After starting off slow, China’s EV industry has reorganized itself in record time, going from a global laggard to the global leader in about 5 years – showing other countries how it ought to be done.
It’s an indication of how much China is able to do when they put their minds to it – and how other countries have completely failed to keep up due to bickering and resistance from companies or governments being hostile to better technology.
China has pushed the legacy automakers from China. new emissions rules that the rest of the world’s automakers hadn’t prepared properly for (despite having 7 years notice) led to a glut in gas car supply – mostly from foreign brands – which we called the “canary in the coal mine” for where the global ICE car market was going.
Chinese auto dealers could have responded to this by asking the government to reverse the rules, but instead they asked for (and were granted) a six month amnesty in order to clear unsold cars off of their lots, and otherwise demanded that auto manufacturers shape up and build EVs faster.
Only Tesla remains as a significant presence in China market space.
But competition is ramping up.
Through September, Tesla delivered 1.3 million EVs compared to BYD’s 1.17 million. Since Tesla doesn’t report monthly sales numbers, we will have to wait until the end-of-year numbers come out to determine who will take the EV sales crown in 2024.
And the Chinese automaker are making progress in foreign markets.
One of the first European markets to truly embrace Chinese-made EVs is Norway, with 11% of its electric car sales being from the likes of Volvo, MG, NIO and BYD so far this year. BYD is already up to 3% of the U.K. EV market, having only launched passenger electric vehicles in the country in March 2023. It’s not the only Chinese EV brand making headway in Britain, either. MG is at 5% of the UK market, while Volvo and Polestar (both part of another Chinese giant, Geely) make up 3% and 2% respectively. So the total share of Chinese EV sales in the UK is now surpassing 13%.
And the EVs sold are priced higher than they are in China. Like at double the price.
The good news is that Tesla is pivoting to autonomous driving and humanoid robots. A mature car industry serves a commodity market. In it’s early years Tesla had the EV market to itself but that stage is quickly fading. EVs are no longer the reason to invest in Tesla. AI is the coming core business monetized via humanoid robots and autonomous cars.
The Chinese know they had a demographic time bomb. There is even speculation that it has already gone off and there are hundreds of millions of Chinese that simply were not born, but are counted in the census.
This demographic implosion was foreseen a decade ago. The Chinese have been working on many ways of mitigating it. This
process was an idea that came from the USA and was worked on by the Chinese for over a decade.
The method involves injecting finely ground iron ore powder into an extremely hot furnace, triggering an “explosive chemical reaction”, according to the engineers involved in the project.
The result is a display of bright red, glowing liquid iron droplets that rain down and collect at the bottom of the furnace, forming a stream of high-purity iron that can be directly used for casting or “one-step steelmaking”.
Known as flash ironmaking, the method “can complete the ironmaking process in just three to six seconds, compared to the five to six hours required by traditional blast furnaces”, wrote the project team led by Professor Zhang Wenhai, an academician of the prestigious Chinese Academy of Engineering, in a paper published in the peer-reviewed journal Nonferrous Metals in November.
It also reduces energy consumption by a third, removes coal from the initial process and allows the use of lower grade iron ore.
This should dramatically reduce the cost of steel going into Chinese cars. However, I am guessing that most EVs are like Teslas and are
made of aluminum so it might not be such a boon to the EV makers in China.
It was the second glimpse of the CR450 – designed with a trial speed of 450km/h (280mph) and a commercial operating speed of 400km/h (249mph) – after a test video briefly surfaced online in November before it was taken down.
The train resembles an arrow when viewed from the side. Its sleek, bullet-shaped nose has slightly angular contours, while the cockpit has decorative breathing lights.
Meanwhile Apple spent 10 years and $10 billion and has nothing to show for it. That’s my complaint with Tim, the “vision thing.” If any company was in a position to execute a new vision and not worry about the start-up costs, it was Apple.
(Meanwhile three Chinese cell phone companies have debuted EVs in the past two years, with far less development time. Xiaomi, Nio, and Huawei all have entries, and they are handsome.)
