Why we should all pay close attention to China and its automakers
Before some people start accusing electric cars of being part of a Chinese plot to rule the world, do yourself a favor: ignore them. China has been forced to adopt cleaner means of transportation to save the lives of people who live in their mega-cities, many of whom have more than 30 million people.
Imagine so many people concentrated in confined areas. Most of them want to drive cars. Some cities have had to impose measures that limit vehicle ownership because traffic caused unbearable levels of pollution.
Anyone who wants to buy a car has to have a license plate, which can cost a real fortune if you don’t have the chance to win it in the lottery. This is why there are so many luxury models on the streets of some of these Chinese megalopolises: anyone who can afford a license plate would rather put them on luxury cars.
The auto industry long ago realized that the combustion engine was doomed. It depends on a finite resource that was estimated to disappear in 50 to 100 years before climate change shows that we need to keep crude oil where it is: underground. This is where it traps massive amounts of carbon. Burning these reserves to the end would raise carbon levels in the atmosphere so much that the worsening greenhouse effect would raise the global temperature much more than it ever did.
Assuming we could start using renewable fuels all of a sudden, the combustion engine would still be an incredibly inefficient machine. The best waste 60% of the chemical energy they store. Most only turn 20% of this energy into motion, releasing the rest in the form of heat and polluting gases. What the auto industry has done is try to buy time before having to forgo all of its investment in combustion engines.
China’s merit was realizing this before most other countries, prompting change. Its citizens who could drive electric cars did not have to go through license plates. This created the demand for electric vehicles. China then helped companies wishing to sell them as well as produce batteries with the necessary funding for research, development and production. It is no coincidence that the country is currently one of the main producers of batteries in the world.
Oddly enough, it still hasn’t caught people’s attention in China. Most don’t care about new automobiles from this country. Some even maintain the prejudice that cars made in China are poorly made.
The truth is, the Chinese market is so large that there is room for all kinds of businesses: the cheapest and those with a high level of craftsmanship. Foreign brands were the favorites. Chinese manufacturers were more present in less populated areas, where people did not have the same purchasing power. That’s why there were so many copiers there: local brands were trying to offer customers with shallow pockets products with the same look as more expensive cars that were “fashionable”.
That started to change with electric cars. Other than Tesla, the EVs that sell really well there are local brands. NIO and Xpeng are number one in the preferences of used car buyers. BYD is launching more and more options thanks to its new e-platform 3.0 and the Blade Battery.
You may never have heard of them because these brands did not need to expand overseas. China’s approach to press freedom, free speech, and the language barrier also doesn’t make this more accessible, but there is an economic reason for it.
Unlike Japan or South Korea, China has a large territory and even more people in it. Sometimes selling more than 20 million cars a year, the Chinese market was more than enough for these manufacturers to try their luck. It has more demanding customers than any other market in the world. If something is selling well in China, there is a good chance it will be going well wherever these automakers are willing to export their vehicles. Now they are ready to ship.
Norway has been buying Chinese cars for a long time, and NIO just got there. If all goes well, the company will start selling in Germany and other European markets in 2022. NIO has already announced plans to use unused capacity from European automakers to manufacture its vehicles locally. In other words, you will soon have to decide between well-known brands and Chinese brands. It won’t hurt if you knew a thing or two about them before they happened. Because they will – probably sooner than expected.