Industry | Is the West giving up on electric cars? Just a delaying tactic

A few days ago, the professional industry editor of PCAUTO China's website, made an industry comment on the recent events of Apple's withdrawal from the car-making field and Mercedes-Benz's modification of electric car plans. At present, electric vehicle export is a major beneficial project for China, and all car companies are also accelerating the pace of exports, hoping to win the first move in the immature international electric vehicle market and achieve the "curve overtaking" they mentioned. On the one hand, they are accelerating the electrification of cars, on the other hand, they are withdrawing or delaying. These two completely different approaches collide with each other, and how does the industry editor in China think about this issue? How do Chinese consumers interpret this issue? The question arising from this contradiction is the interesting part of this article.

Here is our complete presentation of this article:

A few days ago, Apple's abandonment of a 10-billion-dollar car-making plan made the hot search. Netizens with observant eyes found that not only Apple, many Western automotive giants have announced the suspension or abandonment of electric vehicle plans. First, Ford announced the delay of a 12-billion-dollar electric vehicle capacity expansion plan, then the UK delayed the ban on petrol cars from 2030 to 2035, then Mercedes-Benz completely gave up the target of full oil-electric conversion in 2030. At the same time, the EU announced that it would indefinitely postpone the plan to phase out petrol cars in 2035. Even Trump has mentioned in his campaign manifesto that he wants to support the development of petrol cars.

Suddenly, there was public opinion on the Internet that we were fooled by western countries and fell into their preset "pit". Initially, they were the ones who shouted for environmental protection and played with electric cars, and now they are the ones who are leading the way in giving up, leaving China alone in the "pit". Some netizens think that because China controls the new energy vehicle industry chain, the West lags behind in this aspect, so they want China's electric vehicles to fall into the same trap as Japanese hydrogen energy vehicles.

So, what is the truth? Did Western countries really abandon electric vehicles? How do we avoid falling into the trap of the West?

I. The West Rings the Death Knell for Petrol Cars

On October 31, 2021, the World Meteorological Organization released a terrifying report. It said that 2015-2021 might become the hottest 7 years on record, and warned that the record-setting atmospheric greenhouse gas concentrations and heat accumulation had pushed the Earth into unknown territory.

A day later, politicians from nearly 200 countries and regions debated fiercely in Glasgow, the fourth largest city in the UK. The results of their debate will determine the future of the Earth and humans, and the core of the debate is carbon emission reduction.

Because carbon emissions are related to all kinds of development prospects, the politicians did not give in at the negotiation table. As a result, the UN had to "overtime" the conference for one day, and the countries finally reached a "compromise" agreement.

This conference is the famous 26th UN Climate Change Conference. During the conference, BYD, Ford, GM, Jaguar Land Rover, Mercedes-Benz, and Volvo, six major automakers promised to stop selling petrol cars by 2040, and by then they will only sell zero-emission new energy vehicles. At the same time, traditional auto giants such as Volkswagen, Toyota, BMW, Nissan, and Stellantis refused to sign this promise. For environmental reasons, BYD's pure electric bus also became the official shuttle bus of the conference.

In fact, all major Western auto giants have had aggressive electrification targets. For example, Mercedes-Benz plans to achieve a 50% sales ratio of hybrid and pure electric vehicles by 2025 and achieve all-electric vehicle sales by 2023. BMW once announced that BMW is ready to face the ban on petrol cars from 2030, and plans to launch 12 pure electric models on the Chinese market before 2025. Audi announced that from 2026, all new Audi models launched in the global market will completely switch to electric cars, leapfrogging to complete electrification, and Audi's future new models will no longer have plug-in hybrids or extended range cars. It will gradually stop the production of internal combustion engine cars by 2033, and all its own production bases worldwide will be involved in the production of electric cars. Ford also announced that it will stop selling petrol cars in Europe by 2035.

It's not just Western car companies, Japanese and Korean car companies also have an electrification timetable. Nissan announced its plan to stop selling petrol cars after 2025 and turn its research and development and sales direction towards pure electric and hybrid models. In addition, Toyota will stop producing traditional pure petrol cars before 2025, and instead research and develop and produce electric cars, hybrid cars, plug-in hybrid cars and fuel cell cars. Dongfeng Honda announced that by 2025, the electric ratio will exceed 50%, and they will no longer launch new petrol cars after 2027. They plan to launch more than 10 pure electric models before 2030. The Hyundai Group announced that by 2040, Hyundai will only sell pure electric cars and stop selling petrol cars.

At this moment, under the drive of environmental protection and technological change, global car companies are ringing the death knell for petrol cars and turning to electrification without looking back.

II. Chinese Electric Cars Lead the Trend Alone

Although China's new energy vehicle industry is leading the world, electric cars actually originated in western countries. As early as the Los Angeles Auto Show in 1990, General Motors introduced the lmpact pure electric car to the world. In 1992, Ford Motor Company's Ecostar model using calcium-sulfur batteries was released. In 1996, Toyota Motors released the hybrid Toyota Prius.

There is no doubt that Western countries should have a first-mover advantage in the field of electric cars. But in recent years, Chinese electric cars have been shining worldwide. According to Academician Ouyang Minggao, China has quickly achieved the transition from following, running side by side to leading in the field of new energy vehicles. Last year, China produced and sold 9.5 million new energy vehicles, ranking first in the world for nine consecutive years.

