Editor's note:
In 2023, China's auto export business left a new footnote with 5.221 million units: China has replaced Japan as the world's largest auto exporter. With the arrival of 2024, everything seems to press the accelerator button. At the beginning of the year, BYD's first ro-ro ship "Explorer 1" loaded 5,449 new energy vehicles from Shenzhen to Europe; In the spring of this year, Lei Jun appeared with Xiaomi SU7 and sounded the charge of annual sales of 120,000 units; In the summer of this year, Li Bin and Qin Lihong drove the NIO ET7 on the highways of Europe for a "slow live broadcast".
Chinese automobile manufacturing is not only made for Chinese, but also into a wider international market. The perception is also rich: at the big auto show in Beijing, Shanghai, Guangzhou and Shenzhen, a group of bigwigs from the United States and Western car companies stopped to taste in front of the Chinese show cars; A group of bigwigs of Chinese car companies have called for "rolling in the wider world market, not behind closed doors" in various speeches.
Competition is not only limited to the peers of car companies, but also in the perspective of a higher dimension. The United States and the European Union have successively offered trade protection measures, tariff barriers, and entry thresholds, and have been built one after another, and it seems that a war of containment against "China's cars going to sea" is brewing.
From introduction to going out, how can China's car manufacturing be successful? From industrial layout to policy support, why does the rise of China's new energy vehicles arouse the alarm of Western countries? Is it the ivory burning of the guilt, or is there a suspicion of the great power game? The editorial department of "Trend Capture" launched a series of planning "The Rise of China's Car Manufacturing", and this article is the third article.
Recently, the European Commission released the preliminary results of the anti-subsidy investigation on China's electric vehicles: additional tariffs of 17.4%, 20% and 38.1% were imposed on BYD, Geely and SAIC respectively, and a weighted average tax of 21% was imposed on other Chinese electric vehicle manufacturers who participated in the survey but were not sampled.
In October last year, the European Commission announced that it would launch a countervailing investigation on Chinese automakers on a sample basis, focusing on two aspects: first, whether companies that produce electric vehicles in China and export them to the EU receive subsidies from the Chinese government; The second is whether the import of subsidized electric vehicles originating in China into the EU will cause economic harm to relevant EU producers.
As for the United States, in May this year, the White House announced tariffs on $18 billion of imports from China, including tariffs on electric vehicles from 25% to 100%, and said that the move was "aimed at protecting American workers and businesses".
It is not difficult to see that the most direct and important reason for the United States and the European Union to impose tariffs on Chinese electric vehicles lies in the Chinese government's "government subsidies" for electric vehicles, which is also the biggest controversy. The EU has continued the US argument and has set up one "scarecrow" after another to justify the tariffs, such as the so-called "overcapacity" and the so-called "unfair competition" promoted by a series of industrial policies more generally.
▍Industrial policies promote the rise of new energy vehicles
Industrial policy refers to the government's efforts to shape the economy through subsidies, tax incentives, infrastructure development, protective regulations, and R&D support for specific industries, businesses, or economic activities.
The formulation and implementation of industrial policies is a common practice in all countries of the world, and it can even be said that industrial policies originated in the United States and Europe. According to a report by the International Monetary Fund (IMF), the number of industrial policies as a proportion of trade policies has increased significantly in recent years, especially in advanced economies such as the United States and Europe.
In the history of world economic development, whether Britain has caught up with the Netherlands or the United States has caught up with Britain, whether it is Japan and Western Europe after World War II to quickly complete economic reconstruction, or a number of developing countries have achieved rapid economic development after getting rid of colonial rule, there is no lack of industrial policy.
In a word, as the so-called "help the horse, send a ride", no one is alone, and the "policy nourishment" from the government is one of the necessary conditions for enterprises to thrive.
In terms of developing new energy vehicles, China is not the first country to act. As early as the last century, automobile companies in Europe, the United States, Japan and other countries have begun to carry out research on intelligent technologies such as assisted driving. The first-generation Model S, released by Tesla in 2012, is the world's first "software-defined" smart electric vehicle.
It is undeniable that the rise of China's new energy vehicles is inseparable from the support of industrial policies of governments at all levels from the central to the local government, of which government subsidies have played a very large role.
In 2009, the Ministry of Finance, the Ministry of Science and Technology, the National Development and Reform Commission, and the Ministry of Industry and Information Technology launched the "Ten Cities and Thousands of Energy-saving and New Energy Vehicles Demonstration and Application Project" (New Energy Vehicle Demonstration Operation Project), which was arranged by the central government to provide subsidies for the consumption of new energy vehicles in the field of public services in pilot cities.
