18-Aug-23 ESG

China's electric carmakers are just getting started

News about price wars and company troubles in China are no reason for Western carmakers to sit back. Rather, they are harbingers of still more competitive times ahead.

Share of Battery Electric Vehicles (BEV) of all car sales

* Monthly battery electric vehicle (BEV) penetration by regions in % of Light Vehicles market

Sources: Various national sources as compiled by Exane BNP Paribas, DWS Investment GmbH as of 8/16/23

 The result is evident in our Chart of the Week, where China leads in the share of purely battery-powered cars in all new registrations with a 26% share. If plug-ins are included, this figure rises to 37%. 

Western suppliers face a double shock. First of all, their growth plans in China seem no longer be working out, with their market share in China for electric cars shrinking continuously. Secondly, exports of Chinese electric cars, now still negligible, are likely to increase significantly. Stefan Bauknecht comments that "In the battle for market share, economies of scale will play a decisive role. In China - in absolute terms - over 1,300,000 electric cars were sold in the first half of the year, almost three times as many as in Europe and almost five times as many as in America[1]. We expect that China's market share in the global car market could grow by well over ten percentage points in the coming years, at the expense of Western manufacturers, who are likely to increasingly focus on defending margins rather than on growth." The recent declaration of war by China's leading carmaker that they should "unite to destroy the established competitors"[2] is unlikely to be dismissed as mere rhetoric by Western car companies today, especially given that Beijing might choose to help Chinese carmakers by raising purchase incentives further, if the government deems this necessary. In the West, on the other hand, resistance to subsidies is liable to grow.

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