Name: Innovation Forum 2024: Winning The Global Ev Race
Uploaded: 2024-03-27
Duration: 17 min 19 s
Description: Roger Atkins, Founder, Electric Vehicles Outlook (Appearing Virtually) Christopher Beddor, Deputy China Research Director, Gaveka Paul Gong, Executive Director, Autos Research, Ubs

Roger Atkins, Founder, Electric Vehicles Outlook (Appearing Virtually) Christopher Beddor, Deputy China Research Director, Gaveka Paul Gong,  Executive Director, Autos Research, Ubs

Innovation Forum 2024: Winning The Global Ev Race

Conferences

Innovation Forum 2024: Who’s Winning The Global Ev Race?

Hey, everyone, very excited about this panel. I think we all kind of woke up to uh the strength of the Chinese ev sector in the past year. Um I want to start by by pointing out two milestones and the first milestone I would like Chris to respond to last year, China became the world's top auto exporter beating out Japan how much of that is due to evs uh it's basically fully an EV story. Um So the story of China's auto sector is basically that prior to about 2021 the entire industry in terms of production was actually on something of a slight down slope. Uh And then the EV transition happened. So I realized that most people have just kind of attuned to it over the past year or so, but it's actually been going on since about uh you can date it at various points. But we, we take about 2021 as really the the key moment and that growth has been almost entirely from EVs. Uh So what you're looking at is every single year, consumers within China have bought about 2 million more evs than the previous year. Give or take. Um at the same time, uh industrial internal combustion engine vehicles have actually been in decline. The transition has been so rapid that many of the legacy automakers are actually left with excess spare capacity. So they've been started exporting that abroad. So the exports start again around 2021 is when you start to see the increase. And that's es which has caught all the news, but it's also just legacy it vehicles as well. So where we are right now is sort of the inevitable discussions about. Ok, well, have we been producing too much? Is there excess capacity? How many price cuts are manufacturers going to have to give? Uh is there going to be market exits? And then of course, abroad, you're seeing the discussions about what do we do with these extremely competitive Chinese evs and I want to bring in Paul now and I want to thank Paul for giving us your time as you're heading to the airport later today. Um But I want to ask you about the other big milestone last year, which was Byd, beating Tesla as the world's largest seller of battery electric vehicles. And that's specifically saying that because I know in terms of all electric vehicles that beat Tesla ages ago, but, but you know, is Byd just built different, what is it about this company that's made it so successful? Yeah, sure. Um Well, at U Bs, we like to tear down ev five years ago, we had the Tesla Model three tear down and we were shocked how much Tesla was ahead in terms of technology leadership. It was several years ahead. But last year when we had the by DC O tear down this time, we find basically there is little gap of the technology but just different priorities. For example, the Tesla will might prioritize the top speed byp has a bigger space. Tesla has better autom driving a function while BYP has five G connection and the infotainment system that is better. But more importantly is when we find this BYD built by BC O which is highly comparable to the model three as a medium size, its cost is about 15% lower even than the Tesla Shanghai factory production. Thanks to the system integration, thanks to the smart design. And so we were shocked how fast Boyd has caught up in terms of this gap. And behind of that at the moment of our TRB ID has 70,000 R and D engineers as a comparative Tesla has 120,000 total number of employees including workers and sales people. And they recruited another 30,000 last year from the fresh grad. And yesterday, the report is fine annual report that was 100,000 R and D engineers that is the biggest team in the world and almost fully dedicated within the EV and the supply chain. Um I want to bring in Roger for this next question because we talk a lot about EV companies, car makers, but there's more into the car than just, you know, the car, there's components and there's the batteries. Um How is the battery making sector being transformed by this big EV boom? Uh Well, good evening everybody. Hello, Nicholas and, and to add to my panel, um my fellow panelists this all began actually in really 2015 or a little bit before it was all part of the made in China 2025 ambition. And at the heart of that indeed is the battery. Uh So if you look at how China has developed the one thing they've done incredibly successfully as have Tesla is vertical integration is the ability to have the ecosystem which is very much centered around the battery. So when you look at the development in China of companies like Byd, like CATL, like a number of other key companies that's at the core of why Asia now in general, because you've seen similar activity, of course in, in South Korea and in Japan, um very much to a lesser extent, but certainly more advanced than, than Europe. So Europe now is playing a frantic game of catch up and the vertical integration isn't just about making a battery. Of course, there's the downstream and upstream sides to both of those things and the critical minerals focus again that China put into that made in China 2025 plan is at the heart is at the core of where this all is. So I would say it's about having long term strategic thinking, it's about having vertical integration. And