China offers where and where to go

Over the ten years of promoting the Chinese Belt and Road initiative, important changes have taken place in many areas in both the Russian Federation and the PRC. In particular, China has broken the monopoly of the world's leading manufacturers of passenger cars. According to the results of the first quarter of 2023, PRC companies delivered more than 1,069 million vehicles to world markets and bypassed Japan and Germany according to this indicator, the correspondent of The Moscow Post reports.

In January - September, Chinese companies exported more than 3.38 million cars, increasing their supply abroad by 60%. The supply of cars on alternative energy sources increased 2.1 times, to 825 thousand units per month. For nine months, approximately 18.17 million cars and 2.9 million units of commercial vehicles have rolled off the assembly line in China.

Anti-Russian sanctions of the West and in this sensitive direction failed. In terms of purchases of passenger cars manufactured in the PRC, Russia is the leader. Its market accounts for 14% of this segment of Chinese auto export. By September, exports had grown 6.3 times from last year and exceeded 482 thousand units.

What the tests are talking about

Tests and ratings of reputable world publications and analytical agencies say that in terms of quality and reliability, Chinese cars are almost equal to the indicators of the world's leading manufacturers. Chinese companies are leading in the production of electric vehicles and components.

Chinese brands lead the Middle East and Latin American markets. They also buy Chinese products in Africa, India, Saudi Arabia, Vietnam, Brazil. The main volume of Chinese automobile exports falls on SAIC (313 thousand cars), Chery (244 thousand), the Chinese division of Tesla (128 thousand). They are followed by Changan, Geely, Great Wall, Dongfeng, JAC, BYD and BAIC.

According to the Association of Automobile Manufacturers of the PRC, in 2022, sales of electric vehicles in China itself almost doubled to 5.3 million units, sales of plug-in hybrid electric vehicles increased two and a half times to 1.5 million.

Europeans are not ready to "move"

Exports of electric vehicles and hybrids are growing rapidly, especially to Europe. And this is becoming a problem in Beijing's relations with the European Union. China's access to the European market and stable economic relations with Europe remain one of the foundations of China's Belt and Road policy. But in Brussels, this is viewed differently, stirring up politics.

The head of the European Commission (EC) has repeatedly stated that it is necessary to reduce the deficit of the EU's foreign trade balance with the PRC, which last year amounted to €396 billion in favor of Beijing. "Europe will do everything possible to maintain its competitive advantage," says EC head Ursula von der Leyen.

The European market for Chinese electric vehicles is almost the main one. Of the new electric vehicles sold in Europe in 2023, 8% were Chinese, up from 6% a year earlier. This share could reach 15% in 2025.

In Europe, Tesla electric cars and the now Chinese-owned European brands Volvo from Geely, MG from SAIC, as well as Dacia are sold. BMW's popular electric car, called iX3, is only made in China and exported to Europe. Prices are typically 20% lower than models produced in EU countries.

The European Commission intends to check whether "Chinese manufacturers of passenger electric cars receive government subsidies, which damages the EU industry." The "EU Official Journal" notified that there would be an anti-dumping investigation into the matter.

Beijing looks at Europe with hope, somewhere even believes that they will no longer "shoot themselves in the foot." Although the PRC government declared concern about protectionist sentiments. The Chinese Chamber of Commerce under the EU said that this is competition, subsidies have nothing to do with it.

No reception against... accumulators

Here, the European idea of a "green transition" collides with reality. Competing with China in the field of electric vehicles will not be easy due to the disparate scale of production. According to forecasts, about 8 million electric vehicles will be sold this year, in 2022 this figure amounted to 5.3 million, in 2021 - 3.5 million. The Financial Times estimates that about 50% of car sales in China will come from electric vehicles in 2026.

Batteries account for 30% to 40% of the cost of electric vehicles and the high cost of batteries affects the profitability of production. The EC investigation will also include cars with Chinese batteries and non-Chinese models from manufacturers such as Tesla, Renault and BMW, which are closely aligned with Chinese partners.