In that year, the central government kicked off the prelude to the purchase subsidy for new energy vehicles (referred to as "national subsidies"), and the maximum amount of subsidies for new energy vehicles could eventually reach 50,000 yuan per vehicle. In 2012, the State Council issued the "Energy-saving and New Energy Vehicle Industry Development Plan (2012-2020)", which further clarified the purchase subsidy policy.
However, the subsidy policy is, after all, an auxiliary policy means to promote the industry in the early stage of the development of new energy vehicles. After the market gradually matures, the subsidy policies of the central and local governments at all levels are gradually "declining".
As early as 2016, China's new energy vehicles have begun to start the subsidy "regression" mechanism. After 2018, the national subsidy policy has entered a period of adjustment, and the "threshold" of mileage subsidy for new energy passenger vehicles has continued to rise, promoting the high-end development of the industry. On the one hand, new energy passenger vehicles with low endurance no longer enjoy the subsidy policy; On the other hand, the requirements for battery energy density and vehicle energy consumption are gradually becoming stricter, and they are regarded as important factors affecting the amount of bicycle subsidies.
In the 13 years since the implementation of the "national subsidy" policy, new energy subsidies have gradually "declined". Source: The Paper
According to the data, as of 2018, the subsidy for a single pure electric passenger car has decreased by about 50% under different driving ranges. After 2018, the subsidy for some pure electric passenger cars with a low driving range gradually decreased to zero, and the rest of the models also decreased year by year, and by 2022, pure electric passenger cars with a driving range of less than 300 kilometers will no longer enjoy the subsidy.
Until the beginning of 2023, the 13-year-old "national subsidy" policy will be completely terminated. The new energy vehicle industry, which has experienced a short "painful period", still performed well last year. The increasingly mature new energy vehicle industry has shifted from the initial policy "policy-driven" to "market-driven".
▍The subsidy policy is a common practice in various countries, and Europe and the United States are not small
In the "tariff stick" wielded by the United States and Europe against China's electric vehicles, the core controversy is whether "government subsidies" constitute so-called "unfair competition".
In fact, the United States has subsidized the sale of new energy vehicles in the form of tax credits since 2010. According to Subsidy Tracker, Tesla alone has received more than $2.8 billion in subsidies from the U.S. government since 2007. Japan, on the other hand, has been providing subsidies for clean energy vehicles such as electric and clean diesel since 2008. Germany has also implemented a general subsidy for the sale of new energy vehicles since May 2016. In 2010, the UK government proposed to provide purchase subsidies for electric passenger cars, which was officially implemented on January 1, 2011.
The subsidy policies of some developed countries in Europe and the United States for new energy vehicles not only have a larger time span than China, but also are not smaller than China.
U.S. President Joe Biden signs the Inflation Reduction Act of 2022
In the United States, for example, in 2022, the United States passed the Inflation Reduction Act, which plans to spend $391 billion by 2031 to subsidize clean electricity production and transportation. The bill provides for a subsidy of up to $7,500 per electric vehicle, and in previous years, different states have given different amounts of financial subsidies, with California having the highest subsidy of more than $10,000 per vehicle.
The European Union, which has recently adopted countervailing tariffs against China, has already determined to completely eliminate fuel vehicles from the market by 2035, and its subsidy policy for electric vehicles is even more "generous".
The EU's financial subsidy policy for new energy vehicles was launched in 2019 and began to increase subsidies the following year, with the average subsidy amount of each pure electric vehicle in most member states being 3,000 to 6,000 euros, including more than 6,000 euros for a single car in Germany, 5,000 euros in France, 3,000 euros in Italy, and 9,291 euros in Croatia.
It can be clearly seen that not long after China's subsidies for electric vehicles began to gradually "decline", the EU launched the subsidy policy for new energy vehicles, and China's closure of the subsidy policy window for new energy vehicles is just the threshold for the EU to increase subsidies for electric vehicles. It was not until the end of last year that EU member states successively tightened the subsidy policy for new energy vehicles, but the scale of subsidies that have been issued and the existing subsidy level are still not to be underestimated.
