EV ‘decoupling’ unrealistic for China, West despite US trade protectionism

Illustration: Xia Qing/GT

Illustration: Xia Qing/GT

Amid escalating tensions caused by new US tariffs on electric vehicles (EVs) from China, as well as the increasingly fierce competition faced by Western automakers, it is not surprising that some foreign media outlets have been cherry-picking information or even manufacturing stories to claim some US and EU auto manufacturers may accelerate the diversification of their supply chains by producing components and parts outside of China. However, “decoupling” and supply chain cutoffs are neither possible nor feasible.

Recent decades have seen auto companies from the US and EU continuously increasing investment in China, for multiple reasons. 

On the one hand, China has a supersize market. Profits from China sales have been an important source of revenue for many Western auto companies. On the other hand, China’s well-established industrial chain has helped these manufacturers achieve the dual goals of cutting production costs and improving the quality of their products through the development of special and sophisticated technologies.

China’s supply chain advantage has, to some extent, served as a key piece in the puzzle for these automakers’ competitiveness. 

Many Western auto manufacturers have been striving to strengthen the localization of their operations since they entered China. Take Tesla, for example: according to media reports, Tesla’s localization rate of components used in its Gigafactory in Shanghai has exceeded 95 percent.

It is precisely because of China’s well-established supply chain that Tesla’s Gigafactory in Shanghai is reportedly able to produce a vehicle in less than 40 seconds.

The competitiveness of made-in-China EVs comes from continuous technological innovation, efficient production and complete supply chains, as well as high labor productivity. Western auto manufacturers are among the ultimate beneficiaries of all of those factors. If Western auto companies accelerate their supply chain shift from China to other countries, or even decouple from the Chinese industrial chain, their competitiveness will be significantly reduced.

There is no need to deny that Western auto companies are facing tough competition in China, which is an inevitable result of the rise of China’s EV brands. Some foreign media outlets are keen to hype the competition, and some have said that some Western automakers have to scale back production in China. 

It is not wise to draw simplistic conclusions. The depth and breadth of contemporary cooperation between US and EU automakers and China’s supply chains go beyond what some Westerners can imagine. If Western companies move production out of China, it will be difficult for them to compete with Chinese companies, whose competitiveness comes from the country’s inherent supply chain advantages and other factors.

So it is deeply regrettable that US President Joe Biden has decided to impose tariffs of 100 percent on EVs made in China. This approach will seriously disrupt global supply chains. Western companies operating in China may also be negatively affected. Some manufacturers may be forced to make adjustments and bear the losses themselves. 

It is believed these companies will spare no efforts to minimize their losses, which means that even if they make adjustments, the range won’t be large. It should be noted that the development of China’s EV sector won’t be affected.

China is well ahead in terms of core supply chains, mass production and the technological development of EVs. China’s process in this regard has not finished yet. The competitiveness of China’s EV sector will continue to rise.

In contrast to the unprecedented and increased trade protectionism measures the US has launched against China’s EV sector, China will continue to cooperate with Western companies and welcome them to share China’s development opportunities. 

With the continuous rise of China’s EV sector, Western companies have no choice but to continue strengthening cooperation with China’s supply chain, which will help them gain more benefits and improve their position amid fierce competition. 

The author is a reporter with the Global Times. [email protected]

Future sight: tech shines at 2024 Beijing auto show

This year’s Beijing International Automotive Exhibition, also known as Auto China 2024, has a lot of highlights and many new models. Chinese-branded carmakers have rolled out a lot of surprises, showing a strong strength on the electric and intelligent tracks. What new cars are the major original equipment manufacturers bringing to this year’s show? Let’s check it out.

Chinese tech giant Xiaomi launches first EV model, joining competitive domestic market

Xiaomi SU7 is seen at a Xiaomi store in Guangzhou, Guangdong Province on March 27, 2024. Photo: VCG

Xiaomi SU7 is seen at a Xiaomi store in Guangzhou, Guangdong Province on March 27, 2024. Photo: VCG

Chinese tech giant Xiaomi held a launch event for its first electric vehicle (EV) model, the Speed Ultra 7 (SU7), in Beijing on Thursday. It marks the smartphone giant’s entry into the competitive and challenging Chinese new energy vehicle (NEV) market, analysts said.