then the other core part which is only now emerging is joining up the renewable energy revolution, new energy with electric vehicles, with the battery in the middle. So the battery then becomes part of that system if you like it enhances both new mobility and new energy. And I think it's quite, it's quite useful in many ways that the Chinese call their electric vehicles, new energy vehicles, not ev si think that's a very, that's visionary quite frankly. So II I do want to stick on this topic of industrial policy. You know, EVs are now one of it's like solar, it's like wind, it's an area where China made a very big long term bet and it appears to be successful. Um But now you know that they're starting to withdraw support, Robin Zung was to the media talking about how the market to be much more market driven going forward. You know what as Beijing kind of changed its approach to the sector, how is EV is going to change, going to be in the next few years and maybe Chris, you can, you can take that question. Yeah, I think that so where we're at in this movie right now is that you do hear a lot of talk within the government about the potential for, maybe there is excess capacity and maybe we do need to take some steps to, uh, to address that. So, some of the things that the government is doing at this point is, uh, they've already removed cash subsidies. Um, they are capping the, um, the exemption that you get on auto taxes and they're going to lower that. So basically taking away incentives uh that they had put in place and Paul is exactly right. This is essentially a creature of industrial policy at some level. Um But at the end of the day, I mean, what's happening here just like you said, it's happened before with solar. Um and it's happening now with evs, uh China is essentially doubling down on industrial policy. Um EVs are kind of the topic of the moment, there'll be something else, uh you know, after evs um and ultimately how this resolves itself is uh through, you know, prices going down market, clearing and so forth, some manufacturers will probably exit the market. Um So I think that we're, we're sort of like midway through this movie. Um But I think we still got a ways to go. Um I want to go back to you Roger. Um You know, again, the headlines right now, the discussion about companies invest a lot in evs, but now maybe there's some overinvestment of overcapacity, uh dealers in the US are complaining about ev staying on lots. Um And we've seen this cycle before where in the cycle do you think we are in terms of ev demand and, and customer um interest in evs? I really, that's at the heart of this, this whole arena now. I think it's a great question. Um, cycles, you know, we've seen many cycles in human history, you know, in human history, the rise and fall of empire, um economic cycles, the previous panel was talking about where we are, you know, Japan interest rates, the global economic system and yeah, cycles are what they are. And within the automotive industry, I've been in that 40 years, half of that time has been in and around electric vehicles. I've seen a number of cycles but the two big differences, I think now that sit over what happens next are climate change because that hasn't happened at all in human history before. So that cuts right across a number of these cycles, how they work and why they work. And then the other one a bit as the panel were alluding to earlier is demographics, an aging population changes so much. So my personal view, I suppose it's a professional view because that's kind of what I do. Um is I don't think massive option of electric vehicles should or will ever happen. And the reason for saying that is I think the the bigger shift is going to be towards the artificial inspired um uh driverless vehicle technology, uh ride sharing, etcetera, etcetera. Because if you combine an increasingly urbanized city based global population as an aging population with a number of other factors which I won't go through them all. And I think it all leads you down to that. What's that phrase? Uh Necessity is the mother of invention? Um, so I, I don't think we're ever gonna see mass adoption of evs because I don't think that the global car market of 80 million a year is ever gonna be that big again. I think it's gonna come down to 70 60 50 40 million because we'll have, we'll just share more because we have to and I, I want to ask a similar question to you, Paul. Um looking at China specifically, you know, the China Car Association, I believe they're predicting 25% ev growth this year compared to 36% last year and 96% the year before that. So slowing down. Um What does that mean for China's EV sector? You know, a lot of these loss making companies, there's profitability concerns, there's a price war going on as ev growth in China slows, what does that mean for the industry? Well, I mean, from the growth rate point of view because nowadays you have a bigger base. So it seems that the growth rate might slow down a little bit, which might not necessarily be the case because you are going to have another rebalancing of the pricing and the declining of the DC M price as well as the supply chain efficiency. Again, that could bring the UV back into the competitiveness versus the ice car. Again, um What we are seeing is uh the penetration rate continues to raise B to high single DJ or about 10% every single year. And uh the growth slowdown is more like a de or base rather than really a significant slowdown. I think there is a huge difference between China versus the Western market right now. What we are saying is in Europe and in us, the subsidies or the uh is either existing in Germany or tightening in France or us. But in China, the carmakers has