I am sure some will point out Apple’s terrific success elsewhere, and I don’t disagree, but that’s mostly line extensions from the Jobs era; my analogy would be Ballmer at Microsoft. The company did very well with him, but “the vision thing” caused him to miss (even dismiss) the iPhone revolution entirely. And he did belatedly recognize it but it was far too late.
Anyway. Apple Car. Would have sold a ton, probably two tons.
None of these cars are profitable. In fact, I doubt even BYD is making a profit on its BEVs. If it is, it is a small one and only possible because of subsidies and the fact that BYD is a leading battery maker.
Not if the selling price is over a $100,000. I doubt Apple could have sold it for less and still make a profit. To get it below $100K Apple would have had to get into the battery production business and learn how to mass produce cars. Apple doesn’t even have the expertise to mass produce its own phones or computers. It has to outsource to Foxconn and other Taiwanese companies for manufacturing.
You keep saying that, as though Tesla wasn’t unprofitable for 17 years.
Do you think Apple makes the batteries for its phones? How about the screens? Is there an Apple manufacturing plant somewhere that makes the screens? The cameras? The memory chips? The processor? The connectivity chips?
No? You mean they design the parts and how they fit together, and then leave it to others to assemble it all into a coherent whole?
FWIW, there are numerous automobile contract manufacturers, who will (for a price) take a concept from paper (well, electrons now) to finished product, including all the messy parts of component sourcing, assembly line production and the rest.
Yes. That’s the idea. Extend the concept. You’re close, so close.
XPENG has committed to significant investment in AI and autonomous driving technologies. The company aims to achieve L4-level autonomous driving by 2025, with a comprehensive roadmap to extend smart driving capabilities across all road types in China by the third quarter of this year. https://electrek.co/2024/02/29/xpeng-tesla-fsd-xngp-self-driving-adas-now-available-throughout-china/ XPeng continues to challenge Tesla FSD with XNGP self-driving, now available throughout China
XNGP is now available unlimitedly on all roads, everywhere in China. That’s only part of it; XPeng also shared plans to expand the self-driving tech to other markets.
Another huge selling point the automaker has touted over the years is its Advanced Driver Assistance System (ADAS), which it initially called navigation guided pilot, or NGP. The technology was originally only applied to highway driving scenarios before XPeng introduced extended coverage to more congested urban roads with City NGP.
By January 2, 2024 XNGP was available in 243 different cities ahead of news that universal access to the ADAS could be covering all of China soon.
And you keep saying this as though all car companies are going to be as successful as Tesla. There were a lot of dot coms, but few Amazons. In the same way, the great majority of BEV makers today won’t be around in a few years.
During Tesla’s unprofitable 17 years no one else was making a profitable BEV. There was no competition. Tesla is now very profitable and that puts all the other nonprofitable BEV makers at a huge competitive disadvantage.
Your sarcasm only emphasizes your myopia on this issue. Musk has said from the very beginning that the key to making a profitable BEV in an ICE dominated industry is in the production methodology. Tesla builds their cars differently and more efficiently than everyone else. You can’t outsource when no one else can do what you are doing.
The only way Apple could have built a profitable BEV would have been to ask Tesla to do the manufacturing.
That’s because Nvidia did not develop innovations in chip manufacturing. Tesla is revolutionizing car manufacturing.
Yes there’s only one Amazon. But there’s also a thousand other dot-com companies who make a very nice living. Facebook, for instance. Alibaba. Netflix. PayPal. Apple doesn’t have to be the biggest, indeed the iPhone isn’t (worldwide). It wasn’t even in this country until a couple years ago.
Sure, just like Sears could never be overtaken by the likes of WalMart, or White Castle could never be dethroned by McDonald’s. I forgot that once you’re the leader you can never lose market share. Must be why Macs are the biggest selling computers, still.
