This is Tom Relland's Reese, and you're listening to Switched on the podcast brought to you by Bloomberg and EF.

China's electric vehicle market is moving at extraordinary speed.

In the third quarter of twenty twenty five alone, the country sold three point five million evs, accounting for more than half of all new car sales nationwide and driving global adoption to new highs.

As incentives, trade in subsidies, and aggressive pricing boost demand, Chinese auto manufacturers are scaling rapidly at home.

Mini city cars, long wage models, and fast charging features are spreading across the mass market, helping EV sales reach around fourteen point one million expected deliveries this year.

At the same time, China's automakers are expanding abroad at an unprecedented pace.

Nearly one in five evs sold outside China now comes from a Chinese brand, and companies are building factories from Europe to Southeast Asia and Latin America to stay competitive amid rising tariffs.

But as Chinese brands gain scale, diversify their drive trains, and localized production in key markets, is this the moment that reshapes the global industry?

On today's show, I'm joined by Ceme, a senior associate on Bloomberg and yif's Electric Vehicles team, to discuss some of her team's notes, including more of Chinese automakers step into overseas markets and evs are just the start for global carmakers China rebound.

BNF clans can find these along with other electric vehicle research by heading to BNF go on the Bloomberg terminal or visiting BNF dot com to learn more about how BNF approaches strategy research on the energy transition, including developments and commodity markets, sector trends, and the technology shaping the future.

You can find more information at BNF dot com.

So let's dive in and explore how China's ev surch is reshaping the global auto landscape.

See Welcome to the podcast.

Thanks for having me.

So we're talking.

About Chinese electric vehicles, and you know, I'm sat here in New York in the US, and obviously you can tell from my accent from Europe, and so there's this general acceptance I think that the sort of the heartland for electric vehicles now is China, and that the industry in China is really the one to compete against if any manufacturers in those markets or in those countries or regions want to have anything to say about electric vehicles.

Often with those narratives, it's almost like the Chinese electric vehicle industry is the antagonist.

You know, we're talking about what are European companies or what are American company is going to do about China.

So I'm really looking forward to hearing about the kind of the perspective of the Chinese electric vehicle industry.

But maybe we should just start with that question of how the Chinese electric vehicle industry is shaping the global market.

Maybe you can explain a little bit, put it into numbers for us.

Yeah, sure, Like.

China's electric vehicle is important in terms of both the demander supply.

So it's been the world's largest EV market since probably twenty seventeen, and this year is on track to sell more than fourteen million passenger EV's and that's about actually two thirds of the globe passenger EV sells.

So it's the pretty significant market itself.

But also it's the largest EV manufacturing or the producer as well, so it's a very important EV manufacturing basis.

A lot of the not only Chinese domestic but also international automixer are leveraging the economy of skill, the well established apply chains in the country to produce electric vehicle and then ship it elsewhere.

And I mean it stands to reason that the fact that it's such a huge market for electric vehicles has maybe enabled the development of the industry there as well.

I mean, which which came first the growth of the market and then the industry followed, or is it the other way around?

I mean, how have these two developed together and what's been driving that.

I think for the EV industry early days, whether it's in China or in other market, it's always like a niche technology and then it's always kind of a policy that's enabled the market to kick start.

But I think the skill or the demand is important because for auto manufacturing is very much a skill business, like you have the skill and you can drive down the and then it was really important for any for the automakers and any kind of auto suppliers.

So that's what we see is once the.

EV or in any new kind of technology past that early adoption stage, the economy skill becomes really important for any any market.

So the growth of demand has really enabled the growth of the industry there, and you mentioned some policies.

Are there still policies in place driving the uptake electric vehicles in China or is it now sort of taking off on its own so to speak.

I mean, it's very much taking off on its own, but against like, policies still play a very important role.

So China has completely phased out the purchase incentive, but they kind of replace it with like the trading or the scrappage incentives encouraged car buyers to kind of replace their old combustion cars within inductrial vehicles.

And there's also local level kind of a support, like city level restrictions on internal combustion purchase and uses, as well as local incentives on a charge infrastructure.

These are all important enablers that keep driving the EV demand.

But having said that, is that right now EV is already make up more than half of the new car cells in China, so indicating that this market is very much already a mature EV market, that there's very diverse kind of consumer demands on what kind of vehicles they would want, so and automakers, in response to that consumer demand continue investing in EV technology in order to really capture the diverse demand.

And fifty percent of demand in such a huge market as China.

I mean, that's extremely significant.

Has it been around fifty percent for a while or is that a sort of a recent landmark that's crossed fifty percent?

