EVs are on track to gain momentum in the coming years. In 2023, a price war intensified the industry's competition. Geopolitics facilitated the localization of production. Multiple factors will continue to weigh in on the sector's rivalry and collaboration in 2024, with China remaining the center of it.
DIGITIMES Research: Global EV sales to hit 20 million units in 2024
Jessie Lin, senior analyst at DIGITIMES Research, said that global EV sales volume should reach 14.4 million cars in 2023 based on the information gathered by the end of November. The number is expected to grow by 40%, achieving 20 million units next year.
According to a previous DIGITIMES report, automotive suppliers said the industry would encounter several challenges in 2024, including leading carmakers seeing their order backlogs decline. The inflation, regional conflicts, and the crippling effect of the US auto workers' strike would also cause obstacles.
Lin said although some noise exists in the EV market currently, most automakers are optimistic about the sector's long-term development. She estimated that China's EV sales volume could reach 13 million cars in 2024, while Europe would see the number approach four million. The US volume is expected to surpass two million units.
Source: S&P Global, DIGITIMES Research, compiled by DIGITIMES Asia, December 2023
Paul Gong, UBS head of China autos research, said Detroit-based carmakers have yet to roll out adequate and affordable EV models. Moreover, the high interest rates are increasing a consumer's monthly installment. The situation has driven down the US EV sales growth rate, projected to stay between 10% and 15% in the new year.
Automotive electrification will continue, especially in China. Gong said the country saw a sales volume increase of roughly two million cars annually in the past three years. The trend will carry on in 2024.
He added that China's policy support for EVs will stay the same next year, but lithium prices are declining and making EVs a desirable option.
Rising Chinese EV makers to edge out foreign rivals
China Association of Automobile Manufacturers(CAAM) data showed that the country's EV penetration rate was 30.8% from January to November 2023. The proportion is expected to surpass 40% next year.
CAAM estimated that China's EV sales will reach 9.4 million units this year and rise to 11.5 million in 2024. Locally-headquartered BYD has overtaken Germany-based Volkswagen to become the best-selling car brand in China. Homegrown EV companies like GAC Aion, Li Auto, and Xpeng are also gaining traction. Foreign carmakers such as Japanese Honda, Nissan, and Mazda have struggled in the fierce competition and experienced sales declines. Mitsubishi even announced the end of its production in China.
Gong said domestic EV makers currently occupy 60% of China's market share, rising from 50% in 2022. They move faster than foreign and joint venture automakers in technology innovation and cost reduction. In addition, many China-based companies have focused on luring high-end consumers by innovating smart cockpit features or launching models like off-road vehicles to target niche markets.
Joint venture automakers have kept cutting car prices in response to the rivalry and to maintain their market share, according to Gong. He said the Guangzhou motor show in November 2023 indicated that joint venture companies continue to lower their mass-market vehicle prices. In contrast, many Chinese companies priced their cars over CNY300,000 (US$42,370).
Stellantis-Leapmotor bond may lead to more traditional-emerging carmaker partnerships
Foreign-based automakers are deepening ties with emerging Chinese EV companies. Volkswagen and Xpeng announced a strategic partnership in July 2023. The pair will co-develop two battery EVs in China under the Volkswagen brand. The German carmaker also acquired 4.99% of Xpeng shares.
While the partnership represented foreign traditional automaker's efforts to reclaim market share in China, Lin said the more comprehensive cooperation between Stellantis and Leapmotor brought the attempt to the next level. If the collaboration works, it will set an example to establish a closer connection between traditional automakers and emerging Chinese EV companies.
Stellantis became a major shareholder of China-based Leapmotor. Credit: Stellantis
According to an announcement, Stellantis acquired 20% of Leapmotor with an investment of EUR1.5 billion (US$1.64 billion). The pair will form a joint venture, with Stellantis owning 51% of the shares and having exclusive rights for exporting, selling, and manufacturing Leapmotor models outside China.
Lin said traditional automakers will seek more collaboration with rising Chinese car companies as they transition to EVs. China-made vehicles boast 30% lower average costs than cars produced in the West. This advantage could help traditional automakers become more competitive worldwide.
Lin noted that Investment in Leapmotor also reflected Stellantis' recognition of China's EV expertise and said that Leapmotor has developed approximately 70% of the technologies in its EVs, including the battery modules and self-driving systems. The company also saw its gross profit rate become positive in the third quarter of 2023 and has maintained a stable monthly sales volume of over 10,000.
As China continues to dominate the EV market, Lin said Stellantis' partnership with Leapmotor showed the former's intention of leveraging Chinese EV capability to restrain other Chinese competitors. This approach might gain adoption in the future.
Geopolitical factors will influence the industry more significantly
China-branded EVs are also gaining momentum overseas. According to CAAM, China exported more than 1.09 million EVs from January to November 2023, up 83.5% year-over-year. Dongfeng Motor estimated that EVs will account for 53% of the country's car exports by 2030.
Source: CAAM, compiled by DIGITIMES Asia, December 2023
With the dynamics of international politics, the US, China, and the European Union have separately taken measures to protect their interests in the EV sector this year. The moves are expected to create a ripple effect in 2024 onward.
The EU officially launched an anti-subsidy investigation on Chinese EVs in October, targeting BYD, SAIC Motor, and Geely. The probe, which could take up to 13 months, may result in an anti-subsidy duty should the European Commission determine that China's battery EV value chains benefit from the "illegal subsidization" from the Chinese government.
Many have said Chinese EVs would still be competitive in Europe even with the additional tariff because of their substantially lower production costs.
As for the US, its latest guidance on batteries and materials sourcing said an EV is not eligible for tax credits provided by the Inflation Reduction Act (IRA) if it contains battery components and materials from a Foreign Entity of Concern (FEOC).
The rules targeting China will take effect in 2024 and 2025 and are expected to remove the eligibility of many EVs, including Tesla and Ford models. The guidance will also discourage Chinese EV players' expansion in the US.
Gong said the US contributes 30% to 40% of the global automotive industry revenues and has been the largest consumer of premium vehicles. However, geopolitics and policy uncertainties have refrained Chinese companies from scaling in the country. He said the presidential election results next year could also add more variables. Therefore, the Chinese EV market share in the US will likely stay at zero in the foreseeable future.
The US-China tension will continue to affect the EV industry. Credit: DIGITMES
Beginning on December 1, China has tightened exports of synthetic graphite materials, natural flake graphite, and its products. The country has been the world's largest graphite producer, a critical component in manufacturing battery anodes.
The Chinese government stated the export curb aims to protect its national safety and interests. How the move will impact battery production outside China still needs to be determined. Still, it may accelerate research on alternative anode materials like silicon and the localization of graphite production in other countries.
In response to the protectionism from the West, China has been fostering local tier-1 suppliers, car components companies, and even testing equipment suppliers to establish a more comprehensive EV supply chain, according to suppliers. Foreign industry players have also been asked to localize production in the largest EV market.
Suppliers say China is trying to create a buffer should the US impose sanctions on the EV segment. The endeavor would hinder foreign companies' development in the country and redirect them to other major markets like the US and Europe.
