On May 14, 2024, the US administration announced that it would increase tariffs on Chinese new energy vehicles from 25% to 100%. Additionally, tariffs will be imposed on Chinese products such as batteries, chips, medical supplies, and critical mineral raw materials, affecting an estimated total value of USD 18 billion in Chinese imports.

The United States believes that China’s substantial state subsidies and excess production capacity allow Chinese products to penetrate the European and American markets at low costs.

TrendForce Insights:

1. Impact of Tariff Increase on Chinese Electric Car Imports in the US Market Is Minimal

According to sales statistics from the first quarter of 2023 to the first quarter of 2024 in the US electric car market, only Geely, among the Chinese electric car groups actively operating in the US market, holds a market share of merely 2%.

By the first quarter of 2024, this share had further declined to just 1%. In fact, Chinese automakers, anticipating such measures, have already shifted their focus away from the US market to regions such as Europe, Southeast Asia, Latin America, and Russia. Therefore, the current increase in tariffs is expected to have minimal impact on China’s new energy car industry.

2. Consumers Focus on Electric Car Prices, Not Nationality

The affordability of Chinese electric cars stems from China’s long-standing high level of self-sufficiency in the entire electric vehicle supply chain, from complete vehicles to components, especially in the battery sector, which accounts for the highest proportion of total vehicle costs.

Coupled with government subsidy policies aimed at attracting consumers to purchase electric cars and increasing the overall market size, this further enhances the cost advantage of various components.

Additionally, according to data released by Gallup in April 2024, only 36% of people with an annual income below USD 40,000 would seriously consider purchasing an electric car, while those with incomes between USD 40,000 and USD 100,000 or more have a purchase intention of 45-50%.

Therefore, the high cost of electric cars remains the primary reason why consumers are currently unwilling to switch to electric cars, rather than being a matter of the car’s “nationality.”

3. Is the Decoupling Strategy for Electric Vehicles from China a Cure or a Poison?

The US administration’s decision to increase tariffs can protect the US fossil fuel car industry in the short term. With consumers unable to access cheap Chinese electric cars, they may opt for US fossil fuel cars.

While this measure may prolong the life of the US automotive industry chain, it could hinder both US and global carbon reduction goals and reduce the international competitiveness of US car manufacturers in the electric vehicle sector. 

Stellantis CEO Carlos Tavares has stated that increasing tariffs will not truly protect his company, and the only option is to continue fighting. Therefore, while higher tariffs serve as a protective shield for the domestic automotive industry chain, car manufacturers ultimately still need to face the harsh reality of global market competition.

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• [Insights] China’s Position in EV Battery Market to be Shaken as the Mass Production Race of All-Solid-State Battery Industry Speeds up?
• [News] Six Companies, Including BYD and CATL, are Included in the U.S. Procurement Ban List

On October 26, 2023, Stellantis announced a EUR 1.5 billion investment to acquire approximately 20% of Leapmotor, securing two seats on its board. Additionally, Stellantis and Leapmotor will establish a joint venture named “Leapmotor International” with ownership stakes of 51% and 49%, respectively. The CEO of the joint venture will be appointed by the Stellantis group.

TrendForce’s Insights:

1. Leapmotor’s High Self-Reliance in EV Technology (Electric Motor, Battery, Electronic Control) with Completed Four-Domain Integration in EEA Architecture

Before Stellantis took over Leapmotor, European automakers like Volkswagen and Audi had previously collaborated with Chinese counterparts such as XPENG and SAIC in the electric vehicle sector and technological development. The primary aim was to exchange different resources, including funding or access to the European market, for China’s EV technology.

Leapmotor, in addition to independently developing battery packs and an 800V silicon carbide electric drive system, has based its control system on the self-developed “Four-Leaf Clover” Electronical/Electric Architecture (EEA).

This architecture achieves cross-domain integration across four domains—power, body, ADAS, and cabin—utilizing a central computing platform to significantly reduce the use of Electronic Control Units (ECUs) and related wiring. This integration enhances the overall intelligence and range of the vehicle.

Stellantis had previously expressed a “light asset” strategy for the Chinese market, aiming to reduce fixed costs. Collaborating with Leapmotor enables cost savings in independent research and development.

On a global strategic level, Stellantis has its own electric platform, “STLA.” Therefore, cooperation with Leapmotor provides immediate support for Stellantis in the platform of EV technology and market development, both in China and globally.

2. Leapmotor Need to Seize the Opportunity to Accelerate Overseas Expansion

While Stellantis’ current focus is not on the Chinese market, its integration of resources from the merger of FCA (Fiat Chrysler) and PSA (Peugeot Citroën) provides a significant market foundation in Europe and the Americas. According to Stellantis’ disclosed data for the first half of 2023, it achieved a net revenue of EUR 98.4 billion, a 12% growth, and a net profit of EUR 10.9 billion, a 37% growth.

