LAUNCESTON: China's dominance of global electric vehicle production and sales is an established fact, but a new International Energy Agency (IEA) report points to the country extending its influence in autos across the fast-growing economies of Asia.
The IEA's Global Electric Vehicle (EV) Outlook 2024 report, released on Tuesday, shows that China accounted for 60% of all EV sales in 2023, and its rapid uptake will continue, with one in three cars on China's roads in 2030 expected to be electric.
Perhaps more significantly the IEA sees China's influence and lead in EVs spreading throughout Asia as it leverages its vast industrial resources to invest and promote cheaper EVs in countries such as Thailand, Vietnam and Indonesia.
The key to success for China's EVs, when compared to vehicles made in Europe and North America, is cost.
"In China, we estimate that more than 60% of electric cars sold in 2023 were already cheaper than their average combustion engine equivalent," the report said.
"However, electric cars remain 10% to 50% more expensive than combustion engine equivalents in Europe and the United States, depending on the country and car segment," the IEA said.
China is pursuing a different path with EVs compared to Europe and North America, choosing to emphasise smaller and cheaper city cars that can compete, and even out-compete equivalent internal combustion engine (ICE) vehicles.
In contrast, the bulk of European and U.S. EVs have been larger, more luxurious and more costly, with automakers seemingly targeting a wealthier demographic of early adopters of new technologies.
What is happening is that China has built an early advantage in making EVs cheaper and accessible to more people, a strategy that is likely to pay off in Asia.
This is especially the case in countries where switching to EVs, both cars and two- and three-wheelers, enjoys policy support and incentives from governments.
"In 2023, 55% to 95% of the electric car sales across major emerging and developing economies were large models that are unaffordable for the average consumer, hindering mass-market uptake," the IEA said.
"However, smaller and much more affordable models launched in 2022 and 2023 have quickly become bestsellers, especially those by Chinese car makers expanding overseas," the report said.
ASIA EV SURGE
In Thailand, EV sales quadrupled year-on-year in 2023 to reach a 10% market share and the Southeast Asian country has launched subsidies for battery manufacturing and lowered tariffs, which allowed Chinese car makers to increase their presence.
In Vietnam, the IEA said car sales contracted in 2023, but EVs still managed to grow to reach a 15% market share, while in Malaysia EV registrations more than tripled amid tax breaks and import duty exemptions.
India, the world's most populous country, saw EV registrations rise 70% in 2023 from the year before, while overall car sales rose by 10%.
Indonesia is a good example of the combination of policy incentives and the availability of cheaper Chinese-made EVs.
The IEA said until 2019 EV sales in Indonesia were below 100 a year, and this jumped to 17,000 by 2023 as EVs benefited from a Value-Added Tax rate of just 1% compared to 11% for ICE vehicles.
Indonesia also put local content requirements of 40% in place last year in order for EVs to enjoy purchase incentives, and currently only two models qualify.
But more manufacturers are setting up in the Southeast Asian nation, including China's BYD, which aims to build manufacturing facilities to produce 150,000 vehicles, and Vietnam's VinFast, which plans to have a capacity of 50,000 cars per year.
It is worth noting that China's EV sector is facing its own struggles. The state planner expects an intensifying price war amid a glut of supply and new models. China is also facing a European Union investigation on whether to impose tariffs on imports of EVs on the basis that the state has subsidised Chinese car makers, a claim Beijing dismisses as baseless.
Overall, the IEA report shows that China's path of cheaper and smaller EVs is likely a winner in Asia, the fastest-growing region of the world.
It also shows that European and U.S. automakers have substantial work to do to improve the affordability of EVs, and to boost the infrastructure needed to support their widespread adoption.
The report also hoses down some of the worries about a rapid shift to EVs, such as the additional electricity required, saying that the power required by EVs is likely to rise from 0.5% of the global total of electricity generated in 2023 to less than 10% by 2035.
The opinions expressed here are those of the author, a columnist for Reuters. -- Reuters