So last year saying the second half of last year, there are a few months that's already passed the fifty percent mark, and this year we also see that also cross the fifty percent mark, like since a second quarter.

I mean, AUTOVSL is quite seasonal, so they're also kind of the downtimes in like January or like winter time, but there's also kind of pixels tour the end of the year.

So I mean, I'm just imagining I'm in Beijing or Shanghai and I stood at the side of the road watching vehicles go by.

You know.

You mentioned like there's an increasing diversity in the demand for vehicles in China.

I mean, are we seeing the same types of electric vehicle as we're seeing in other parts of the world, or as there you know, other particular archetypes I suppose of Chinese electric vehicles that are typical to China, maybe not elsewhere.

Yeah, definitely, I think there's quite a wide range of electric vehicles currently offered in China.

So they're like those really small mini or smaller sizes for the electric vehicle, which is a site slightly bigger maybe than golf car, but against like perfectly for like one or two persons, and then to commute or for like their shopping or very easy kind of the short distance travels.

There are also those average kind of compact or gidium sized vehicles that's typically like what families would buy for their first family car.

And then there's also larger vehicles that's used for multiple purposes.

But again it's like the side of the vehicles are different.

And then we do also see them used in different cases like private vehicles, but also like government fleet, share fleet and and taxis.

Therese are almost fully electric as well, and again it's like we're not only we're talking about electric vehicles, but against that that also include like battery electric vehicles.

We also see plug in hybrid vehicle.

We could utilize both the charging and then the internal combustion engine as well as this new technology not necessarily, but it's like more of a like research of the technology.

The range extended vehicles use kind of the gas combustion and as an extender to allow people to drive on longer electric ranges.

I'm really curious to learn a little bit more about these mini evs you've mentioned, because if that's something that I don't well, I've not seen that in the US.

I mean, coming from Europe, you come to the US and you realize how everyone has to have a massive car.

There's no lock what to me, and no normal sized cars on the road.

So the mini ev this concept just slightly bigger than a golf car, is you know, very different.

I'm assuming that's something that people have in cities more and so my question for you is the people that have those cars or those mini evs, I don't if you would call them a car.

Are they owning those in addition to a more conventional sized car or instead of a conventional size car, or do you think it's people who wouldn't have had a car at all in the first place, but now the mini ev is here, there's an option that's suitable for them.

Just kind of interested in how this is transforming the automotive picture more generally.

Yeah, that's a good question.

Yeah.

I think definitely first started when mini EV's like start to kind of pick up in China.

It started as like a second or third family car.

So these are also bought by families that already own a internal combustion and in vehicles, and then they want their additional car because, like lociously, it is cheaper to use, and these mini cars are also priced below like ten thousand US dollars, so that's like real very affordable for those as use a commuter car or those two maybe pick up their children or do their kind of a Grosceri is quickly so increasingly.

Is that the technology underpinning those mini cars are also improving quite a lot, so they're rein increasing, their charging speed are increasing, and then they also equipped with like smart driving, like driving assistant systems, so they're not really simplely like for commuter, but they are becoming more common or even becoming more popular among first time car virus as well.

That's so interesting, and I'm really curious to know if we're going to start seeing the uptake of similar vehicles in other markets as well.

So let's talk about the industry in China and in particular relationship between the as you alluded to already, the relationship between the market and the industry.

I mean, there's huge market for electric vehicles in China, Is it fair to say that it's predominantly served by domestic manufacturers?

And if so, who are the big players there?

Yeah?

So, so far for the China's EBN market, over ninety percent of the sales came from domestic players and that's ninet yes, okay.

And then we're talking about like more of established manufacturers like the Sha Automatic Group, but also like those leading EV players like byd or jaily and as well as there's also emergent for startups like new expots.

So it was really mostly domestic players.

And having said that, is that these are basically squeezing out the international automakers.

They used to control two thirds of the China's overall auto market, but now there's like share of the overall China auto markets like less than forty percent, which is a big, pretty big hit for them.

Yeah.

I'm just doing the numbers in my head.

If if electric vehicles are fifty percent of the market, now fifty two percent and ninety percent of that is Chinese V manufacturers and then obviously the non evs there's going to be some Chinese manufacturers.

Yeah, the Chinese auto market is becoming increasingly Chinese served that's really interesting.

And then how are these Chinese electric vehicle manufacturers performing outside of China.

They're accelerating their global expansions outside of China, so we do that for example their cells.

So Chinese automakers sold nearly one million passenger evs outside.

Of China in the first nime ounth of this year.

That's almost like twenty percent of the global passenger EV seals.

Again, and they're also shipping over one million passenger evs from China, so it was like representing an important share of the global market.

