China has rapidly become a global powerhouse in electric vehicle production and export, with nearly 40% of its electric vehicle exports bound for Europe. Despite rising trade tensions and looming EU tariffs, Chinese automakers continue to expand their global reach and innovate in electrification, smart mobility, and sustainability. Backed by strong policy support and ambitious industry goals, China’s automotive sector is reshaping the global market landscape.
Surging exports amid trade tensions and policy shifts
From 2020 to 2023, China's global EV exports increased by 851 percent, with nearly 40 percent of those exports destinated for Europe.In October, 2023, the European Commission launched an anti-subsidy investigation on imports of EVs from China, resulting in a provisional increase in tariffs on Chinese EV exports to the European market. Despite these challenges, China's automotive manufacturing sector has continued to grow at an accelerated pace. In 2023, vehicle production and exports from China reached an all-time high. Growth in the automotive manufacturing industry persisted into the first quarter of 2024, marked by a significant increase in vehicle exports. Of the cars sold, 4.58 million were sold domestically, while 1.11 million were exported, reflecting year-on-year (y-o-y) increases of 6.2 per cent and 34.3 per cent respectively. During this period, the market share of domestic passenger car manufacturers expanded to 59.6 percent, an increase of 7.4 percentage points. In September 2024, China exported over 60,000 EVs to the EU, achieving the second-highest monthly export level on record, which represents a more than 60 percent increase from the average monthly exports earlier in the year. This surge in exports was largely driven by Chinese automakers' strategic efforts to capitalize on the EU market before the implementation of new tariffs.
The European Commission has announced plans to impose duties on Chinese EVs, citing concerns over state subsidies that enable these vehicles to be sold at artificially low prices in the EU market. The tariffs, which could reach as high as 45.3%, were set to take effect by October 31, 2024. Analysts forecast that Chinese-owned brands will export approximately 4.5 million passenger vehicles globally in 2024, marking a 29% increase from the previous year. However, the growth rate for battery electric vehicle (BEV) exports is expected to slow to 9%, totaling around 860,000 units. Consequently, the share of BEV exports is projected to decline from 22.5% in 2023 to 19.0% in 2024.
Sustainability transition policy
In recent years, the Chinese government has provided support for the automotive industry, focusing on sustainable and low-carbon development, in the face of challenges, such as rising raw material costs, supply chain disruptions, recycle material et al. Key policy areas include tax incentives, dual-carbon initiatives, smart technologies, green mobility, and industrial upgrades. For instance, the Technical Policy for Recycling Electric Vehicle Batteries has established a framework for battery traceability and extended producer responsibility. Additionally, the Development Plan for New Energy Vehicle Industry (2021-2035) aims to enhance innovation and infrastructure, while addressing challenges related to technology and quality assurance.
The National VI Emission Standards initiated in July 2023 aim to regulate vehicle emissions, and prohibit the sale of non-compliant vehicles. In December 2023, the Ministry of Industry and Information Technology (MIIT) issued the Green and Low-Carbon Development Roadmap for the Automotive Industry 1.0. The roadmap integrates the focus on NEV technology development with the country's 30/60 Goals. Additionally, the NEV tax exemption policy by the Chinese National Government has been extended from January 1, 2024, to December 31, 2027, providing a four-year period of tax relief to encourage the adoption of electric mobility. This policy offers reductions of up to 30,000 yuan (approximately 3,900 Euros) to further incentivize local consumers to purchase NEVs.
Research and Innovation
China's automotive industry is rapidly evolving, driven by innovations in vehicle technology that emphasize electrification, smart systems, and sustainability. Key players such as BYD, NIO, Li Auto, XPeng, BAIC, and Geely are at the forefront of advancing electric vehicle technologies, including high-performance batteries and dual-mode systems. Innovations in the fields of smart cockpit systems and autonomous driving capabilities are significantly enhancing user experience and safety in vehicles. In China, at least 16 cities permit the testing of autonomous vehicles on public roads, while over 20 Chinese automakers and their suppliers are actively pursuing global leadership in this field. As noted by The New York Times, "No country is taking such drastic action." Furthermore, in 2024, Chinese automakers made significant strides in chip innovation for NEVs, with breakthroughs in 7nm, 5nm, and RISC-V technologies. These advancements led to enhanced AI capabilities, safety standards, and system integration, with widespread applications in vehicles, showcasing China's growing self-reliance and leadership in automotive chip development. In 2024, Chinese automakers made significant strides in chip innovation for new energy vehicles (NEVs), achieving breakthroughs in 7nm, 5nm, and RISC-V technologies. These advancements have resulted in enhanced AI capabilities, improved safety standards, and better system integration, with widespread applications in vehicles. This progress showcases China's growing self-reliance and leadership in automotive chip development.
Sustainability-driven business
Many Chinese automotive companies have set ambitious carbon neutrality goals, demonstrating a commitment to reducing their environmental impact through recycling and lifecycle management efforts. The China Association of Automobile Manufacturers recently analyzed the sector's social responsibility management, revealing insights that could be beneficial for Swedish companies looking to enter the Chinese market. For instance, SAIC Group aims to peak carbon emissions before 2025, with its subsidiaries targeting specific carbon reduction goals. GAC Toyota is adopting green manufacturing practices and promoting carbon emission management among its suppliers. Meanwhile, Changan Automobile has set ambitious targets, aiming for peak emissions by 2027 and neutrality by 2045, leveraging a digital management platform.
Volvo Car is at the forefront of the transition to electric propulsion, demonstrating its commitment to the Paris Agreement's greenhouse gas targets through a range of electric vehicles and robust sustainability initiatives. In 2024, Volvo Car and CATL deepened their collaboration by signing a strategic cooperation memorandum, focusing on sustainable development. As part of this agreement, Volvo Car has implemented a comprehensive recycling strategy for retired and end-of-life batteries, engaging certified downstream suppliers to extract valuable materials such as nickel, cobalt, and lithium. Additionally, Volvo Car's Taizhou factory has become the first climate-neutral facility within the company's operations in China. The impact of Volvo Car's sustainability strategy extends to domestic automotive supply chains, promoting advancements in Life Cycle Assessment (LCA) accounting, carbon reduction in parts and materials, and the use of recyclable resources.
Meanwhile, other European automotive manufacturers, such as BMW Group and Scania, continue to set high standards in green manufacturing and electrification. Since 2019, BMW Group has utilized 100% renewable electricity in its China production facilities and has implemented closed-loop battery recycling and green dealer certification programs to ensure supply chain sustainability. Scania, focusing on renewable fuels and electrification, aims for a significant share of electrified vehicle sales by 2030 while working to reduce its overall environmental footprint. Together, these companies exemplify how Sweden's advanced sustainability strategies are influencing both global and Chinese automotive industries, fostering a greener future.
Key information sources:
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- Work Plan for Stable Growth in the Automotive Industry (2023-2024), MIIT, 2nd September 2023, viewed 16th May 2024,(in Chinese)
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- Carbon Neutrality(in English)
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