By Yaxin Guo
Asia House Fellow Yaxin Guo has conducted research to analyse the strategies that China can use to sustain and strengthen its global competitiveness in the electric vehicle (EV) market.
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China has established itself as a leading force in the emerging electric vehicle (EV) industry, primarily due to its control over various stages of the supply chain, from raw materials to finished products. However, China is facing growing threats to its position, including hefty tariffs slapped by large economies on Chinese-made vehicles, which risk increasing costs, slowing sales growth and deterring investors who may be considering establishing EV manufacturing hubs in China.
The main findings of the research are:
- The competitiveness of China’s EV industry is facing growing challenges, including escalating trade tensions with key export markets. Additionally, homegrown Chinese EV brands are contending with limited customer awareness, negative brand reputation, and external obstacles like insufficient EV charging infrastructure in certain regions.
- The strategies adopted by Japanese automakers in the 1980s may provide valuable insights into addressing the challenges currently faced by EV exports from China. Japanese manufacturers overcame export barriers by establishing local factories in their target markets, creating employment opportunities, facilitating technology transfer, enhancing market recognition, and localising their brands.
- The regression analysis supports the notion that establishing local production facilities can stimulate exports, suggesting that Chinese EV companies could set up factories in their export markets to address current trade challenges. This approach would not only benefit all EV manufacturers based in China but could also enhance homegrown Chinese EVs’ brand reputation and promote their market entry overseas.
- In Europe, EVs made in China face tariffs, which serve as a means for Europe to protect its key domestic industries. In recent years, the European Union’s trade policy has shifted from prioritising free trade agreements and economic efficiency to emphasising the creation of a fair competitive environment. Therefore, in the European market, Chinese EV manufacturers could consider establishing factories in Europe to create local value, such as job creation and fostering a fair competitive environment for this key industry, which could help reduce trade tensions and improve China’s global reputation. Additionally, this strategy would enable Chinese EV manufacturers to better understand European consumer preferences. By reducing trade tensions, China could become a more attractive hub for EV production, thereby enhancing the competitiveness of Chinese-made EVs in Europe and globally.
- In the Gulf region, the establishment of local factories by Chinese EV brands could help diversify geopolitical alliances and strengthen trade relations between the Gulf and China. Beyond this, there are several other pathways for mutually beneficial cooperation in the EV industry. These include strategic investments by Gulf countries in Chinese EV companies, many of which face capital shortages, and replicating the “Belt and Road Initiative” model in the EV industry.
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