Xiaomi has conducted tests using 576 vehicles in 300 cities, with a total road test mileage of 5.4 million kilometers, said Lei Jun, founder and CEO of Xiaomi at the launch event.

The SU7 series will be launched in nine different colors, at a price starting from 215,900 yuan ($29,866), Lei said, adding that mass production is expected to start in the first half of 2024.

Xiaomi Auto said in a post on Weibo on Thursday night that pre-orders hit 50,000 units during the launch event.

Xiaomi has invested over 19.1 billion yuan in 2023 in the initial research and development phase, and the total R&D investment is expected to reach 24 billion yuan in 2024, the CEO said.

The new car has drawn wide attention, including from rival firms. William Li, founder, chairman and CEO of Nio, He Xiaopeng, chairman and CEO of Xpeng, and Li Xiang, founder, chairman and CEO of Li Auto, were all seen at the launch event.

Customers and analysts had previously estimated that the SU7 would be priced at 200,000 to 300,000 yuan. Earlier in the afternoon, at a Xiaomi store at Heshenghui shopping mall in Chaoyang district, Beijing, the Global Times learned that many buyers have already paid around 5,000 yuan ($693) as a deposit, and they are eager to start test driving the car.

Starting from Monday, the SU7 series has been on display in 59 stores across 29 cities in China, a staff member at the store told the Global Times, adding that people have been crowding into the showroom to see the car.

The staff member told the Global Times that the SU7 uses the company’s self-developed Hyper OS as the operating system. It connects EV users to other devices, including smartphones.

“China’s auto market has welcomed another newcomer,” Wu Shuocheng, a veteran automobile analyst, told the Global Times on Thursday. This will increase the already intense competition among major NEV manufacturers, he said.

China’s NEV market has become the world’s biggest, and carmakers are ramping up efforts to improve technological capabilities amid an ongoing price war.

Xinhua News Agency reported on Monday that BYD, China’s top NEV manufacturer, has become the world’s first NEV firm to produce 7 million cars. The company reported annual NEV sales of more than 3.02 million units in 2023, maintaining its lead in the global NEV market.

Beijing-based Li Auto posted net income of 11.81 billion yuan in 2023, up 173.5 percent year-on-year, making it the first of China’s three EV startups to record an annual profit, media reports said.

Meanwhile, Chinese NEV manufacturers are expanding overseas. About 19.5 percent of EVs sold in Europe last year were made in China and this is on track to reach a quarter in 2024, according to new analysis by Transport & Environment.

All these signs indicate that with the accelerated development of global green travel, Chinese brands are leading the transformation of the automotive industry, Wu said. This is inseparable from China’s industrial advantages in the scale and systematization of NEVs, he added.

It’s still unknown whether Xiaomi’s ambition to fulfil its auto business dream will succeed. However, analysts believe it will drive innovation and progress in NEV technology, and help promote the expansion and market penetration of NEVs by attracting more consumers, and increasing awareness and acceptance of NEVs.

China is the world’s largest market for electric vehicles (EVs). In the first two months of 2024, production reached 1.252 million, up 28.2 percent year-on-year, and sales reached 1.207 million, up 29.4 percent year-on-year, according to the China Association of Automobile Manufacturers.

The combined share of EVs and hybrids in China’s auto sales is likely to reach 42 percent to 45 percent this year, up from 36 percent in 2023, according to a report by AP citing data from Fitch Ratings on Thursday.

There is also strong support for the development of NEVs at the national level. China will consolidate and enhance its leading position in industries such as intelligent connected new-energy vehicles, according to the 2024 Government Work Report.

Analysts believe that further refinement and implementation of relevant policies will help to continuously consolidate and expand the stable and positive development trend of the automotive industry and stimulate enterprise innovation.