China’s EV makers, big and not-so-big, have the same goal: Go global.
BYD, arguably the most prominent maker of electric cars, said Wednesday that it eventually wants overseas markets to account for nearly half of its total sales, up from around 16% of its sales now.
Expanding beyond China, still the world’s largest car market, is vital for the growth of the country’s EV makers, battered by a brutal, years-long domestic price war.
Global sales could help restore profit margins. For example, BYD’s best-selling car in Europe is the Atto 3, which goes for about close to 40,000 Euros. Yet Eugene Hsiao, Macquarie Capital’s head of China autos research, explains the car sells for less than half that price in the Chinese market, so BYD’s absolute profit on a car sold in Europe is greater than what it earns in China, even after factoring in shipping and localization costs.
But Chinese EV companies are finding Western markets increasingly tricky to navigate. Just this week, Canada became the latest foreign government to throw up barriers to Chinese-made EVs. Prime Minister Justin Trudeau accused Chinese EV manufacturers of “not playing by the same rules,” as he pledged to impose tariffs as high as 100% on Chinese electric cars. The U.S. imposed 100% tariffs in May; Europe followed with tariffs of up to 36.3%.
In all three cases, officials accused Chinese EV makers of benefiting from an unfair level of state subsidies, putting local companies at a disadvantage. Chinese manufacturers dispute the allegations, instead crediting better technology and management efficiency for their success.
As Western governments pile on tariffs, Southeast Asia "will probably be the most important market" to China’s EV makers' in the near term, thanks to its proximity, friendlier geopolitical climate, and lack of major domestic automakers according to Hsiao.
Tariffs are also used to “protect the local auto industry,” Hsiao says. That's missing in most of Southeast Asia’s auto market, long dominated by foreign brands, particularly Japanese ones. A Southeast Asian government is thus unlikely to slap huge tariffs on a Chinese company to benefit a U.S., European or Japanese competitor.
Chinese investments in local production can help smooth a path into regional markets. Chinese EV brands like BYD and Great Wall Motor are setting up facilities in Thailand, a hub for Japanese automakers.
Southeast Asian nations also generally have more positive views of China, making it a “much friendlier kind of environment [for Chinese EV makers] to build up their brands and presence,” Hsiao says.
Where are Chinese companies selling EVs?
Chinese EV makers, led by BYD, are already changing Southeast Asia’s auto market.
BYD is the second most popular car brand by sales in Singapore, according to government data covering the first half of the year. BYD is also in the top ten brands in Malaysia, as well as the country’s top EV brand, based on vehicle registrations covering the first half of the year.
But BYD is making the biggest play in Thailand. The company has invested close to half a billion dollars in a local production facility. BYD chairman Wang Chuanfu recently claimed the company is the country’s best-selling EV brand, with over 40% of the new energy vehicle market. (New energy vehicles cover both battery electric cars and plug-in hybrid vehicles.)
Besides BYD, other brands like Geely, Chery and Xpeng are also entering Southeast Asia.
Analysts say that Latin America represents another potential region of growth for Chinese EV brands. Like Southeast Asia, Latin American countries generally have a more favourable view towards China and also do not have major domestic auto brands that governments would want to protect.
Chinese brands already dominate Brazil’s fast-growing EV market, notes a recent HSBC report. Over 50,000 EVs were sold in Brazil in 2023, compared to 1,000 in 2019. BYD also has a production facility in Brazil that will start operations this year.
Going local
Chinese investment in local production facilities could help mitigate future tariff pressures in emerging markets, Yuqian Ding, an analyst for HSBC and an author of the bank's recent EV report, says.
Shipping cars directly to foreign markets could lead to higher margins, Ding explains, but leaves manufacturers at risk of protectionist policies. Local production, and even creating models tailored to local markets, will be more sustainable, she suggests.
Chinese manufacturers are thus following a path blazed by Japanese automakers in the 1980s, who built factories in the U.S. to skirt tariffs, Hsiao explains. Another advantage of local production is that Chinese brands can lower their prices, appealing to consumers in markets with lower incomes than developed markets.
“You can literally go to the BYD Thailand website and they’ll show you the price of a BYD that’s imported into Thailand versus a BYD that’s made in Thailand. It’s cheaper for the made-in-Thailand version,” he says.
