China Wants to Be the World’s EV Factory – It May Succeed

The country has yet to become an export hub for traditionalautomobiles. But electric vehicles could be another matter.

By guest author Jacky Wong from Wall Street Journal

And things are moving along nicely: Tesla said this week it will start exporting its China-made Model 3 to some European countries. BMW’s BMW -0.12% electric sport-utility vehicle iX3 on sale globally will be made by its joint-venture with Chinese partner Brilliance China Automotive.

Caption and graphic courtesy from Wall Street Journal

China is the world’s largest car market—auto sales in 2019 were 28 million units—but it exported only around a million cars last year and mostly to developing countries. Most Chinese brands aren’t well-known in developed markets, and foreign auto makers mostly use their Chinese plants to make cars for the local market, instead of for exports. It is a good sign for China that foreign car makers are beginning to use the country as an export hub for their EVs.

China’s head start in the EV market, with the help of generous subsidies and government procurement, has built a cluster of suppliers. China has been the world’s largest EV market for years, even though Europe may briefly take that perch this year with supportive policies. China has some of the largest makers of EV batteries. Tesla, for example, has used cobalt-free batteries made by Contemporary Amperex Technology to lower the costs of some of its cars made in Shanghai. Volkswagen VOW 0.48 % spent USD 1.2 billion to buy a 26 % stake in Chinese battery maker Guoxuan High-Tech this year. Major battery makers in nearby South Korea and Japan also have factories in the country.

To be sure, it’s still very early stage. EVs are a small percentage of total car sales globally. Export plans from global car manufacturers may not amount to much in the short term. Europe is also trying to catch up in battery manufacturing. And Tesla is also building a plant in Berlin, which means the plan to export from Shanghai may be temporary.

But unlike in the era of internal combustion engines, China has a real chance to become a heavyweight in the export market for EVs.