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China’s electric cars buoyed by state support poised to sweep the world



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When Daniel Zhu bought his first electric car earlier this year, the main engine was not the environment. That’s reality.

It is nearly impossible to get a license plate for a petrol car in Beijing. Furthermore, Arcfox, a Chinese brand launched in 2020 by the state-owned BAIC Group as a potential Tesla competitor, has offered a deal to cut the price of several thousand dollars, bringing the car this battery-powered car down to $41,300.

And for everyday use, electricity is cheaper than gas. “If there were no license plate restrictions, most of my friends would prefer a gas car, but for those who already have a car, they would consider an electric car because it costs less to charge,” the factory said. 28-year-old manager said.

This year, about a quarter of vehicles purchased in the world’s largest auto market are battery-powered or plug-in hybrids. By the end of the year, this number will be about 6 million vehicles. No other country comes close.

China’s rise as an electric vehicle powerhouse has been fueled by generous government support as well as fierce domestic competition, driving prices lower and demand up. According to research firm JATO Dynamics, electric vehicle options in China are now not only cheaper on average than petrol cars, but also more affordable than comparable vehicles sold in Europe and North America.

Would you buy an electric car made in China? They are coming.

Analysts increasingly see Chinese automakers leading the industry’s electric revolution not only in China but globally, as Chinese products become available overseas. From a global perspective, China’s emergence of affordable electric vehicles is a victory for global efforts to avert the worst consequences of climate change. This is one area where the world’s largest emitter is working ahead of its commitments in the Paris Agreement to reduce greenhouse gas production.

It’s also a win for industry planners in Beijing, who have been focused on creating a world-leading auto brand for decades. Chinese manufacturers like Nio and BYD are now often seen as Tesla challengers.

But the race is far from over. They are still among more than a dozen manufacturers selling electric vehicles in significant numbers in China today. Many companies face bankruptcy due to excess capacity and razor-low profit margins. The story of the venerable BAIC Corporation is a prime example of the blend of fierce competition and state support.

The company began operations in the 1950s, building Soviet-designed vehicles such as the Dongfanghong BJ760 sedan, named after a revolutionary song – “red east” – glorifying Mao Zedong. Over the past decade, it has played a central role in China’s efforts to bring affordable electric vehicles to the masses.

Buy an electric car? These models are made in China

From 2013 to 2019, the group’s electric car arm, BAIC BluePark, led battery-powered passenger car sales nationwide, thanks to government subsidies and purchases for taxi fleets. But since then, it has lost ground to a host of local startups and international companies selling high-end models. Its response was to launch Arcfox in 2020, which turned a profit. After the chairman of the brand quit his job last month, Chinese media claimed that the group was at a crossroads.

That calculation was indirectly given by the opening of Tesla’s Gigafactory in Shanghai in December 2019, which was a turning point for the electric car sector in China.

Up until that point, sales growth had been mainly driven by subsidy-dependent companies who sold small cars, but the administration cut funding for many light vehicles simultaneously. allows the California-based automaker to form a wholly foreign-owned entity. , the first of its kind.

China’s middle class has responded enthusiastically. Tesla has outsold all other options for most of 2020, proving that there is demand for premium electric cars. After that success, Chinese startups such as Nio, XPeng and Li Auto – all of which offer more expensive and high-tech vehicles – have raised huge amounts of money by listing in USA.

BAIC BluePark is starting to feel the heat of the competitive market. Back in 2019, it sold more than two-thirds of its cars to government buyers, while only 30% to private customers. But demand for taxis has dropped during the coronavirus pandemic.

The company has struggled to shed its reputation as a maker of cheap taxis and roundabouts. It benefited greatly from government subsidies, receiving about $140 million in both 2018 and 2019, according to the company’s financial statements, but those are coming to an end.

Liu Yu, president of BAIC BluePark, told Chinese media outlet Caijing in early 2021 that the previous year had been a year of pain and reflection as the company wondered “how, as an entrepreneur” state-owned enterprises, we may not look like a state-owned enterprise.” Arcfox is part of BAIC’s reinvention effort.

In response to written questions from The Washington Post, a BAIC BluePark spokesperson said that to reduce costs, the company has developed four sets of shared design and manufacturing platforms to build models from small cars to sport utility vehicles and work closely with suppliers. to ensure raw materials and other parts at competitive prices.

A spokesperson said the sector’s transition from “hot fad” to a period of rapid acceleration “is inseparable from policy support”, including financial assistance, which remains critical. partly because of how long it takes to design and manufacture new cars. “Promoting auto consumption is a complex and systematic work that requires a combination of different policies to continue.”

Qiu Kaijun, a China auto industry analyst, said that while it was effective in creating a thriving industry, the government’s intervention in the market had left “a great opportunity for mergers and acquisitions”. more” and mass bankruptcies in the future as the industry tries to deal with overcapacity. He added that price cuts, a popular tactic to boost sales, will remain popular even after government subsidies expire at the end of 2023, because umbrella manufacturers Chinese cars cannot raise prices and risk losing customers.

But the sector’s state-led development and focus on cutting costs is good for customers. Buyers in China have a wider selection of electric vehicles than anywhere else in the world — and at lower prices.

China’s next trade war could be about electric cars

Felipe Muñoz, global analyst at JATO, said that although the main reason electric cars are cheaper is because of the focus on small cars for the mass market, the size of the Chinese market has now grown. starting to drag prices down even for larger models such as sport utility vehicles. Kinetics. “It’s easier for them to reduce the cost of developing these cars – such as lowering the price of batteries – compared to car manufacturers that don’t get as much support from their local governments,” he said.

That trend has led many Chinese to choose electric cars not out of fear for the future of the planet, but based on cost considerations and the prospect of overcoming the limits of owning and using cars. big cities. China’s major cities limit access permits to reduce congestion. Buyers of electric vehicles often have shorter wait times than when they buy a conventional car.

For years, Zhu, a factory manager living in Beijing, had no luck getting a driver’s license in the city’s annual lottery draw. He then received a set of handmade records from his parents this year.

After months of research, he narrowed his choices down to ArcFox, Tesla Model Y and Geely-owned Zeekr, before deciding on Arcfox Alpha-S because of the better price.

His wife, Esther Liu, added that the mark of an electric car is also appealing. “Personally, I feel cooler and more trendy driving a new energy vehicle, which is more in line with the lifestyle and mindset of the younger generation,” she said.

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