[China's Electric Vehicle Invasion] 'Fake Car Stigma Is a Thing of the Past'... Why Are People Falling for Chinese Cars?

[why&next] China's Electric Vehicle Boom Triggers Major Shift in Global Auto Industry Landscape
Domestic Sales Up 125.3% in First Half
Competitiveness Boosted by Chinese Government Support
Rapid Growth Driven by Domestic Market Scale Economy

[Editor's Note] "Internal combustion engines couldn't catch up, but electric vehicles will be different." vs. "Chinese-made vehicles have yet to be proven on the global stage."

Perspectives on China's rise in electric vehicles (EVs) are sharply divided. While some view China as having shifted early to EVs and built up strong capabilities, others see many shortcomings beneath the surface. China's EV industry has grown its scale backed by a massive domestic market and is now ready to expand globally. The global competition for leadership in the future mobility industry is also showing a different pattern than before. This article examines the background behind the success of Chinese EVs and looks at future prospects.

[Asia Economy Reporter Seong Giho] The label "Chinese cars are unsafe" has long followed Chinese vehicles. While rapidly growing in the world's largest domestic market, Chinese cars often caused problems overseas due to inferior quality. The perception that "Chinese-made products are unreliable" led to their thorough rejection.

However, as transportation rapidly shifts to electric vehicles, perceptions of Chinese cars are changing dramatically. This is due to massive government support and investment that have enhanced technological capabilities. Based on technology, Chinese manufacturers boldly removed the "Chinese" stigma and attracted consumers with overwhelming price competitiveness. Chinese cars have gained a reputation as cost-effective vehicles and are standing out in the global EV market. China's dominance of batteries, a core component of EVs, is also seen as a key factor in their success.

Chinese EVs Increasing Presence in Domestic Market... Now Eyeing Sedans

According to the Korea Automobile Manufacturers Association's "Analysis of New Vehicle Registrations in the First Half of This Year" report on the 26th, Chinese imported cars sold a total of 5,112 units in the domestic market through June. This represents a 125.3% increase compared to 2,269 units in the same period last year. While sales from major countries such as Germany (-2.9%), the United States (-22.6%), and Japan (-25.8%) declined, China was the only country to record growth.

In particular, commercial vehicles such as trucks and buses, as well as electric passenger cars, are selling well. Imports of electric vehicles from Chinese brands like Polestar, an EV-only brand under Geely, and China-produced models of global brands such as the IX3 (BMW) and S90 (Volvo) have increased, reaching 3,400 units?an 83.9% increase compared to the same period last year.

Chinese EVs are enhancing their own brand technology and threatening domestic brands. BYD filed six trademarks domestically between April and May this year, including Seal, Dolphin, Atto, Carpe, Fari, and Halo. The Seal is expected to be the first model launched.

The Seal is a sedan developed by BYD in China to compete with Tesla Model 3. It is equipped with up to two motors, either single or dual motor configurations. As a result, its zero-to-100 km/h acceleration time is 3.8 seconds, and according to the CLTC standard, a Chinese government measurement method, it can travel up to 700 km on a single charge. Notably, the most affordable model starts at 220,000 yuan (approximately 42 million KRW), offering strong price competitiveness.

Competing on Price Competitiveness, Recently Gaining Attention for Technology

China's competitiveness is rising rapidly because the automotive industry paradigm is shifting quickly from internal combustion engine vehicles to electric vehicles. Supported by a huge domestic market and government policies, China has grown into the world's largest EV market. Chinese EV companies are threatening the global EV market with a variety of models, battery technologies, and affordable prices.

Small Electric Cargo Vehicle Masada

The greatest competitive advantage of Chinese EVs is price. For example, the small electric cargo vehicle Masada, launched domestically in April this year, is priced between 37 million and 38 million KRW. With maximum local government subsidies, it can be purchased for 14 to 17 million KRW, about 10 million KRW cheaper than comparable domestic models. Chinese electric buses accounted for 48.7% of the domestic market in the first half of the year. The import price of Chinese electric buses is set at 150 million KRW, which is half the price of domestic electric buses priced at 300 million KRW. With subsidies of up to 70 million KRW, the price gap widens further.

The price competitiveness of Chinese EVs is also due to the cost of batteries. The new Kia Niro EV, launched in June, is equipped with batteries from China's CATL. The Niro EV is priced around 45.3 million KRW, with the battery accounting for about 21 million KRW, or 40% of the total cost. Assuming Chinese batteries are up to 40% cheaper than domestic ones, this results in approximately 8.5 million KRW in cost savings.

Hyundai Motor Group, the top domestic automaker, using Chinese batteries indicates not only price considerations but also the improved technology of Chinese products. In June, CATL unveiled the "Qilin battery," which applies cell-to-pack technology by omitting modules and assembling cells directly into packs during manufacturing. This battery is planned for mass production next year and targets high-end EVs. The Qilin battery features significantly improved space utilization, raising energy density to 255 Wh/kg, enabling a driving range of 1,000 km on a single charge. It also supports fast charging up to 80% in 10 minutes.

Following the Qilin battery announcement, CATL revealed a next-generation lithium iron phosphate (LFP) battery in July, with plans to launch it next year. The driving range per charge is reported to exceed 700 km. Although LFP batteries have lower energy density, they are relatively inexpensive and safer, attracting attention from the automotive industry. CATL emphasized that the new battery's energy density reaches up to 230 Wh/kg, close to the 250 Wh/kg density of ternary batteries, while manufacturing costs remain similar to LFP batteries, offering excellent cost-effectiveness. It combines both price and performance.

Chinese Government Support Began in the 1990s... Core of 'Made in China 2025'

The rapid growth of China's EV market is largely due to government support. The Chinese government began planning for the industry in the 1990s, even before the concept of electric vehicles was established. Since internal combustion engine vehicles were already dominated by advanced countries, China chose to pioneer a new market instead. The plan also aimed to address worsening air pollution and reduce oil dependency for energy security.

According to a report titled "China Electric Vehicle Market Trends" by KOTRA, "Since 2016, China has imported almost no electric vehicles from abroad (especially from the U.S.), and the vast majority of EVs sold in China are produced domestically. Therefore, South Korea also exports very few electric vehicles to China."

CATL's Kirin Battery

In 2011, the Chinese government designated new energy vehicles?including electric, hydrogen, and plug-in hybrid vehicles?as one of seven emerging industries and began providing subsidies to accelerate related businesses. The "Made in China 2025" plan announced in 2016 also prioritized new energy vehicles. Thanks to this support, China gained overwhelming competitiveness. In 2020, consulting firm McKinsey ranked China first in EV industry competitiveness, ahead of Germany, the U.S., and Japan.

The growth of IT and battery sectors, central to the mobility industry, has also been remarkable. China developed the mobility industry based on its giant IT companies. Mobility has been integrated into big tech platforms such as Baidu, Alibaba, Tencent, and Huawei. China also produced CATL, the world's top battery company.

Despite this, China continues to invest. As of 2020, Germany invested 59 trillion KRW, Japan 33 trillion KRW, followed by the U.S. (30 trillion KRW) and China (12 trillion KRW). All major countries invest significantly more than South Korea (8.6 trillion KRW).

Lee Hang-gu, a research fellow at the Korea Automotive Technology Institute, said, "All global automakers have announced plans to establish software-based electric powertrain connected car production systems by 2026, making the next four years a critical period for determining future car competitiveness. It is urgent to foster future car ecosystems and expand R&D investment."