The sales volume of new energy vehicles also grew by 24% during the same period. The “Leapmotor International” joint venture between Stellantis and Leapmotor is not only responsible for the Greater China region but plays a crucial role in global sales and holds exclusive manufacturing rights for Leapmotor’s vehicle models.

Although Leapmotor holds a technological edge in three key components over European and American automakers, it faces fierce competition in the Chinese market from startups like NIO, XPeng, Li Auto, and traditional manufacturers like SAIC and Great Wall Motor. In the third-quarter financial report of 2023, Leapmotor achieved a gross profit margin of 1.2%, marking its first positive gross profit.

However, the net profit continues to incur losses. Stellantis’ financial injection serves to alleviate Leapmotor’s financial pressures, allowing it to capitalize on opportunities for global expansion.

In addition, amidst the escalating competition among Chinese automakers to enhance their export capabilities, Leapmotor can leverage Stellantis’ mature sales channels and resources to gain a strategic advantage in the international arena. The operational control of Leapmotor International remains in the hands of Stellantis, not only acquiring Leapmotor’s technology but also eliminating a potential competitor.

This transaction is built on the mutual benefits each party seeks, potentially establishing a collaborative model for future technology and market-sharing partnerships between Chinese and European automotive manufacturers.

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• [Insights] Even Ford Halts EV Investment, How Will the Automakers Adjust Its EV Strategy?

Tesla initiated a price war in the Chinese market this year, forcing local manufacturers to confront the challenge. However, after nearly a year of intense competition, Tesla unexpectedly called a truce, while Chinese manufacturers led by BYD thrived in the fierce price war, turning adversity into opportunity.

According to a tally by Tencent News-affiliated media “Deep Web,” in the first two days of November, three Chinese automakers have already announced price reduction and promotion policies: BYD offers discounts ranging from CNY 5,000 to RMD 18,000 on five models; Leapmotor provides a maximum discount of CNY  10,000 across all models; Lynk & Co, under the Geely umbrella, offers a subsidy of CNY 6,000 for its Lynk 08 model. Since October, more than 10 car manufacturers have implemented price reduction and promotion policies.

Tesla Bucks the Trend with Price Increase

While several Chinese car manufacturers are engaging in a price war, Tesla is moving against the current by increasing prices. On November 9th, Tesla officially announced a price hike for the Model 3 Long Range version by CNY 1,500, bringing the total price to CNY 297,400. The Model Y Long Range version also saw a price increase of CNY 2,500, bringing the total to CNY 302,400.

This marks Tesla’s second price hike in nearly a month. On October 27th, Tesla China raised the price of the Model Y Performance version by CNY 14,000, resulting in an adjusted selling price of CNY 363,900. Additionally, the North American Tesla Model Y Long Range version also experienced a price increase of USD 500.

The report further indicated the industry analysis, suggesting that the previous round of price increases has already eroded Tesla’s profitability. Tesla’s third-quarter financial report, released in mid-October, revealed earnings and delivery volumes below Wall Street expectations. The gross profit margin was particularly impacted by the price war, reaching a four-year low of 17.9%.

BYD Secures Sales Crown in Chinese Car Price War  

In contrast to Tesla’s unexpected withdrawal from the recent price war, Chinese manufacturers are not only surviving but maintaining their ability to continue the battle. BYD, sitting comfortably as the global leader in new energy vehicle sales, reported a third-quarter net profit of CNY 11.54 billion.

Meanwhile, AITO revived its fortunes with the new M7 model, and XPeng Motors successfully returning to growth in sales.

Data indicates that BYD emerged as the winner in the first half of the price war, maintaining the top position in sales. Despite a decrease in unit revenue amid the price war, quarterly net profit per unit increased. In contrast, Tesla’s per-unit net profit has declined each quarter this year, reaching a global per-unit net profit of only CNY 31,300.

The overall gross profit margin trend and per-unit net profit trend of BYD and Tesla align. In the third quarter of this year, BYD achieved a historic high gross profit margin of 22.1%, while Tesla’s gross profit margin hit a near three-year low at 17.89%.

However, the price war is inevitably taking a toll on the industry, with multiple research institutions and investment banks predicting an increase in mergers and acquisitions, as well as bankruptcy reorganizations among Chinese new energy vehicle manufacturers in the future.

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• [NEWS] BYD Outpaces Tesla in Production, Securing the Crown in EV Sector

(Photo credit: BYD)

Recent reports suggest that Li Auto, a Chinese new energy vehicle company, is currently building a team in Singapore dedicated to the R&D of SiC power chips. On LinkedIn, Li Auto has posted five recent job openings in Singapore, including roles like General Manager, SiC Power Module Failure Analysis/Physical Analysis Expert, SiC Power Module Design Expert, SiC Power Module Process Expert, and SiC Power Module Electrical Design Expert.

In terms of power devices, electric drive systems in current 400V models typically employ Si IGBT, while 800V models mostly utilize SiC MOSFETs. This choice enables higher power density, leading to smaller and lighter equipment.

