may have to set up manufacturing operations in the U.S. to meet the high volume demands of the American market. However, because of the tariffs, Chinese brands may have to aim at the low-priced end of the passenger vehicle market—which, in many ways, is today an underserved segment of the EV market in North America.
Engineering innovation in China’s auto industry
Chinese automakers, like some of their counterparts in other manufacturing industries in the nation, have been criticized in the past for copying or infringing on existing designs. In 2019, a court in Beijing ruled that Jiangling Motor Corporation’s (JMC) Landwind X7 had several features that were directly copied from the Range Rover Evoque, and there are other examples. However, in spite of this reputation, China’s automotive engineers have developed some remarkable innovations.
One example of this is BYD’s so-called Blade Battery, a lithium iron phosphate (LFP) battery that has powered all BYD EVs since 2021. The Blade’s singular cells are arranged together in an array and then inserted into a battery pack, with the name based on the appearance of the thin cells arranged in the pack.
BYD claims the Blade Battery has numerous advantages, particularly with regards to safety. In nail penetration tests, the Blade Battery emitted no smoke or fire after being penetrated, and its surface temperature reached only 30 to 60°C (86 to 140 °F), according to BYD. Due to its optimized battery pack structure, the automakers says the space utilization of the battery pack is increased by over 50 percent compared to conventional LFP block batteries. In 2022, BYD began supplying Blade Batteries to Tesla’s factory in Germany to be used in the Model Y.
China’s “Big Four” automakers
In China, the “Big Four” automakers are SAIC, Dongfeng, FAW and Chang’an.
SAIC
China’s largest carmaker, SAIC (Shanghai Automotive Industry Corporation) sold more than 5.3 million vehicles in 2022, ranking first in China for the 17th consecutive year. The company announced in an April 2023 press release that by 2025, sales of its self-owned brands, new energy vehicles (NEVs), and intelligent connected vehicles (ICVs), are expected to account for 60 percent, 50 percent, and more than 50 percent of its total sales volume respectively, while its overseas sales will make up more than 20 percent of its total vehicle sales.
SAIC has a 50/50 joint venture with GM to manufacture and sell Chevrolet, Buick and Cadillac vehicles in Mainland China. SAIC-Volkswagen, another joint venture, sells Volkswagen, Skoda and Audi in China. SAIC USA is a wholly owned subsidiary, though SAIC vehicles are not currently sold in the USA.
Outside China, SAIC has manufacturing facilities in Chonburi, Thailand, Halol, India and one in Lahore, Pakistan. The company previously ran a manufacturing operation at the Longbridge Plant in the UK, but it has since closed, and a SAIC R&D facility remains there.
FAW Group
FAW is the second largest of China’s big four, behind SAIC. FAW operates joint ventures with GM, Volkswagen and Toyota to produce vehicles under these marks in China. Through a subsidiary called FAW Import and Export Corporation (FAWIE), the company operates overseas production facilities in Pakistan, South Africa, Tanzania, Ukraine, Vietnam and Russia.
Dongfeng
Dongfeng Motor Corporation, founded in 1969, deals in commercial vehicles, passenger vehicles, auto assemblies, parts and components, machines and equipment, and other automobile-related products and services. DFM’s sales revenue reached 90 billion USD in 2018 and it has 150,000 employees.
Dongfeng has joint ventures to produce Nissan, Kia and Citroen/Peugeot vehicles in China.
While DFM has a global presence, it does not currently have a presence in the UK or North America.
Chang’an Automobile
Chang’an is the smallest of the big four Chinese automakers. Joint ventures in China with familiar automotive brands include Ford and Mazda, and formerly Suzuki.
Internationally, Chang’an had an assembly plant in Poteau, Oklahoma for the Tiger Truck brand from 2007 to 2010. The Chang’an CS35 has been built in the Lipetsk region of Russia since 2016. The company also operates a production facility in Azerbaijan, and one in Karachi, Pakistan. The company also operates R&D facilities in Japan, Italy, Birmingham UK and Detroit.
BYD
BYD (it stands for “Build Your Dreams”) is not part of the “Big Four” in China, but it is still a major automaker from the country. Of the companies mentioned in this article, BYD is the most established and seems to be the most interested in the U.S. market. BYD manufactures passenger vehicles, buses, trucks, electric bicycles and rechargeable batteries. BYD is currently the world’s largest manufacturer of EVs.
BYD has a bus and truck factory in Lancaster, California, where it also makes batteries for the vehicles it manufactures. A factory was inaugurated in Brazil in 2015 for the production of electric buses. A bus plant was opened in 2019 in Newmarket, Ontario, to handle orders in Canada. BYD has an electric bus assembly facility in Europe in Komárom, Hungary.
According to a January 2023 article from Reuters entitled China’s BYD takes cautious approach to U.S. in global EV push, BYD spent much of last year conducting a study on how to set up a U.S. distribution network for its latest electric models. These efforts are mainly clouded by political tensions between the U.S. and China.
While these tensions are complicating efforts to bring these vehicles to the U.S. market, these companies remain committed to bringing vehicles stateside by 2025, and certainly within ten years.