On the contrary, the development of electric vehicles in Western car companies is not as expected. For example, in the European market, electric vehicles accounted for only 11% of Mercedes-Benz's total sales in 2023, and hybrid vehicles accounted for 19%. Audi, even though it has invested a lot of money in the research and development of electric vehicle platforms, but his electric car models have always been unsalable. Ford's electric vehicle business in the United States lost $4.7 billion in 2023, with net revenue of $4.3 billion. If Ford did not go to electricization, it might have made 10 billion dollars. In fact, even in the high-speed development of China's electric vehicle market, it is still extremely difficult to make a profit with electric vehicles. Currently, only BYD and Li auto have made it.

On the one hand, selling petrol cars can make a huge profit, on the other hand, making electric cars can lead to huge losses. From this point, it is not difficult to understand why foreign car companies are no longer enthusiastic about electric cars.

Of course, this is not the whole reason.

The automotive industry in Western countries has been developing for more than 100 years, and they have an absolute advantage in the manufacturing of engines, gearboxes and chassis. But in the field of electric cars, many automotive industry chains and supply chains have become dominated by Chinese companies. If the West wants to develop electric cars, they will need to rely on China's industry chain. Whether from the perspective of making money or geopolitics, Western countries may not like this situation right now.

Besides, in the field of electric cars, Western car companies have lost their technological advantages. In the era of petrol cars, with their profound technical accumulation and excellent products, Western car companies have reaped huge profits from China. But in the era of electric cars, China, the latecomer, has actually taken the lead in technology from Western car companies. Faced with the challenge posed by Chinese car companies in the field of electric vehicles, Western car companies can no longer maintain their leading position through rule-making and technology monopolies, which obviously makes them anxious and the profits are greatly affected. For example, Germans have found that the ID3 electric car produced by Volkswagen costs about 40,000 euros in Germany, but it only costs 15,000 euros in China, and there is a profit to be made. Therefore, a German dealer bought 22 ID6 cars from China, transported them back to Germany, and prepared to sell them in Germany. Of course, this German dealer was quickly sued by Volkswagen, who even asked the court to destroy the cars.

Another very important point is that the continuous investment in charging piles and other infrastructure by the Chinese government and car companies has provided a fertile soil for the vigorous growth of electric cars in China. At the same time, China's advanced power grid and low electricity prices also provide cost advantages for users' use of electric vehicles.

Based on the above advantages, China's new energy vehicles will continue to explode. Academician Ouyang Minggao believes that before 2026, the market share of China's new energy vehicles is expected to rise rapidly, with nearly 40% by 2024, nearly 50% by 2025, and more than 50% by 2026. This means that new energy vehicles will dominate the market before 2026. He also predicts that by 2030, in terms of new energy vehicles, the reserve in the Chinese market will reach about 100 million, with a market share of over 70%; In terms of lithium-ion batteries, according to estimates at home and abroad, by 2030, the global shipment of lithium-ion batteries is expected to reach 5 billion kWh, with China accounting for over 60%, which is about 3 billion kWh.

It seems that the prospects for China's new energy vehicle industry are very good.

III. The West Has Not Given Up on Electric Cars

In response to the slowdown in electric vehicles by Western car companies, some voices believe that they are exiting because they can't dominate, and then try to isolate Chinese electric cars like isolating Japanese hydrogen energy cars.

But it needs to be emphasized that so far, Western traditional car companies have just slowed down the pace of electrification, they have not given up electrification. They slow down because they can't keep up with the pace of Chinese car companies. As BYD and other Chinese new energy car companies have already shouted "electricity is cheaper than oil" in 2024, the electric cars of Western car companies are still more expensive than petrol cars, and some models are even twice as expensive. This indeed makes their journey to electrification not easy.

Despite the slow pace, the determination of Western car companies to transform into electric vehicles has not changed. For example, Mercedes-Benz has said that it will continue to take necessary steps to promote electrification, stay focused on strategy, and maintain flexibility. It is estimated that new energy vehicle models will account for up to 50% of new car sales before 2030. It is worth mentioning that Mercedes-Benz has already launched a pure electric product lineup covering 9 models in China, and will launch 15 new products covering multiple drive forms in China in 2024, such as the brand new electric G-Class off-road vehicle, the brand new Maybach EQS pure electric SUV, the new generation EQA and EQB pure electric SUVs, etc.

Audi has also said that Audi will not seek to maximize the production of electric cars, but will promote internal combustion engines and plug-in hybrid models at the same time. The implication is obviously to slow down, not to give up, electric cars.

In January, Ralf Brandstaetter, CEO and Chairman of Volkswagen Group in China, also said that given the huge differences in the China market, Volkswagen Group will continue to invest in petrol models in China. At the same time, all major petrol models will be transformed into new energy vehicles, and the Group will also introduce the latest plug-in hybrid technology to achieve a pure electric range of more than 100 kilometers.

Although Ford has delayed the pace of electrification, it has clearly stated that Ford will place more development hopes on hybrid petrol cars. It is expected that the sales of its hybrid petrol cars will increase by 40% in 2024. It is reported that last year, 1.167 million hybrid petrol cars were sold in the United States, an increase of more than 52% year-on-year.

The current situation brings back memories of the explosive growth of hybrid cars in the Chinese market back in 2022. Western car companies are merely slowing down the development of pure electric vehicles and are instead ramping up production of hybrid ones. However, this doesn't mean they've abandoned electrification and new energy altogether. Once there's a significant technological breakthrough, the supply chain is fully established, and the infrastructure is improved, Western car companies will undoubtedly make a strong comeback in electrification.

This is a critical moment for Chinese new energy vehicle companies. They shouldn't hesitate. Instead, they should seize the advantage while Western companies are still figuring things out. They need to accelerate their development and further widen the gap between them and their Western competitors.

（Interview：Kevin Wong，Author：喻钦涛）