BYD has also expanded its sales network in Japan and is working to expand the market (October 2023, Japan Mobility Exhibition). China's automobile export volume ranks first in the world for the first time. In 2023, China's automobile export volume will reach 4.91 million units, surpassing Japan. This is the first time in seven years that Japan has fallen from the top spot. China is expanding production scale in the field of pure electric vehicles (EV) and increasing its presence in overseas markets. The growing presence of China is beginning to change the power map of EVs in the world.
Data released by the Japan Automobile Manufacturers Association on January 31 show that Japan’s automobile exports will increase by 16% in 2023 compared with 2022, reaching 4.42 million vehicles. Data from the China Association of Automobile Manufacturers shows that China's new car exports will increase by 58% in 2023, reaching 4.91 million units.
Looking at data from countries with comparable data, Japan has fallen from the top spot in export volume for the first time since Germany jumped to the top spot in 2016.
The driving forces for China's automobile exports are the expansion of exports to Russia, as major U.S., Japanese and European companies have withdrawn, and the growth in production of "new energy vehicles" centered on China's leading EVs. Exports of new energy vehicles will increase by approximately 80% in 2023 compared with 2022.
Symbolizing China's rise is China's largest EV company BYD (BYD), which surpassed Tesla of the United States in EV sales for the first time from October to December 2023.
BYD is rapidly expanding production capacity. The passenger car production capacity in 2022 is 1.25 million units, but the actual output exceeds 1.8 million units, and the operating rate exceeds 100%. Local media reported that production capacity will reach about 3.5 million vehicles in 2023, exceeding Tesla's production capacity in 2023 (2.35 million vehicles).
BYD, with help from local governments, is rapidly expanding its domestic factory base in China.
Local media reported that the first phase of the project in Hefei, Anhui Province, took only 10 months from the start of construction to the start of production. It is expected that the factory production capacity in Shenzhen City, Guangdong Province and Zhengzhou City, Henan Province will be strengthened in the future. Huaan Securities estimates that BYD's production capacity will exceed 4.5 million vehicles in 2024.
Overseas sales are also growing rapidly. BYD's overseas sales will exceed 240,000 vehicles in 2023. It exceeds the disclosed cumulative number of approximately 50,000 vehicles from July to December 2022.
Overseas, sales of Chinese-made EVs are increasing due to lower prices compared with overseas competing models such as Tesla and Germany's Volkswagen.
In Europe, BYD's sales are increasing, centered on environmentally conscious young people. Compared with EVs from large European automobile companies, BYD's EV body prices are on average 20 to 40% cheaper.
In Thailand, BYD's SUV "ATTO3" is becoming increasingly popular, mainly among the wealthy class in urban areas such as the capital Bangkok. The small EV "Dolphin" can be purchased at a relatively cheap price after receiving subsidies, and is expanding to the middle-income class.
BYD started out in the battery business and can produce major components independently. Even chips, components and seats are always produced independently, reducing procurement costs. The more sales, the greater the mass production effect. Judging from the net sales profit margin from July to September 2023, BYD reached 6.4%, which is also close to Tesla (7.9%) in terms of profitability.
Behind the increasing strength of Chinese companies in automobile production, policy promotion also plays an important role.
China’s policies guide EV transformation
In 2009, the Chinese government proposed a policy to promote the popularization of new energy vehicles such as EVs. A sales subsidy system will be fully introduced from 2010 to 2022. According to Chinese media reports, the total amount of subsidies issued by the government reached 300 billion yuan.
In addition, a system to promote companies to switch to EVs has been introduced. Starting in 2019, in principle, only EVs will be approved to build new factories that assemble cars. In 2020, a system requiring companies to manufacture and sell new energy vehicles according to a certain proportion was officially introduced.
Koichi Iguchi, executive director partner of KPMGFAS, said, "The investment ideas and sense of speed of Chinese EV companies are close to those of IT companies. The government has also given strong support, allowing the low-price trend to continue, and it has swept the world EV market in just a few years."
30% of China's new energy vehicle exports come from overseas brands
China is promoting the export of new energy vehicles, including overseas brands. Among the new energy vehicle exports in 2023, Tesla actually has the largest export volume, reaching 340,000 vehicles. Far ahead of BYD, accounting for nearly 30% of the total.
It is reported that China, which is striving to expand EV exports, is believed to require Tesla to export half of its output when Tesla opens its Shanghai factory.
China aims to use the shift to EV as an opportunity to become an "automotive power" leading the world market. China's rise to the top of exports is just the beginning. Future growth will shift to overseas production. Relevant Chinese people predict that in 2030, automobile exports will reach 6 million vehicles, overseas production will reach 6 million vehicles, and overseas sales will reach 12 million vehicles.
Exports may help alleviate China’s overcapacity problem
Behind China's expansion of exports is also its intention to alleviate the problem of domestic overcapacity. According to Chinese media reports, the operating rate of domestic automobile factories in 2022 will be only 54%, a significant deterioration compared with 67% in 2017. Facing a serious oversupply problem.
It is estimated that the production capacity of new energy vehicles will exceed 36 million units in 2025. Domestic sales in 2025 will be around 14 million to 16 million vehicles, and it is expected that there will be overcapacity of 20 million vehicles.
Slowing domestic demand in the future may exacerbate overcapacity. France and Italy have restricted subsidies for EVs made in Asia and are wary of low-priced Chinese EV imports.