Stand by for a flood of cars from China – particularly electric vehicles from the likes of global leader BYD – over the rest of 2023 and into 2024.
We already have evidence of the early stage of the assault – Chinese exports of cars topped one million in the March quarter – up nearly 60% from a year ago – of which EVs accounted for 248,000 units – up 110% and led by BYD and Tesla.
And that’s just for starters, with BYD alone looking to boost its exports from just over 50,000 in 2022 to at least 600,000 and as many as 800,000 by year’s end.
This assault – with the growth coming from EVs – will need more key renewables such as lithium copper, nickel, cobalt, magnesium, manganese and graphite. Perhaps that’s why Pilbara Minerals was so sanguine about the outlook for lithium in a quarterly report briefing on Friday (see separate story).
China exported over 3 million vehicles in 2022 – most of which were conventionally powered vehicles. That will change this year with hundreds of thousands of EVs to be shipped.
And this is no isolated move from just one or two carmakers – it’s a government-directed attack on western car markets – a development signed off on by China’s powerful State Council last Tuesday.
The car assault was one of a number of measures revealed by the meeting aimed at forestalling a feared slump in exports (and overcapacity in the Chinese car making sector).
Chinese state media have reported a slide in foreign orders for exporters (a surprise after the shock 14% jump in exports in March), weak demand from existing foreign buyers and an absence of interest in other markets outside the US, Japan and Europe.
While Chinese trade with Russia is booming and exports to ASEAN countries at record levels, it has fallen away with the US and Europe in particular.
State Council issued a statement calling for the promotion of imports and exports and laid out “measures to improve the scale and structure of foreign trade to ensure its stable and high-quality growth.”
“Work must be done to stabilise, improve processing trade and enhance favourable policies for border trade.
“To beef up trade and promote development of the market, governments at all levels should promote full resumption of important domestic offline expos for better supply and purchase matchmaking, and facilitate cross-border business personnel exchanges.”
“Efforts will be made to enhance market development services to stabilise exports to developed economies, guide enterprises to further develop markets in developing countries, ASEAN and other regional markets.”
And the most important part was this line “In order to stabilise and expand their import and export, work will be done to cultivate industrial advantages in automobiles and provide overseas financial support for automobile enterprises.
“All local governments should further support automobile enterprises to build and enhance an international marketing service system.” State Council also called for improvements in logistics and shipping of commodities and products.
While China’s car exports have risen strongly in the past six months, Chinese industry sees more problems – transporting these vehicles will have to be better controlled by Chinese shipping companies like COSCO (the state-owned shipping line) and not left to foreign shippers, especially from Japan, South Korea and Europe.
China clearly sees a chain from its car plants, through its ports, to foreign markets via its state-owned car carriers, landed at foreign ports but cleared by Chinese-owned importers and transported to Chinese owned retail centres (if possible) where they are to be sold – all this to be financed by Chinese banks and other financial groups.
It sounds a bit over the top, but China is merely following the Japanese car industry’s template set up decades ago. Japanese car companies like Honda and Toyota still dominate the Australian car industry for example, with similar structures from German and South Korean car makers like BMW and Hyundai.
Zhang Zhanhao, operational director of COSCO Shipping Car Carriers, a leading car shipping company in China, told the Global Times (the Communist Party-controlled tabloid newspaper) “that it is imperative to strive for self-reliance in ocean-going transport vessels and develop a global presence in the world’s ports to ensure the smooth flow of automobile exports, one of China’s fastest-growing export categories.”
In the first three months of 2023, China exported 1.07 million vehicles, a 58.3% increase from the same period last year, while the value of the shipments increased 96.6% to 147.5 billion yuan ($21.5 billion), according to the General Administration of Customs.
That’s well ahead of the 2022 rate when more than 3 million vehicles were shipped out of China.
China’s exports of NEVs (Battery and plug-in type EVs) totalled 248,000, up 110% year-on-year, according to the latest data from the China Association of Automobile Manufacturers. Of that figure, 167,000 were shipped out of Shanghai and included vehicles made by Tesla at its huge plant in the city and bound for the likes of Australia and NZ.
Chinese car industry reports say Tesla is readying a service from Shanghai to Canada to supply its best-selling Model Y vehicle instead of shipping them from Fremont in California. It would be the first time that Tesla has sent Chinese made cars to North America.
Tesla CEO Elon Musk said at this month’s profit briefing that the Shanghai plant was his company’s lowest cost operation globally and he emphasised that the recent price cuts are due to his policy of maximising market share over profit.
With new energy vehicles becoming increasingly popular, Europe and North America are becoming the two major markets for China’s auto exports. The top three markets for new energy vehicle exports are Belgium, the UK, and the Philippines. UAE and Mexico are also growing markets for Chinese cars.
At a briefing in late March, BYD executives revealed plants to boost the battery/car maker’s vehicle sales this year to between 3 million and 3.6 million. That would be close to double 2022’s 1.85 million units.
All are battery-powered NEVs or plug-ins of varying size and costs – BYD stopped making conventionally-powered cars a year ago.
BYD is upping production capacity from 2.9 million units up to an estimated 4.5 million, with a new factory finished in China and one underway in Thailand.
This will not be a global assault- while Chinese companies are shipping small numbers into the US, the lift in EVs will be targeted at countries which do not have strong local brands – so that rules out the US, much of Europe, Japan and South Korea.
But it doesn’t rule out Australia where BYD has started building volume in the chase to catch market leader Tesla.
And the new subsidies and other rules in America’s Inflation Reduction Act will make it very tough for Chinese EV makers to compete from now on (but not as makers of conventionally powered vehicles).
But there is one unspoken reason for the extra boost for car exports, especially EVs. Chinese government purchase subsidies have all but ended and to forestall a slump in domestic sales of the vehicles and a cutback in orders, production and employment, exports will be encouraged to keep volumes high and factories working.
There has already been a massive fall in lithium prices on fears sales of NEVs could slow further, with Tesla and other makers cutting prices to protect market share and drive sales. That could escalate into the nasty war that damages the successful Chinese NEV sector as it is just getting off the ground.