So and you said that when was for what period was that one million?

One million was like from January to September this year.

So for most of the year.

Because I'm trying to obviously you mentioned Chinese electric vehicle represent twenty percent of the global electric vehicle market.

But from the numbers you're saying to me, it sounds like, actually the Chinese market is so big even compared to the international market for electric vehicles that actually the going global at this point in time is maybe less important than doing well in China.

Is that a fair statement?

I actually I'm trying to calculate it on this provide.

I think was it you said forty million EV sales in China expected this year, Yeah, and we were saying one million internationally for most this year.

Yeah.

So even if they would dominate, if even if it was one hundred percent of the global market, yeah, the Chinese market is still more important.

Yeah.

And that's really just a striking thought when we think about I mean, we'll talk about supply chains and things like that, so much of the focus you know, like I mentioned, when we're talking about electric vehicles from the perspective of US or European manufacturers, and the Chinese industry is, as I say, always the antagonist who they're having to compete against, but things like supply chains, but just have that market in China is actually just the biggest advantage you could possibly ask for for Chinese manufacturers more than anything else.

Well least I don't know, because I'm not an analyst on this topic.

That's what I'm just saying is the podcast.

But is that thesis?

Is that a fair takeaway from this?

I think definitely, like having the Chinese market is lay of good foundation for them to go global.

So not only for the Chinese market, but also for international market who want to compete on the EV front as well.

So because as you said, the skill, the cost efficiency, the relatively kind of cheaper electricity, water, the sort of costs as well as like the skill labors or still workers in the market, that's very hard to compete if anyone wants to manufacture or make electric vehicles.

I mean, you touch on an interesting point the international players competing in the Chinese market, because it sounds like that's actually what they really need to do if they're going to stand the chance globally in the long term.

Yeah, so what are international players doing to be relevant within the Chinese market?

I think they already recognize that in order to compete in the trend of market, they have to definitely focus on electric vehicles.

So what we see is that the leading international automakers German or Japanese friends, they're doubling down on evn investment and EV products in order to stay more relevant or defend their market share.

They're also increasingly partner with local tech providers on EV technologies, on smart driving technology and as well as kind of the way to scale their local manufacturing.

I think it's like so far, it's like most of them have not really said their want to axit China even though they're losing their market, so they're still staying because the skill or the size of the market is like so important.

Like they basically China markets still count for like twenty to thirty percent of their global sales for leading players like Toyota or Worldswagons, so it's like still very major market for them.

And is that for like all vehicles of vehicles, but increasingly if it's not electric, they're not going to compete and they're not going to do well in China from the way the trends are going, right.

Yeah, absolutely, And I think to add on as it's also like more about just having more electric vehicles.

They also have to compete on speed because their Chinese competitors also rolling out EV models that really fast speeds.

So a lot of them already have an nouns or roll out some localization strategies in order to better compete.

But again it's like, really the key is actually fusion and how could they really deliver the products in a relatively quicker speed than before.

I mean in this fast moving picture where you know international manufacturers they're computing, it's the moving target because the Chinese manufacturers are growing and expanding.

How are they funding that expansion?

I mean, what role IPOs and capital markets playing in that?

You know, where is the money coming from to fuel this growth in the Chinese EV industry, It.

Kind of depends.

So for international automakers, mostly still funding by their own revenues, and that's a lot of actually ironically come from excelling internal combustion and the vehicle, which is still very luctive business so far.

By contrast, excelling or making evs are not really profitable for many of them.

So is that they're using the revenue coming from ice vehicles to found their EV growth targeting the long term growth story.

For domestic Chinese automakers, we do see that increasingly they're tapping into the public market.

Some of them have announced that IPO already went public this year, and then a lot of them really public on the Hong Kong Stock is Changers.

So taping into the international financial markets enable them to very quickly adapt to the overseas market, and it gave them the actual fundy that needed to speed out their global wolves.

Let's talk about the I know, we've sort of established that right now the most important market is the Chinese market, but we know that electric vehicle sales are growing globally and so at some point that's not going to be the case.

It's going to be really important to be an international manufacturer or that's the huge opportunity, and obviously Chinese electric vehicle manufacturers in a really good position to be those global exporters.

I suppose.

My question is is like what is the strategy there?

You know, for example, I mean I'm in America and the talk has all been about tariff's tariffs, tariffs for example, and we're seeing in a world with less and less free trade.

So is the strategy to manufacture cars in China and export them or is it to have overseas capacity to manufacture those cars.

What kind of moves are we seeing?

Yeah, so many of those on make say China started their local move by simply making evs in China and then exporting to other markets.