In Germany, for example, the program has paid a total of about 10 billion euros in subsidies for around 2.1 million electric vehicles since 2016, although the subsidy policy was forced to end early on December 17 last year for fiscal reasons, according to the German Ministry of Economy. The data also shows that before 2023, pure electric and plug-in hybrid vehicles under 40,000 euros in the German market can receive subsidies of 6,000 euros and 4,500 euros respectively; Subsidies of €5,000 and €4,000 for plug-in hybrids between €40,000 and €65,000 are available, respectively.
On the other hand, China's "national subsidy" policy for new energy vehicles has already been fully withdrawn in early 2023. What's more, China's new energy vehicle subsidy is not very high: the US new energy vehicle tax credit is $2,500 to $7,500 per vehicle, Germany has been declining but will still reach about $3,200 per vehicle in 2024, Japan currently has the lowest subsidy amount of more than $2,800 per vehicle, and China has less than $2,000 per vehicle before the subsidy is withdrawn.
Even in terms of total subsidies, the subsidies of the EU and the United States are not inferior to those of China. According to statistics from the Ministry of Industry and Information Technology, the central government has issued a total of more than 150 billion yuan in subsidies for new energy vehicles in the 13-year subsidy process, and the total amount of subsidies given to new energy vehicles in China is roughly between 200 billion and 250 billion yuan. In the European Union, although the total amount of subsidies has not yet been disclosed, Germany alone has subsidized about 10 billion euros (about 77 billion yuan) for new energy vehicles in 7 years; In the United States, the "Inflation Reduction Act" clearly states that the subsidies that will be given to the new energy vehicle industry exceed 300 billion US dollars (about 2.2 trillion yuan).
▍ "Subsidy" cannot make up for industrial competitiveness
As the most eye-catching business card of the "new three" exports, China's electric vehicles have captured the hearts of many overseas users, including BYD's "seal", many popular models, are also constantly conquering cities in overseas markets, and have a good reputation among consumer groups.
According to data from the China Association of Automobile Manufacturers, China's vehicle exports in 2023 will be 4.91 million units, a year-on-year increase of 57.9%, ranking first in the world for the first time. Among them, exports of new energy vehicles totaled 1.203 million units, a year-on-year increase of 77.6%, providing global consumers with diversified consumption choices.
However, some Western politicians with tinted glasses do not think so. From enjoying the government's high subsidies to winning the competitive advantage of low prices, it is the basic logic of the EU's proposal to impose countervailing tariffs on China's pure electric vehicles.
By relying solely on state subsidies to explain China's huge competitive advantage of electric vehicles, and to advocate another trade war with China that could have been avoided, some politicians in the EU and the United States may not simply deceive themselves, but deliberately make bad intentions.
The picture shows BYD's "seal"
Taking BYD's "seal" as an example, according to UBS's conclusion on dismantling the seal in 2023, in the same situation, compared with competing products such as Tesla's Model 3, this model has a cost advantage of about 15% to 25%.
Coincidentally, not long ago, a company called Caresoft Global in western Detroit in the United States managed to "scoop" a BYD "Seagull", disassembled and reassembled it. Who would have thought that taking it apart and looking at it would exacerbate the sense of crisis among American automakers and politicians. They thought that the electric car would be shoddy when the price was low. After dismantling, it was found that this "Seagull" not only has excellent driving performance, but the production process can even be comparable to the more expensive American-made electric car.
U.S. media reported that the BYD "Seagull" was about $12,000, but American auto engineers found that the U.S. electric car, which has the same performance as the Chinese electric car, costs more than $30,000. In other words, based on the average cost of manufacturing in the United States, the cost of building a similar tram is nearly three times that of a Chinese company.
"Subsidies" cannot make up for industrial competitiveness. At present, the huge cost advantage of Chinese car companies in the international market is only a phenomenon, and in essence, the continuous technological innovation led by Chinese car companies and the upstream and downstream of China's complete industrial chain, etc., multiple factors have jointly created the huge competitiveness of Chinese car companies - this is by no means simply "subsidy" can be explained.
In June this year, BYD once again detonated the public opinion field because it was called "the world's No.1 volume king". However, the real "volume" is not only BYD car companies, Chinese car companies are all rolling prices, rolling technology, rolling to the sea, but behind the "volume", is full market competition, and full competition can give birth to technological innovation, in order to bring full prosperity.
The wheels of history are rolling forward, and good money will eventually drive out bad money. In the process of "actively rolling up", Chinese car companies will inevitably touch the interests of other international car companies, but this is the inevitable business competition in the context of globalization. As Wang Chuanfu said, all entrepreneurs must embrace the competition and stand out from it - this of course also applies to car companies in the United States, Europe, Japan and South Korea.