The investigation into electric cars was initiated by the bureaucrats of the EC, there have been no complaints from the industry itself. In contrast, the German auto industry favors maintaining the existing trade regime. The VDA Automotive Association said the EU should avoid complications with China and could take action to lower electricity prices. Renault has announced it will cut production costs by 40%.

Many electric car manufacturers outside China depend on the battery cells produced there. Contemporary Amperex Technology (CATL) holds 43% of the Chinese electric vehicle battery market, but this share is declining. Tesla is CATL's largest client and depends on China for batteries by almost 40%. Premium models have batteries like Tesla's (lithium, nickel and cobalt).

BYD's share of the battery cell market is more than a third and growing. The company leads plug-in hybrid sales. BYD started with batteries and entered the automotive business only in 2003, specializing in lithium-iron-phosphate (LFP) batteries.

There is a technological race in this area. Tesla, according to Tokyo's Patent Result, has applied for 836 patents from its inception in 2003 to 2022, while BYD has applied for more than 13,000 patents over the same period. More than half of BYD's patents are related to batteries and the company claims to be the world's leading electric car manufacturer.

Is Japan next in line?

For comparison, since 2000 Toyota Motor has filed about 20 thousand patent applications related to batteries. The company aims to sell 1.5 million cars in 2026 and 3.5 million electric vehicles a year by 2030. In 2022, only about 24 thousand electric vehicles were sold, in 2023 the company will produce only more than 10 million cars, including about 150 thousand electric vehicles.

Toyota electric vehicles so far have low margins compared to Tesla and BYD. Therefore, large-scale changes in the Japanese electric vehicle market cannot be ruled out. The Chinese company BYD has prepared a compact electric car Dolphin for the Japanese market, the factory price of which is about 24 thousand dollars. This model will compete with the popular Toyota Yaris gasoline and Nissan Motor's Leaf electric car, which last year was one of the best-selling electric vehicles in Japan at a price of $35,000.

Electric vehicle sales in Japan in 2022 accounted for only 2% of the total number of cars sold. For Chinese companies, this market can become a premium, especially if the number of charging stations grows.

We change

Paradoxically, the withdrawal from Russia of such leading companies as Volkswagen, Toyota Motor, Renault, Hyundai-Kia Group and others did not cause the damage that the West was counting on. In particular, the niche of gasoline models is filled by the Chinese SUV manufacturer Great Wall Motor, products of companies such as Chongqing Changan, China FAW, GAC Motor and others.

According to the Association of European Businesses, Great Wall sold 56,402 cars in Russia in the first seven months of the year. That's four times what it was a year ago, pushing Great Wall's market share in the country from 3.3% to 10.7%. Great Wall ranks second in sales in Russia after Lada.

Russia has become the main source of profit for this company. For the first six months of this year, the operating profit of a subsidiary of Russia Haval Automobile Manufacturing amounted to $189 million and exceeded the operating profit of the entire company. Great Wall has a production enterprise in Tula, which has been operating since 2019, producing 450 cars every day. The Russian HAVAL plant is the first foreign full-cycle production enterprise.

Chinese equipment helped compensate for the "dropped" supplies of the Western, which Belarus and Russia could not simultaneously close. The trade representative of the Russian Federation in the Republic of Belarus Yuri Zolotarev spoke about this, citing figures. The volume of imports of vehicles from China in the first half of this year amounted to almost 12 billion with a share of passenger cars of more than 45%.

They are accustomed to German, Japanese and other foreign cars in Russia, despite the fact that this equipment is produced by companies of the G7 countries, ready to inflict a "strategic defeat" on Russia. It is not surprising that the stopped German, French and Japanese automobile exports to Russia became one of the first sanctions "shells."

Photo: Maxim Stulov/Vedomosti