The Silent Invasion of Chinese Electric Cars

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Beijing. Unthinkable autonomy, futuristic design, hyper-advanced technology, economy car prices. Bulgarian duties may be coming, but the Western automotive market is destined to be inundated with Chinese electric cars. This is the impression you get after visiting a giant shopping mall in Beijing: we found about fifteen dealerships, mostly of brands that no one has ever heard of in the West. In short: they are all very beautiful, cost very little and have supercar design and accessories. But how did the Chinese get to the point where they apparently become the best at making such cheap electric cars?

In a strange way. The leaders of the Chinese Communist Party knew well that to recover the technological delay with respect to the West on the components of the old internal combustion engine they had only one card: their ever-growing internal market. This was how the strategy of joint ventures was born, the first of which dates back to 1983: the Berlin Wall was still standing, Tiananmen Square was a topographical indication like any other, and the JV was called BJC, Beijing Jeep Corporation , born from the marriage between Beijing Automobile Works and American Motors. The first real success story told in books on international economics and management, however, dates back to the following year, when Shanghai Volkswagen was born, a union of Saic and the famous car manufacturer desired by the Führer.

The Chinese government's idea was clear: to open the market to foreign companies on the condition that they transfer, directly or with less orthodox methods, know-how and technology to local partners. Thanks to this method, China was able to assimilate advanced production and design technologies . During the 1990s, the joint venture model became the norm, with protagonists such as General Motors (Shanghai GM), PSA (Dongfeng Peugeot-Citroën), Honda (Guangzhou Honda), Toyota (Faw Toyota) and others, also in the industrial and commercial vehicle sector. In those years, the theoretical foundations for another leap were laid: with the new millennium, China began to churn out an average of four million graduates in STEM subjects per year , most of whom were engineers. Nothing surprising in a country that has been delegating the political leadership of the state to technical figures for decades.

This enormous amount of brains goes to populate the numerous managerial positions of the new companies in the sector, which are springing up like mushrooms, but at the same time another awareness emerges, which has been making its way since the early nineties thanks to the vision of Wan Gang , recognized by all as the father of the Chinese electric car. Wan, a promising engineer who graduated in Germany, joined Audi as a new graduate in 1991, and received a visit to the Ingolstadt factory from the then Chinese Minister of Science, Zhu Lilan. After a conversation with Wan, Zhu is convinced that the game on traditional vehicles is over, but that it may be worth diversifying production, and at the same time finding a more sustainable alternative to oil, given the increasingly pressing level of pollution in China. Zhu convinces Li Lanqing, former vice-premier with a past in what is now Faw Group: less than fifteen years later, the world's first fleet of electric buses is ready to welcome visitors for the 2008 Beijing Olympics .

Today, cities like Shenzhen have a fleet of cars and buses that are almost entirely electric. And it is in Shenzhen that the most famous company in the domestic market (where it has more than 30 percent of market share) and abroad is based: Byd , from the acronym for “Build Your Dream”. The company founded in 1995 by Wang Chuanfu (also, obviously, an engineer) anticipates by a couple of decades Xi Jinping's narrative regarding the Zhongguo Meng, the “Chinese dream” that in his vision is destined to replace the American one. Byd was born specializing in the production of rechargeable batteries – a pattern that will return frequently in the recent history of its competitors – to then expand to electronic components and, finally, to the automotive sector.

What is surprising, in fact, when analyzing the industrial panorama of the Chinese automotive industry, is the spectrum of different expertise that helps it. Unlike the Western competitive arena, which is highly specialized and proceeds through aggregations in increasingly larger conglomerates, as is typical of the markets of more mature technologies, in China electric vehicle manufacturers are also diversifying into other sectors, not necessarily related, such as drones. The most striking cases are those of Xiaomi and Huawei, known to the Western public mainly for their production of cell phones, but which entered the car business after already being present in those of semiconductors, AI and self-driving cars. Then there are players like Li Auto, which in addition to electric cars, is present in the supply chain of industrial robots and humanoids.