Curiously, two of the three Chinese EV manufacturers tearing up the country used contract manufacturers to start, and they’re underpricing Tesla in China significantly. Huawei partners with other companies to build (and design some parts) of the car.
Xiaomi cars was founded just in 2021. They now have two plants, so highly automated that they are producing one car a minute on one of their production lines. Also underpricing Tesla. (Now: are these the long runners in the EV market? I don’t know, I haven’t seen, much less driven either of them. But they’ve come on incredibly quickly, don’t you think?)
For the record, Nio also began with contract manufacturing, which they are set to take over this year and claim it will reduce their costs another 10% (which I assume is basically the contract manufacturers profit margin, plus or minus.)
As for the complain that “they are subsidized”, well probably so. OTOH, Apple is sitting on $160 billion in cash, or more than the market cap of 90% of S&P corporations. They could afford to subsidize something and do something with the money, especially something as life changing (“dent in the universe”) as the EV.
But only Tesla can do that? Who has the myopia now?
You are conflating short term competition and long term population trends. Sears catalog was an opportunity created by the railways which cannot compete with Amazon’s opportunity created by the Internet. Amazon also killed a drugstore on every corner.
Short term competition follows the 80/20 Pareto rule, the long tail withers away. How many Tesla killers are still alive?
I suggested that the sales successes of Xiaomi, Nio, and Huawei cars are less impressive than Goofy thinks because these companies are currently pricing their products to gain marketshare without caring about profits. That seems like an obviously relevant point. Goofy answered with:
which while true doesn’t seem pertinent. I then suggested using dot coms as an example that most non-profitable startups fail when competing with a dominant early mover (like Amazon or Tesla), and therefore most current BEV makers will fail. Goofy gave the counter-examples of:
Of these examples only Netflix directly competes with Amazon and Netflix was the early dominant player in movie streaming. To my seemingly obvious point that a profitable Tesla has a huge advantage over its nonprofitable competitors, Goofy brought up:
Odd examples as WalMart and McDonalds were profitable companies during their rise to dominance. Profitable companies can certainly compete on an even playing field with other profitable companies.
Finally, to my point that Apple couldn’t successfully outsource car production because Tesla was revolutionizing BEV manufacturing, Goofy brought up Nio and Xiaomi. However, both companies realized early on that they could not compete by outsourcing production and so built their own manufacturing facilities. That’s about the time Apple killed their car project. IMO this was because they realized they couldn’t build a car significantly better than what Tesla has at nowhere near Tesla’s production costs. Apple’s hope was that it could develop better driving and manufacturing software than Tesla. It couldn’t.
But let me be clear. These Chinese companies could become very profitable and surpass Tesla. This is especially the case since Tesla under Musk isn’t focused on dominating the conventional car industry using conventional strategies in the way of BYD. Tesla is looking to revolutionize the industry with its fully automated cybercab/FSD, certainly a risky venture.
If Musk succeeds in the next few years it doesn’t matter what the competition is doing now, they’ve all lost.
If Musk fails, then Tesla becomes one player in a cutthroat electric vehicle business undergoing a prolonged price war and weeding out process in an increasingly protectionist global market. Who knows who the winners will be.
I’m mystified here, I admit. Tesla lost money on every car it sold for 17 years, but that doesn’t count somehow? Now it’s the Chinese who can’t compete because “they’re selling their cars at a loss.” Weird: one set of rules for Tesla, another for everybody else.
It’s got nothing to do with “competing with Amazon. Unless there is a company named Shamazon, yoju’re never going to find a perfect comparison. (Although Alibaba, and now Temu seems to be making strides.) The point was not that many EV makes won’t fail, of course they will. The US had 200 automakers at the dawn of that age, most failed. The idea that the Chinese brands can’t compete with Tesla is ridiculous, they’re already doing so - as the next quarter’s sales will likely demonstrate. They’re losing money? Big whoop. (Again:) So did Tesla, when competing against Detroit. Then suddenly they were making money, gobs of it. I expect the same trajectory with the Chinese guys.
