Manufacturing of electrical vehicles (EVs) has kept up with fast growing demand in red-hot markets
Logistics prevailed...until now
Chinese industry has been able to respond to explosive Chinese demand every step of the way
Mining cobalt deep in Africa's Congo, supported by cargo shipments of basic materials refined in domestic refineries, advancing the technology and producing the batteries, China has achieved global EV dominance
With its ability to deliver, the Chinese EV supply chain circling the world has been a model of demand anticipation
In 2015, China's passenger EV sales of 220 000 cars represented 26% of global sales - and electrical vehicles weighed just 0.7% of all car sales in China
From January to November '22, the cumulative production reached 6 million EVs and sales 5.25 million, 30% of all cars sold in the country
With the exception of Tesla
As could be expected, consumer demand in the US and Europe remained spotty for lack of choice across the full price range and because of the lagging build-up of networks of charging stations
However, with credible political engagement - translated in a 'Green Deal 2035' in Europe and US-based production subsidies in America - a fuse has now been lit under EV demand in developed markets, Europe leading the way
Global demand is caught in a whirlwind
A whirlwind
A fresh European wave of EV interest - abutting powerful Chinese consumer momentum - will have Chinese supply scrambling
But bottlenecks and delays in leveraging manufacturing capacities could have the severest implications for Western carmakers, slow off the mark
- Demand in Europe, the most advanced EV market besides China, opens a window of opportunity for Chinese exports - and not (yet) for the legacy car markers gearing up to meet eager consumers
- While the later will - at huge cost - catch up over time, control over mining and refining capacity for battery production might empower the Chinese industry even later in the cycle
In the short - even medium-term - the EV car market, globally but especially in Europe, might be for the taking by the best prepared, lowest cost manufacturers... based in China
Even so....guidance in the 3-year medium term remains uncertain at best, contingent on volatile consumer demand and a fluid regulatory framework
Although best positioned to benefit, China exports will only flourish in the most compliant markets
....provided Chinese demand growth, fired up by regulatory measures and financial incentives, is tempered...
....provided EV sales between domestic and export markets are balanced to perfection ...
How will Europe respond to the crumbling of its heartland industrial base?
With even more relevance, how quickly will the looming danger bring about a political backlash in Europe?
Tight EV markets
Who is buying EVs and on what terms ?
Exponential domestic growth, +114% in 2022 over 2021, has cemented China’s standing on the global stage
In 2022, once the full numbers are tabulated, China is expected to sell close to 6 million passenger plug-in electric cars on the domestic market - closing in on 30% of total passenger car sales of 20.6 million
At mid-year, through June 22, the Chinese domestic market already represented 56% of global EV sales
- if domestic growth keeps outpacing foreign markets
- playing down economic headwinds and poor November sales
China might command 60% of global EV sales for the full year 2022
In Europe, according to 2022 projections, EVs account for approx. 20 % to 23% of total passenger vehicle sales (est. at 9.6 million cars), in line with a similar adoption rate in China
- The projection is based on 1.2 million battery-powered BEVs and 1 million plug-in hybrids PHEVs - remaining below 2.5 million unit sales at best according to Counterpoint
In the US, EV market share is only approx. 6% with 900 000 cars sold in 2022
Reporting globally on the 2025 EV market, industry analysts at Bloomberg New Energy Finance (NEF) project worldwide sales of 20.6 million EVs (6.6 million in 2022)
Europe and China are expected to account for 80% of all EV sales globally
- In Europe, adoption rate could double by 2025 from 20 to 40%, raising sales of a mix of mainly battery-powered EV, complemented by hybrid PHEV, to 4/4.5 million cars and 20% of global sales
- China, on current red-hot consumer EV momentum, might command 10 to 12 million EVs in 2025, implying an adoption rate above 40% as well, if the country stays the course (forecasting sales of 6 million EVs in 2022 on total sales of 21.5 million cars) - staying on top with 60% of global EV sales
The estimates, in line with Bloomberg NEF global projections, would extend the recent EV adoption run and overshoot demand anticipations, as charted by the ICCT, by a wide margin
The US, a late comer to EVs, targets a 15% market share (2021 sales of 15 million cars) - 2 to 2.5 million EVs
- 900 000 are expected to be sold in 2022 (as of November: 816 000 EVs)
- By 2025, there could be 74 different electric vehicle models offered in North America
- With a line-up the American consumer might actually like, EVs are expected to finally catch on - a lag which US carmakers surely welcome...
With a first-mover advantage, China will be uniquely positioned in the short-term to gain market share in global EV-demand driven markets, mainly in Europe
| All cars | EV cars demand in millions | ||||
| Total Sales | 2025 (est. ICCT) | 2022 | 2025 (Bloomberg) | 2025 EV share in region | |
| China | 21.5 | 6 | 5.5 to 6 | 10 to 12 | 45% to 50% |
| Europe | 10 | 2 | 2.2 to 2.5 | 4 to 4.5 | 40% |
| US | 15 | 2 to 2.5 | 0.9 | 2 to 2.5 | 15% |
| Global | 6.6 | 20.6 | |||
| 2022 estimates (as of mid-22) ICCT - Bloomberg (by CNN) - Pininvest | |||||
Though 2025 EV sales estimates remain indicative, China's and Europe's volume outperformances stand out
Both China and Europe are on track to achieve 2025 targets three years early
If EV sales maintain their momentum, global EV demand will triple to more than 20 million cars, up to 44% of total car sales
EV affordability at mid-range prices will drive market penetration (especially in Europe) and battery availability will command supply - China might be holding the cards, in the short term and maybe longer
An embarrassment of riches
...when potential global demand becomes too much of a good thing
Strong domestic sales in China in 2023 might run into ebullient international EV demand, crowding out the exports to potential new markets
In the first 10 months of 2022, 499 000 passenger EVs were exported from China (+96.7% year-on-year)
In October 2022, 762,000 EVs were produced (+87.6%) and 714,000 EVs were sold on the Chinese market (+81.7% year-on-year) - leaving just 48 000 cars for export
According to China Customs, November '22 global EV car exports deliver another very strong month (+165% year-on-year), mostly on the back of soaring European demand of branded EVs manufactured in China
- Over 257,000 Tesla MIC cars were exported in 2022 as of November (+ 69% year-over-year) and Europe has most probably been the primary destination
Through November this year, the cumulative EV production reached 6 million and domestic sales 5.25 million cars, implying a capacity to export up to 750 000 cars
Taken together, China's EV exports have responded with agility in 2022
- boosted by global EV adoption rates, particularly in Europe, a primary destination for export of familiar brands - foremost Tesla, but the brand will not be a lone exporter for long as other European brands follow a similar track (BMW, Volkswagen, Stellantis, Renault, Smart)
- overcoming supply chain constraints, related to unabated momentum of the Chinese consumer
Something might have to give in 2023....
In uncertain times, two issues stand out, between success (for China's export ambitions) and failure
How China hopes to become a major contender for the EV crown in Europe, challenging the legacy car makers for the long haul ?
How a stampede of Chinese consumers might be competing with export markets for EV deliveries creates uncertainty in well laid-out plans ?
Tentative answers will be suggested in the follow-up report China EVs - Winner take all ?