So where does their competitive advantage come from? The – hopefully – few readers still convinced of the equation Made in China = low-cost, low-quality labor will have to think again: the overtaking of Chinese and Italian white-collar workers' salaries took place a dozen years ago, and even among specialized workers the difference in salaries is not that significant. The factors that justify the difference in competitiveness between China and the rest of the world today are mainly two. The first is the very advanced stage of robotization present in the assembly and manufacturing processes of Chinese industrial hubs. China is now among the leading countries in the world for industrial automation: a competitive advantage that provides enormous economies of scale in the production of high-tech products like these. The second factor has to do with the cost structure of the product itself: the battery represents about 40 percent of the total production cost of an electric vehicle, and here the advantage deriving from the Chinese expertise in the sector, from which many of the main producers come, means that the cost of this element is reduced by up to 20-30 percent. This translates into greater competitiveness on the final price to the customer, with a technological superiority that means that it is not uncommon to find products on the Chinese market that largely exceed the not only psychological threshold of a thousand kilometers of effective autonomy.

Some useful examples to get an idea. Byd is the best-known brand, and today by far the world's largest producer of electric cars, but the Chinese market is huge and constantly expanding . In the last ten years, about thirty brands have been born from nothing or as offshoots of companies that did something else, a practice that is widespread in Asia: about a third have already gone bankrupt. About twenty brands remain, almost all unknown in the rest of the world. From the smartphone sector, the hyper-technological cars of Huawei and Xiaomi have emerged, with very aggressive design and price positioning. Among the unknown in Italy, it is worth mentioning Avatr , whose line was designed by the historic German designer of BMW, and which in fact is already marketed in Germany : its fully optional models, with massaging seats and a riot of screens start on the Chinese market from about 31 thousand euros, for 750 kilometers of autonomy. Nio is another locally appreciated brand, the batteries have increasing autonomy from 500, 800 and 1,100 kilometers and provide for battery swapping, which are replaced instead of recharged by a local network. The sports model is sold for around 41 thousand euros, but you can also buy the car without the battery for around 10 thousand euros less. Much more affordable are the Arcfox , whose Kaola model (the Chinese word for Koala) starts at 25 thousand euros. Great Wall is also present with its electric range, under the name of GWMaio, with a presidential car sold for 38 thousand euros. Like the Li line, whose L6 model, a sedan, costs 31 thousand euros. Also known on our market is the Lynk&Co , which can be purchased for less than 24 thousand euros with an autonomy capable of reaching 1,400 kilometers. And then there is the luxury sector, in addition to the already mentioned Yangwang , there are the sports versions of the Xpeng (the G6 starts at 45 thousand euros) and the Aito S9, with performances that would make internal combustion engines envious. Finally, the price of the Volkswagen Id Unix is ​​very significant, an exclusive model for the Chinese market of what we call the Id4, sold for just 22 thousand euros, or about half the equivalent on the European market.

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The prices of these cars are competitive despite Trump's duties . So why is the European market not yet flooded with these electric cars? For a number of factors. First of all, the distribution network, which is very limited in Mediterranean countries, and a certain distrust towards electric products in certain segments of the population, especially the more advanced ones. It is no coincidence that almost all of these brands, when they sell outside of China, do so only in certain geographical areas: Scandinavia , where sales of electric vehicles are the highest in Europe in percentage terms, and in some cases the United Kingdom .

In recent years there has also been a certain mistrust towards Chinese cars , on the one hand due to concerns about safety, on the other also due to an effective bombardment by Tesla, whose brand for many is synonymous with electric vehicles. But Tesla's narrative has essentially revolved around the figure of Elon Musk - who, let's remember, is not the founder, but one of the first investors - and this very strategy could now turn against the company itself: the role of overexposure on the world media scene of the South African entrepreneur has made him unpopular with a large portion of the population, including many of his customers.

All this risks helping to pave the way for its Chinese competitors already present on the market and for many others. And in the era of tariffs, China's strategy seems to be the one it has already applied at home: the opening of assembly centers in European countries , in the wake of the one that will be inaugurated this year in Szeged, Hungary. The Italian government of Giorgia Meloni had already discussed with the management of Shenzhen to open a "gigafactory" in our country , in a move that strikes at the heart of the pride of what remains of one of the symbols of Made in Italy manufacturing. Prices could be higher in the case of localization, but by the admission of the CEO of BYD, Wang Chuanfu, this is a strategy that would help the parent company to better root itself on the market and increase the positive perception of the brand. Moreover, among the dreams of the Shenzhen company there is also a challenge in the supercar market with Ferrari and Lamborghini. It is no coincidence that last year the Yangwang U9 was presented, capable of reaching 306 kilometers per hour with an electric engine. At the moment the model is only intended for Chinese buyers, but with a price of just over two hundred thousand euros it is a candidate to be a serious competitor in the luxury car sector.

The countdown to 2035, the date from which internal combustion engines will no longer be registerable, has begun. And Stellantis and the other major European brands are seriously behind the Chinese pole position.

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