But it's like increasingly there are difficult vulnerable as the global trade attention kind of escalated, So right now they're increasingly moving towards the local manufacturer.

And then when it comes to local manufacturer also different ways.

Some are contract manufacturers, some are building up their own factories from the scratch, so it was like really divergent ways, but I think generally we do see that still relying on export simply because the manufacturing skill in China is hard to replicate in other markets right now, but also increasing to tap into the local production opportunity in response to terror but also to some of the local production incentives.

I imagine it's not just the capacity that's hard to replicate, but also the skilled workforce.

I imagine, Yeah, it's a lot of skill.

It's definitely first and most important, but also like the skilled workers in not only automaking, but also like in battery in electric motors, those along the EV supply chain.

Because also China make up like about eighty percent of the battery seale manufacturing capacity, so if you want like a EV maker, you definitely have to be move closer to your your battery suppliers.

So that's one of the records as well.

So what I'm taking from this is with all these challenges around you know, trade, Chinese electric vehicle manufacturers are pushing to have international production capacity, but there's like a limit to how far they can realistically go with that.

Is that a fair takeaway from what.

You're saying, I think right now, it's more of a tapping into like some of the emerging markets like Southeast Asia, Latin America like Brazil, as well as some of the European countries.

So they start small in EV manufacturer like companies like Cherry, which they start with kind of contract manufacturing, whereas complex bid they use their own kind of capacities.

But would it take time that international presence.

The reason I'm thing about this is this global raising of trade barriers happened so fast.

You know, a change of president in the US had a huge impact, and maybe it could go away just as quickly within a different set of political winds blowing.

I mean, obviously if it doesn't, then those will be good long term investments.

Maybe this is me being unrealistic.

If we move back to a world where the trade barriers come down again, then it'll be back to manufacturing in China, because there seems there seems to be no good reason for Chinese EV manufacturers to have international operations except for because of trade restrictions.

I think trade is definitely a key enabler into why Chinese automatics are moving production overseas, but there's also other reasons.

I would say general like European market there are still encouraging the EV industry development, but there's like incentive, there's incentive, but also like generally like these are the markets I think there's still see that's as important or as still transition to electrification.

Some of the emerging market like Thailand and Indonesia, they already have like quite established auto manufacturer and the local governments also want to be a new champion or new leader in EV industry, so they are attracting investments that are from like Chinese automakers.

I mean, whilst we're talking about where the capacity is going to get built in the future and where it's emerging in the different strategies, So what's the importance of supply chains and sort of having really established supply chains, and I mean, how do Chinese TV manufacturers position themselves in this regard.

So definitely a lot of the movements are coincided with the global expansion of the Chinese battery industry as well, so computiues like ctlps they're also building new battery factories overseas, so that bacterily encouraged Chinese automakers to set up factories nearby or in the vicinity.

And similarly, like because batteries are such a core component to these kind of the movements of supply chain where the geographic movement the battery become quite important.

There's also other y like electric motors, like electronics.

These are things that of core to evs, but for others like for example, like sea belts, some of the interior.

These are things that components are largely can be sourced locally or relatively to set up like a local assembly shops.

Got it.

So there's this sort of hybrid where the core components might be getting manufactured in specific regions and clusters within China where the industry is really established, and then the details can be taken care of locally.

Yeah, exactly.

Yeah.

I think it's like it's similar to ice, like internal combattion vehicle.

You always building your engine, your transmission kind of west nearby, whereas for others like you can take it from overseas or other readers.

And we've mentioned a little bit the growth of the international market and Chinese players there and the localization of industry.

I mean which countries specifically are we talking about here?

So I think market wise, Europe is still the most important market for Chinese automakers.

It represents almost half of all the Chinese automakers oversea cells.

And among Europe, I think countries like the UK is pretty important, mostly because right now UK has a much lower TERRORFF compared to the European Union.

So since like European Union in the last October, it increased the terrors of China made better electric vehicles, and also UK has like some local incentives, so that also pushed the domestic brand as well.

Outside of Europe, there's also increasing focus on the emerging markets like Celsias, Asia or Latin America.

These are markets that are relatively small in size, they're less competition, and there's also more willingness to accept like foreign brander or Chinese brand.

So Chinese automakers are almost eighty ninety percent of all passenger vehicle cells in countries like Brazil or Thailand.

I've mentioned a few times so far her in the podcast that normally when I'm talking about electric vehicles either with people from the US, Europe and they're looking at it from the perspective of those industries.

The challenge that those industries face that they have to overcome is how do they compete with the Chinese electric vehicle industry.