McDonald’s famously went years and years being un- or barely profitable. It was only when Harry Sonneborn changed the business model from “hamburgers” to “real estate” that they prospered. But even during the time when they weren’t “prospering” they were expanding. Sometimes companies can do that. You know, like Tesla did.
No, it’s because Apple pursued so many blind alleys and had no “vision” of what it should be. Read up on the history of it*. They changed targets more often that you change underwear, and in the end came up with nothing. That’s on Tim. The Chinese, by contrast, pursued a specific target with singular focus, and have pretty good entries. (Not to put too fine a point on it, but the “vision” what Steve Jobs did. He was barely involved in the manufacture, as the imbroglio over the first jelly-bean Mac’s demonstrated.)
And the companies which started using contract manufacturing are building their own factories (or buying existing ones) because it’s the next logical iteration of the business, not because they chose the wrong course at the beginning. Contract manufacturing is a way to begin scale without the heavy capital requirements necessary to do it all. Once you have a valuable prototype and production, it’s quite natural to take over production. That’s what contract manufacturing is for. (That Apple hasn’t done that with iPhones is more a testament to the paucity of acceptable alternatives in the West, for which we all agree there are none.)
Quite a philosophy. That’s what Henry Ford thought, right up until the moment GM outproduced, outsold, and outmarketed him. Quite a dangerous theory, actually.
It’s a car. No it’s a van. No it’s a van without steering wheels and will be self-driving. No, it’s a self driving sedan. No wait, maybe if it had 6 wheels…
For the record, some cars that have been built by contract manufacturers include the BMW5, Ford Focus, Maserati, Toyota and Jaguar, Porsche and Fisker. The Volvo C70 is contract manufactured, as is the Mitsubishi Colt. It’s done for a variety of reasons: smaller batch production, no capital overhead, to get out from under the umbrella of a parent corporation to spur innovation, and for other cost considerations. But first you have to have “a vision” for what you’re trying to do. Apple never did, while the Chinese clearly did.
NIO & Xpeng started operations 10 years ago.
Both have announced they plan to soon turn the corner into probability NIO-2026 Xpeng-2025. Of course that may not happen but their profit margins have been increasing as are EV sales.
We’ve discussed this a number of times already. And yet you persist with this kind of statement. An “Apple” car, in order to have the proper level of Apple-ness, would be priced near or above $80,000. And the market for $80k cars IS NOT “a ton” or “two tons”.
It works with smartphones because enough people are willing to pay $1000 for Apple-ness in their phone over a comparable non-Apple phone for $500-600. But not enough people are willing to pay $80k for a car instead of $40-50k for Apple-ness. And forget “willing”, not enough people are ABLE!
Sure. Because Apple doesn’t have to sell in numbers bigger than GM. (Bad example. Toyota.) They don’t have a majority share in headphones, yet do nicely with Beats. Their desktops are far behind PCs, yet they persist in selling them. Apple TV doesn’ have any particular “Apple-ness”, has a share a million miles behind Netflix and Amazon, yet exists.
Is the Apple Watch the biggest smart watch? The VisionPro the most successful virtual reality device? And the VisionPro’s big claim is that you can link it to your iPhone and link it to your iCloud account? Big whoop. You could do the same with a car - and a car, I point out, is something people actually use and need.
As for “afford”, how many people do you think can “afford” a VisionPro at over $3000 for a face mask? You can have a nice business on a production of 50,000 cars. Maserati and other prestige nameplates have done it for decades. Talk about status! Watch the heads turn as you drive by in your Apple Car!
I grant that nobody would give to cahoots about a Microsoft Car, but an Apple nameplate? They’d sell plenty. Heck, stick a badge on one of the nicer new entries from China and they’d sell hundreds of thousands.
Apple getting out of cars is a smart decision. It was a sunk cost fallacy and they chose well. Going after vision pro is right. They will need to compete with Meta and in coming years with OpenAI and xAI/Neuralink.