really brought down the e cost back on par versus the ice and the introduction and the market competition has made them so competitive that it is indeed going to be fully. Yeah. Uh you know, another, another question for you, Paul that we were talking earlier, you know, there's this, there's this big battery electric vehicle versus hybrid vehicle debate um in the global ev sector, you know, everyone talks about Toyota made this big kept with hybrids, everyone made fun of them and now they have record sales. Um What's the EV versus hybrid discussion like in China? Um It's more or less really leaving to the market to design. Uh Just now. Um Roger has emphasized the made in China 2025 the government policies, but I think what has been underappreciated in this market is really the market for the competition. When you consider that the US is like 1 million a year. Tesla has more than half the market share in Europe. You have Volkswagen and these traditional car makers. But in China, Tesla is just 10% out of this 9 million units, Volkswagen. Less than 5% 85% of them are Chinese, the start up the incumbent transformation, the joining of the tech giant all in this fierce competition. And of course, not everyone is going to make but the excited it is this a market force that has bought the innovation efficiency again. And when you mentioned about this planing hybrid, actually, the government never plan the extended range electric vehicle, never in the plant, but it was the the auto that bought this and it was a market force that brought this into the center stage. Um But Nicholas can I just say in terms of cycles, we've been here before. Um history teaches us a lot in the United States when Henry Ford initiated the internal combustion indus industry uh for a number of decades. In the 19 twenties and thirties, there were hundreds and hundreds of car companies just like there've been lots hundreds of electric vehicle companies in China. And what happened is over time, they all, they all diminish because and then you know, the cream rises to the top that happens. And also what we've seen before was when China uh Japan had its export onslaught into the United States and Europe back in the 19 seventies and eighties. Um the Europeans then the Americans as well uh imposed tariffs. And then the way the Japanese got around that was to embed facilities, production plants in those locations. We're now already seeing that with Byd in Hungary, for example, building batteries. So, so if you like the play, we've seen it before. This story, this movie that my friends have. Uh I like the description, by the way, movie we've in these scenes before different access, same scene. Um It's good, you mentioned be waiting hungry because um there is obviously this like overseas expansion in terms of sales and in terms of manufacturing, that's potentially triggering a protectionist backlash in Europe in the US, potentially even like Brazil, you know, very quickly, Chris, I mean, should China's Ed companies be worried about this backlash or will it just kind of play out? Ok. Oh, they should be, I think they already are. Um So there's protection is upcoming. It's really just a question of how much. Uh so I think the focus right now is of course on the EU um and its anti subsidy probe into Chinese uh Chinese autos. Um Also, you're hearing noises from the Biden administration as you mentioned, Brazil. Um So it's really, I mean, we, we basically agree with consensus that you'll see more tariffs saying in the Eu um that said, I think that, you know how they're responding in terms of locating more production facilities abroad. That's the right way to go. I also think that the key factor is going to be the demand in other emerging markets. And there, you've got a really mixed picture. I mean, you've got a group of countries like uh like South Africa, like Indonesia that maybe don't want to scrutinize Chinese imports too much because they sell other things to China. You've got a group that maybe uh like Russia depends on China for other needs. Um So really, once you go through all that list of emerging markets and think through what are the protectionists like, how likely is that? Is that to be uh you get a very, very mixed picture. Final word Chris, very quick. We talked about China having an industrial policy playbook for solar for wind, for evs. Are we going to see it again in another industry? Yes, that's, that's the easiest question you asked. Uh um So I think uh just, just my two cents would be like uh I think that China is currently doubling down on industrial policy. I think that what you're seeing in EVs is of course a story about Chinese CV S and EVs more broadly. Uh but it's also a story about how China conducts industrial policy. Um as Paul mentioned, there is a lot of market forces in there, but there's also a tremendous amount of, I mean, it's a Leninist system, you know, the, the central leadership will say we want to target a certain industry. Everyone focuses on that it's conducted in a campaign style. They go forward at some point. There's a recognition we've gone too far. They pull it back. I think we're currently sort of in the process of that for evs. But the key is that what you're seeing in evs is just a preview. So they're doubling down, there's gonna be more to come. Um So can I just say, I think this whole thing is about energy, it's about resources. It, it always has been, that's the way the world's always worked. So I think the battery and this marriage between new mobility and energy. That's the key. Yeah. So we're at the end of our journey for evs and we should charge ahead to our next session. But before that, I want everyone to thank Chris Paul and Roger for joining us today.