China's Electric Vehicle Tsunami - Is the West Ready for the Onslaught?

"Made in China" no longer has a bad connotation, thanks to the world of EVs.  The auto industry has been going through a rapid transformation from traditional combustion engines to electric vehicles (EVs). While developed countries have taken a giant leap in adopting this emerging EV technology, China has been catching up at an unprecedented pace. In fact, if the West doesn't act fast enough, China could soon launch an onslaught of vehicles into the world market.

For the past decade, China has invested heavily in materials, material processing, and manufacturing for the chip, solar, and EV industry. They've built an impressive head start in these areas, including most of their top EV firms. China has created EV giants by mimicking Tesla's every move for the past ten years, setting up R&D centers, copying their casting technology, and approaching their sourcing or supply chain management.

The five leading EV companies from China, namely Geely, BYD, SAIC, Nio, and Xpeng, have successfully copied Tesla's model. Their manufacturing technology and efficient supply chain management have brought them on par with their Western contenders.  I worked in the Bay Area from 2016 to 2021 and supported every Chinese effort with an office in Fremont from Byton to SF Motors.  These companies poached so much talent from Tesla that even their offices looked similar to Tesla's design center in Palo Alto, now Fremont.  From a more direct approach to the supply chain to more efficient manufacturing compared to the legacy auto, Chinese OEMs have walked their path three steps behind for the last decade.  

In addition to these five giants, 15 other EV companies in China are also launching new programs at a cheaper rate. Here's a list of their top 15, but there are closer to 30 efforts in the country: Top Chinese EV efforts.  If their majors were competing with ours, it would be a fair fight, but even their Startups are out-matching us.  We have success stories at Rivian, Fisker, and Lucid, but very few of our startup efforts have made it from Sono to Lightyear to Faraday and maybe Canoo soon.  Meanwhile, the Chinese government is backing around 15 Startups right now.  

One of the critical factors giving China an edge over the Western OEMs is CATL, a state-influenced Battery OEM that owns 75% of the EV market and offers preferred pricing to their country's companies. China also has the capex support from parent companies like BYD and Geely, along with the resolute backing of the government, making them a formidable enemy in the race to EV domination.

The Chinese government provides companies with significant incentives to shift towards EV production, creating a favorable environment for these firms to grow. The government also offers massive support for the development of charging infrastructure, another remarkable advantage Chinese companies have over Western companies that are still struggling to establish similar infrastructures.

China's strategy has mainly been to create an integrated value chain of everything related to EVs, starting from the production of batteries to the end user. This vertical integration has indeed benefitted them as they can control the costs and quality of every element throughout the production process, adding another reason why they are a formidable competitor to beat Western Vehicle OEMs.

The rise of Chinese vehicles is going to continue, and if Western companies don't act now, we are going to face an onslaught of Chinese cars in the world market. The Chinese companies have undoubtedly incorporated many of Tesla's successful strategies and have taken these strategies to the next level. While Western economies are slow to develop charging infrastructures and still rely on gasoline-based vehicles, China has adopted a more aggressive and forward-thinking approach in the EV industry. As the world steers towards renewable energy, we are quickly approaching a high-stakes battle for EV domination, and China is well on its way to winning it.

Pic Credit - Chinese Money Garden Chery Car Top Chinese EV Bad News for Western Auto