SiC, known for enhancing the driving range of electric vehicles and improving charging efficiency, finds widespread application in components like main inverters, on-board chargers, and DC/DC converters.

Recognizing the potential, Li Auto is among the many new energy vehicle makers incorporating SiC into their products.

As of August last year, Li Auto had launched the construction of power semiconductor R&D and production base in the Suzhou High-tech Zone. The base aims to initiate sample production in the first half of 2023, officially beginning full-scale production in 2024, with an ultimate annual capacity of 2.4 million SiC power modules. This marks Li Auto’s strategic move into the independent industry landscape for the next generation of high-voltage electric drive technology.

To achieve higher efficiency on the high-voltage platform, Li Auto is opting for SiC power modules over traditional IGBT. At the 2023 Auto Shanghai in April, Li Auto unveiled an 800V fast charging solution featuring an 800V high-voltage electric drive system built on SiC technology, enabling a 10-minute charge for a range of 400 km.

Li Auto’s next-gen SiC power module, integrating multiple components into the motor controller design, compresses the controller’s volume to within 4L, boasting a high power density of up to 62 kW/L. This reduces the volume and weight of the electric drive system, further optimizing the vehicle’s spatial layout and energy consumption.

In addition to Li Auto, the all-new NIO ES6, also showcased at the 2023 Auto Shanghai, incorporates SiC power modules and is equipped with a the second generation high-efficiency e-drive platform.

Furthermore, Hongqi, FAW Group’s premium auto brand, latest electric E202 SUV debuted at the 2023 Auto Shanghai. Based on the FMEs architecture 800V SiC charging platform, it requires only 5 minutes of charging for a range of 300 km.

Notably, Huawei recently introduced the new DriveONE 800V high-voltage SiC motor platform, focusing on better performance for electric vehicles. With high-voltage SiC technology, this motor platform achieves a rotation speed of up to 22,000 rpm and a maximum efficiency of 98%. Huawei’s latest SiC motor release is anticipated to open a new page in the electric vehicle industry.

The integration of SiC power devices into electric vehicles represents a significant trend in the development of the new energy vehicle industry. Leading automakers are poised to invest more resources in the research and development of related products, ultimately attaining independent control over core technologies.

(Image: Li Auto)

Xiaomi’s venture into automotive industry takes a significant stride as the company’s latest models, SU7 and SU7 Max, makes its debut in the latest catalog from China’s Ministry of Industry and Information Technology. The listed entity is Beijing Automotive Group Co., Ltd. (BAIC), marked by the distinctive “Beijing Xiaomi” emblem on the rear.

Sources from Xiaomi’s car supply chain suggest an imminent small-scale trial production phase, hinting at the first model’s market introduction in February 2024, reported by UDN News.

As per the disclosure, the cars boast a 3,000mm wheelbase. SU7 will feature Fdbatt’s lithium iron phosphate batteries, and SU7 Max is complemented by CATL’s ternary lithium batteries. Interestingly, the smart driving features will not include an optional optical radar package.

The catalog showed Xiaomi’s car brand as Xiaomi, while the declared corporate entity is Beijing Automotive Group Off-Road Vehicle Co., Ltd. (BAIC ORV). The product’s rear proudly displays “Beijing Xiaomi.”

Despite leveraging BAIC’s production qualifications, Xiaomi’s car has its declared production address at the site of its self-established factory.

The car factory’s construction unfolds in two phases, with the first, covering approximately 720,000 square meters, achieving an annual capacity of 150,000 vehicles by June 2023. The second phase is slated to commence in 2024, concluding in 2025. Public records confirm the successful acceptance inspection of Xiaomi’s car first phase factory workshops on June 12.

Xiaomi Group Chairman Jun Lei’s October announcement highlighted smooth progress, anticipating an official launch in the first half of 2024.

Since Lei’s announcement of Xiaomi’s foray into smart cars, industry observers have closely monitored Xiaomi’s car dynamics. Internal sources reveal that Xiaomi’s car will leverage ICT industry experience to enhance operational efficiency across research, production, supply, and sales.

Xiaomi plans a US$10 billion investment in the automotive sector over the next decade. Operating in a wholly-owned model, Xiaomi aims to provide users with a comprehensive smart ecosystem and enrich their smart living experiences.

At the October Xiaomi product launch, the introduction of the HyperOS was a highlight, applicable not only to mobile devices but also set to feature in Xiaomi’s cars.

A notable addition revealed by National Business Daily, citing a supplier who visited Xiaomi’s car factory, is that the four major manufacturing process production lines (stamping, welding, painting, and final assembly) in Xiaomi’s car first phase factory are operational, engaging in small-scale trial production. With mass production scheduled to commence in December, Xiaomi’s car is poised for market launch in February next year.

(Image: China’s Ministry of Industry and Information Technology)