Now, if we turn it around and you know, today we're talking it from the perspective of what the Chinese electric vehicle industry is up to.

A China is a protagonist in the Chinese electric vehicle industry's story, what is the challenge that they face?

Because when I'm looking at it from the other perspective, it always just looks like the Chinese electric vehicle industry is just well positioned to win.

But I'm sure that when you're looking at it from the perspective of the Chinese electric vehicle industry, it's not that simple.

It's not that easy at this stage.

So what are the things that people in the industry are concerned about, the fears, the challenges, the things that could make life difficult for some of these companies that we're talking about.

Absolutely, first, it's that the because the market's already fifty percent of new cars, that was quite established, and then the growth of cells become to slow down a bit, so because some of the segments already getting saturated.

And then like the meaning a small car we talk earlier, that's already one hundred percent electrics.

So they're not really much of a growth story there.

And also like because the demand is slowing down, the question lies on the kind of the suppli set where we do see their successive supply in auto manufacturer and EV manufacturing the country.

So the plant utilization has been dropping.

I think last year it was about forty eight percent, which very unhealthy rate.

So typically it was like for automaking that's like seventy eighty percent.

That's more of a health big rate for plant utilization.

That's also kind of a reason why these Chinese automakers are trying to push overseas to improve their capacity utilization as well.

I mean, sorry, just to try and understand this picture.

We mentioned the start.

Having this huge market for electric vehicles locally is a huge advantage for the Chinese industry, but it's almost like that card has now been played.

They've reaped the benefits of that, and so now they have to figure out how to move to the next stage beyond that.

When you talk to the non Chinese EV players, they would say what's the biggest channel and just say it's competing with Chinese EV manufacturers.

And then based on what you're saying, if you say to Chinese EV manufacturers.

What's the biggest challenge you face.

It's competing with.

Chinese exactly exactly, and.

That the over capacity you're mentioning is is maybe a part of that because I've been ramping up capacity because the market's always been ramping up locally and as it's so suddenly they have to look abroad.

Is am I understanding you?

Right?

Yeah?

I just think that the market has developed to a certain stage that it faces that kind of similar problems like for example, ice vehicles.

So they're like the overcapacity, the intense competition, like price competition, those sort of things.

It's inevitable.

It's not really kind of a niche market, just like they have to face those channels and try to improve their profitability along the way.

Rights it's moving on from growth growth, growth to profit, which you know, I so many industries you've seen this where like you can expand and shareholders are happy because you're expanding for the future, and then when you reach certain of maturity, then you expected to make a profit on a consistent basis.

Do you think we will see some consolidation then in the future.

I think that's inevitable.

I will say smaller player will be a squiz out or kind of maybe it'll be acquired by larger automakers, because right now there are over one hundred I think at least one hundred automakers for a single market.

That's like way too many.

Do you see any parallels with the Chinese solar industry, because it seems like the Chinese solar industry, it went through that whole thing of growth, nobody internationally could compete with it, so then China became the dominant industry.

But I think it's fair to say that companies in China have now been I think they struggled with that maturity phase.

I guess is that like the companies still find it hard to make a profit because it's still so competitive.

Do you think that might be the fate of the electric vehicle industry, that it might be too competitive for its own good?

Or do you think that it's going to be able to reach that?

And I realized it's vehicles are a lot more complicated than solar modules, So it's not a perfect analogy, I'm not, but but is there is there a parallel?

Is there a lesson that can be learned there?

I think in terms of the kind of competent landscape.

There are definitely some parallel comp draw to like solar or badgery industry, which also in that phase of competition.

I guess like for all the industry person is that first it's it hasn't really reached that high level of maturity or high level count development, so we're not talking about fifty percent.

But against that, there's still like forty fifty percent of a market yeah, for them to penetrate.

And then also is that they're not really kind of a single players or a few players that can really dominate the market.

We do see some of the leading prolects a bid or really their grown market shap but against like the smaller players just still have a phase to to compete.

So I think probably we always see it's the next two or three years that will be really intense competition and force us the market to consolidate.

But who are going to win or not?

I think that's still too early to tell.

See, this has been a really fascinating chat.

I think it's it's been so refreshing hearing the the sort of the perspective of the Chinese EV industry.

Like I say, because we always look at it the other way and even though it seems to be on the path to success, the path to success doesn't necessarily mean everything is easy or simple.

I would also say I really want a Mini EV having heard that description, firstly because I can afford one, unlike a lot of other electric vehicles.

But they just sound so cool.

I mean, maybe this is wishful thinking that they'll be available in the US anytime soon, but maybe they will.

But thank you so much for coming and sharing your insights today.

Thanks Tom for.

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