As Ola Källenius, CEO of Mercedes, recently said at a dinner speech in the Black Forest: "There are around 100 Chinese e-car manufacturers. Hardly any of them are making money and many will not survive the next few years."
However, this also raises the question: what does the future hold for European e-car manufacturers in the next ten years?
In China, the world's largest car market, the share of European brands has fallen steadily from 60% to 40% year on year over the last five years. At the same time, the Europeans have also failed to gain a foothold in the booming Chinese market for battery-electric and hybrid vehicles.
The figures make it clear: China produced a total of 26.7 million passenger cars in 2024 and Germany 4.1 million units. Of these, 12.5 million were NEVs (BEV + hybrid) in China and 1.4 million cars in Germany.
"The Germans are often too slow."
BYD Vice President Stella Li told Automobilwoche. This also refers to the development times for new models. Whereas in the past it took around four to five years to develop a much more complex combustion engine, the new target is now < 40 months. In contrast, Chinese manufacturers and Tesla have a development time of 24-30 months.
"Our common enemy is the combustion engine." With this statement, Head of Europe Stella Li makes the direction clear. BYD sold 4.27 million new electric vehicles (NEV = BEVs + hybrid) in 2024, of which 1.76 million were e-cars (BEVs). The target for 2025 is 5-6 million vehicles sold, which would overtake the core brand VW with 4.8 million vehicles delivered (electric + combustion engine).
With planned production plants in Hungary (production ramp-up at the end of 2025) and Turkey and possibly in Germany, BYD wants to circumvent possible customs barriers and trade obstacles.
Five influencing factors that make Chinese e-car manufacturers successful
1. vertical integration (all in-house)
As part of global sourcing, more and more components and services have been 'outsourced'. True to the motto 'Everyone does what they do best', companies such as Volkswagen have taken this to the extreme. Negotiating, organizing, controlling and managing prices was the order of the day.
In 1995, chemist Wang Chuanfu founded a small factory with 20 employees in Buji Town, near the Chinese city of Shenzhen, where initially only rechargeable batteries were produced. Competition came from companies such as Sony and Sanyo, which dominated the market at the time. In 2003, the company entered the automotive industry by taking over the ailing company Xian Qinhuan Automobile. Today, BYD employs around 900,000 people and has a turnover of 100 billion dollars.
The concept is vertical integration, with all parts, e.g. the volume model BYD Seal with the exception of the windows and tires, being manufactured in-house(Fig. 1). This includes the powertrain domain controller, the BYD Blade LFP battery, the on-board charger and, last but not least, the PM synchronous motor. This ensures a consistent level of quality, closely coordinated components and high logistical availability as well as maximum added value and the retention of profits in-house.
The Volkswagen MEB powertrain platform for the ID.4(Fig. 2) is completely different. More than six manufacturers supply the components, including Bosch for the high-voltage DC/DC converter, the Korean battery manufacturer LG for the expensive Li-ion technology, Huber Automotive for the battery management system (BMS), Siemens and Valeo for the inverter, Kostal for the on-board charger and Euro-Group for the synchronous motor.
Fig. 1: BYD Type Seal - e-Platform 3.0 8-in-1 Powertrain
Fig. 2: Powertrain-MEB platform for the Volkswagen ID.4 with at least 7 third-party manufacturers
2. smart design
Tesla has already shown what a design with fewer body parts, for example, looks like and how these can be produced using mega-casting. The same applies to the electric Drive, the vehicle platform with a 12-in-1 design with motor, control system, BMS, charger, inverter, etc.
3. scalability
Standardization on a 100% e-car platform that can be used as the basis for various model series. This realization has now also been accepted by European car manufacturers. However, European luxury car manufacturers such as Mercedes, Porsche and AUDI are pained by the Chinese approach of first building successful electric cars in mass production and then building on this to penetrate the luxury segment.
4. battery innovation
Another success factor is the global market leadership in battery technology. CATL has a global market share of 38%, followed by BYD with 17%. Blade technology and the triumph of the lithium iron phosphate battery (LFP) in almost all newly designed Chinese e-cars are another factor, as is CATL's third generation of cell-to-pack technology (CTP). CATL operates 13 production plants worldwide, is currently setting up 100 GWh production in Hungary and is planning 50 GWh per year production in Spain in 2026.
Fig. 3: The BYD blade battery in lithium iron phosphate (LFP) technology offers improved cooling and pre-heating efficiency, slower heat build-up, low heat emission and no oxygen release compared to round batteries. The blade battery passes the nail penetration test
5. economic promotion by the Chinese government
The support ranges from the targeted promotion of innovation and cooperation between individual manufacturers to the strategic securing of raw materials in African countries. In addition, loans and tax subsidies worth $29 billion were provided between 2009 and 2022.
In a nutshell
- China produced a total of 26.7 million cars in 2024 and Germany 4.1 million units. Of these, 12.5 million were NEVs (BEV + hybrid) in China and 1.4 million cars in Germany.
- Vertical integration in order to generate as much added value as possible in-house is the trend among Chinese e-car manufacturers such as BYD. In contrast, outsourcing is the trump card in Europe, where the supply chain is becoming increasingly difficult to manage.
- Smart design and scalability as a construction principle has already been demonstrated by Tesla and is being consistently pursued by Chinese car manufacturers.
- Battery innovation, because that is the heart of electromobility. More than 20,000 employees work in development at global market leader CATL.
With targeted economic development, China has become a world leader in electromobility. It is an intermediate step and part of the Chinese Vision 2049:
- 'Made in China 2025': high-quality skilled production capability in China
- Intermediate goal 2035: globally leading production capabilities in defined target industries
- Goal 2049 (100 years of the People's Republic of China): leading global economic power for electromobility and other target industries
The Chinese government knows what it wants. And what about us?
I wish you a creative start to the 2nd quarter.
Let's stay in touch.
Best regards
Yours
Hans-Joachim Friedrichkeit
