top of page
Alexandra Dixon

CHINA: HITTING THE GAS ON ELECTRIC VEHICLES

In December 1978, following Mao Zedong’s Cultural Revolution, Deng Xiaoping launched a series of transformative economic reforms that marked China’s bold opening to the global economy. For the car industry, however, this came with a caveat: foreign carmakers could gain access to the Chinese market, provided they formed a joint venture with a Chinese carmaker. By giving domestic manufacturers time to catch-up to European and American rivals, Chinese firms, in time, would be able to operate independently. Or so the theory went. Chinese internal combustion engines never quite managed to outdo Western ones, even in domestic markets.


Enter electric vehicles (EVs), a market that plays directly into the hands of the world’s tech powerhouse. Market power in engine cars has perennially lain with German, Japanese and American manufacturers. But years spent manufacturing mobile phones and gadgets meant China already had the supply-chain infrastructure to dominate a transitioning car industry. The PRC is now pursuing EVs in earnest. In 2019, Chinese manufacturers supplied over 50% of global EV sales.


The removal of the so-called “50:50 rule” in 2018 meant that foreign carmakers no longer required local ventures to gain market access to Chinese consumers. This has been a boon for Tesla, who have since opened a ‘gigafactory’ in Shanghai. This has no doubt given Chinese carmakers a nudge to strengthen their brands and drop prices. This is not to say that Tesla is the mainstay of China’s EV market. It is only really in the West that Tesla has come to dominate our imaginations. China’s EV market is littered with start-ups; its industry is no longer reliant on western IP and instead uses 100% Chinese technology and licensing.


Meanwhile, the global outlook is much the same: EV consumption is set to skyrocket in the coming decades. Britain’s EV sales more than doubled in 2020. China may dominate for now, but as European automakers catch up, their experience with large-scale manufacturing may prove better equipped to meet rising consumer demand.


But where do lawyers fit into all this? It is a big industry to cover, but narrowing in on just one step in an EV’s lifecycle might provide some insight.


- SPOTLIGHT ON: EV BATTERIES -


Sourcing Raw Materials

The most common of today’s EV batteries are a mixture of nickel, manganese and cobalt. A scale-up in mining capacity will be required to meet demand for these metals. Under EU rules, mining companies must meet social and environmental sustainability standards. Meanwhile, China’s rules are more relaxed. This is likely to necessitate greater risk management of EV supply chains, particularly pertaining to conflict minerals and labour conditions. Added to this, is the price volatility of mined materials which could deter investors.


Battery Manufacturing

Market activity has so far demonstrated a tendency towards battery ‘megafactories’, such as those owned by Chinese firms CATL, BYD and Tianjin. With China’s “50:50 rule” relaxed, we can expect to see more foreign firms following in the footsteps of Tesla and trying to capture Chinese consumers. It seems likely that joint ventures within the industry will increase. The EU have already pledged to extend state-aid to encourage cross-border EV battery research, an acknowledgment that joint ventures are essential to keep pace with rapidly developing technology. The rumoured partnership between Hyundai and Apple is just one example. Two ostensibly distinct firms - a technology company and an automaker - will need a seamless partnership in order to develop a seamless product: a car that connects motor, battery and the outside world.


One of the biggest challenges EVs present is their capacity for data-harvesting. Vehicles are becoming mobile data platforms; Tesla’s over-the-air software updates are as smooth as an iOs update on an iPhone. Predictably, this has been a big hurdle for Chinese firms that have their sights set on overseas markets, particularly the US and Europe. We can expect to see Chinese firms looking for cross-border mergers, such as that between Geely and Volvo, an established brand in Europe.


Industry growth is of course contingent on better electric charging infrastructure which, crucially, depends on levels of government intervention. The impetus is certainly there, with growing consumer demand and emissions targets to meet. As incumbents like Volkswagen catch up, it remains to be seen whether Chinese players can maintain their momentum.



19 views0 comments

留言


bottom of page