Automobiles Is China in the driver’s seat for the EV revolution?

Following our battery teardown analysis, we now ask: Can China lead the electric vehicle (EV) revolution? As Chinese carmakers continue to roll out competitive EV models and develop a diverse ecosystem, we believe it is heading towards disrupting the current global auto industry landscape. Today Chinese firms produce 72% of the world’s solar modules, 69% of its lithium batteries and 45% of its wind turbines. Compared with its 10% of global combustion cars, its 30-40% in EVs suggests it could potentially become a disruptive force in EV revolution. While several Chinese companies should become strategically important, global auto companies would further rely on China supply chain and R&D, in our view

We see Chinese EVs have increasing competitiveness in driving range (+75% since 2018-2020), powertrain efficiency (80%+ battery-to-wheel efficiency), battery energy density (180kw/kg+ on battery pack), cost (c.10% cost cut y/y) and even intelligence features. This is a result of promotive industry policies, efficient supply chain, tech-savvy customers and entrepreneurial tech giants. While numerous companies could fail, survivors would evolve faster than elsewhere.

We build four scenarios of global EV landscape by 2030s, based on different factors such as brand acceptance, subsidies, etc.

1. Dominance: Chinese carmakers takes up 40-50% global EV market share.
2. Division: Chinese and western companies dominate their own home market.
3. Follower: Chinese companies are not competitive; foreign marques maintain dominance.
4. Cooperation: China manufactures for global auto companies who own technology and branding.

But even with different beneficiaries in different scenarios, the current development trend seems skewed towards dominance. In our base case, we estimate China EV sales grow from 1.1m in 2020 to 14m in 2030, indicating a 30% CAGR.