Why Chinese Cars Are Flooding The World 

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BYD is not just a car company, it actually started out as a battery company and honestly this is its real strength as it doesnt depend on other companies to provide the battery pack.

An anecdote: I was in China 2019-2020, when EVs were only getting started, and it felt like maybe 1 car in 10 or 20 was an EV. I went last month in April 2023 only 3 years later, and about half the cars there are EVs. It seems like the Chinese government's policy of promoting EVs has born fruit.

I see more and more Chinese brands here in Indonesia. They're growing fast, faster than Korean brands.

I remember when GWM started selling pickups in Southern Africa. Even as kids at the time, people my age still knew that GWM was a company we could make endless jokes about for its poor quality. However, my mother told me at the time that that was how both the Japanese and Koreans started their now highly respectable auto industries, and that it was just a matter of time before Chinese cars would be amongst the best sellers

One correction, the German brands were not forced to share their technology with local companies after they settled in China; they agreed with that before they arrived in China. German car companies are not stupld; they decided that since the begging, but they underestimated the fast growth of Chinese companies.

I disagree with you. I’m South African and personally have always driven German cars…most recently, my last two being a Porsche, before that a Mercedes C63 and Audi TT respectively. However, although I most likely won’t move away from Porsche, I have seen Chinese cars flood the South Africa market by storm but here’s the catch…South Africans no longer view them as cheap low end cars, in fact it’s quite the opposite as the perception of most South Africans has changed 180 (obviously not making any comparison to the three top-tier commercial car brands ie Mercedes, Audi and BMW). Cherry and Haval are the biggest brands flooding our market yet despite the models we see exported to South Africa being rather impressive, it’s nothing compared to the models (and different Chinese brands e.g NIO) locally in China or being exported to Australia. Yep, Australia car market is also big on China. My point is, gone are the days that China is known for fake replicas or low-end technologies…as mentioned before, my personal taste in cars is still German but I like many others fall into a particular class of car enthusiasts. Your figures may very well be correct wrt current stats but Germany should worry as it won’t be long before China cements it’s place on the global stage as being a car manufacturing giant, if not front runner in the industry. Ps: I should also add that historically, Toyota and Volkswagen have been the two biggest and most successful brands in South Africa. In later years, Hyundai seems to have eaten away at that market…currently as mentioned before, Haval and Cherry have overtaken and killing those markets as consumers turn towards the Chinese brands as a better and more viable option.

There’s another component, which is to attract the world leader-Tesla, to the Chinese home market, which forces the local brands to compete and hence avoid the low quality monopolies that happened to companies like Baidu

The use of industrial policies in national economics is a common practice worldwide. The US spend billions in chips and military R&D and billions more propping up its financial industry. Germany and France does the same for its power generation, military and car industries. The Koreans, Taiwan, Japan has well known industrial policies. Even countries that ain't successful yet are busy nudging the development of its own industries, just read up on every country in ASEAN.

Even in the dump truck sector China has been excelling esp in countries with no emission rules.

As someone who has driven both the model3 and the Accord, I was shocked by the quality of the Han EV after driving it. It has had zero failures in three years, and the quality is far better than that of the model 3 and Accord.

Other countries are still arguing about the timeline on banning ICE vehicles while China has already reached its 2025 goal (25% EV) 3 years early. The Chinese government has been subsidising the EV and battery manufacturers while expanding the charging network (doubled each year) for the past decade. China will reach 70-80% EV sales at the end of 2025 already.

This video completely missed the point. Chinese car manufacturers were not able to catch up in ICE cars because of the patent barrier that was over a century. In hybrid cars, Toyota also held the patent dominance for about two decades. Newcomers such as BYD and Chery were able to establish their lead because of their breakthroughs in hybrid engines, electric motor and battery technologies, for which they deserve the credit. It's not just about throwing money at things. Biden is good at throwing money at EV but it turns out that many American car manufacturers are eager to collaborate with Chinese companies.

It's also important to note, Tesla made in China uses Chinese suppliers and components, this alone is a massive supply chain. China makes more EV batteries than the rest of the world combined, and with battery dominance, Chinese companies like CATL and BYD, can set the industry standards. BYD for eg, popularized the LFP batteries, this move pulled the rug out from the feet of Korean and Japanese battery makers who had smaller scale and focused on ternary lithium batteries. Now BYD's most affordable car, the Seagull will use sodium batteries, this again will shift the battery chemistry for low-end affordable cars. Another Chinese battery maker CATL, is now developing modular swappable batteries, once enough car makers use the CATL battery standards, it will create an unsurmountable protective moat for the company to direction control the most valuable component in an EV

In the past I thought we have many Chinese cars in Iran because of sanctions, but after reading comments, I find out that every place in the world has the same situation. Interesting how fast China develops!

Beating Germany in numbers is still a great achievement for China and it has been the industries norms to first charge low to grab the market and as getting technological advance by spending more on R&D then charge more for it and we will see this trend after few years.

China is also first at implementing new type of batteries - Sodium ion.

It's actually very easy to understand why EV in China is so popular and important. China has cheap electricity but expensive petrol so EV is the best solution. If local consumption needs EV might as well make more EV for export. EV isn't that complicated in engine parts like that of the internal combustion engine,spare parts are less complicated as long as the designs are attractive enough and the batteries are reliable and lasting for longer distances. With all these factors EV therefore becomes the ultimate goal in China's car manufacturing, particularly with its cheap and affordable price. Most of the western manufacturers can't compete in prices so will be left out in the EV market

Existing tech leaders also use patents, which acts as a barrier for future challengers to catch up, they either get sued to bankruptcy or the licence fee make the business unfeasible.

Being able to make the same product at lower price is the same as being able to make a better product for the same price. And once people's expectation for quality at a given price change after seeing a Chinese car, they'll start seeing German cars as lower quality, even if a more expensive German model might have the same quality. European belief they're safe in the high end segment is going to be the end of them.

I live in Germany and from consumer perspective German brands are not providing reliability or production quality better than Japan or Korean alternatives. Most of my friends drive Toyota or Mazda. Sick emission standards and low quality with high prices drive customers towards Japan.

Im in china right now, living in Berlin, it is absolutly breathtaking. I can literally see our car industry dying. Id say in several cities half the cars are now ev, with busses and taxis hovering at 95%. Of which the germans make up what feels like 1%. Cool looking, apparently efficient enough chinese evs which are super affordable. Who would buy a 60k € american or European ev if you can have a better one for 30...it really is crazy how fast this change is coming

Thanks to our western friends, in Russia we have now 70% chinese cars instead of previous german\japanese dominance.

Pretty good summary. Just a couple additional points: - whilst it is true that all foreign carmakers had to have joint ventures in China, this also was beneficial to them: a lot of the capital expenditure was co-financed and at least a couple of these automakers would not have survived the financial crisis of 2008 without their Chinese partners (GM? PSA? and Volvo / Polestar would definitely not exist anymore without Geely) - In terms of AI, I think that China has been quite successful but that a lot of the Chinese tech ecosystem is much more insular and focused on the domestic market - Many consumers now not only switch to EVs in China but in last 3 years, many now who have the money for a Tesla will look at other brands. A lot of people are confident in local EV brands becayse they provide innovative, well built and affordable cars in any case I had a German car in the past and now two EVs in China including an Xpeng. The quality is really there and also a lot of the foreign carmakers including luxury German brand had terrible customer service in China....

The gov support of EV cars in China can be traced at least 10 years ago. It's still early to say China's investment in aeroplane, AI and semiconductor is not producing similar outcomes, they are just at different stages. In the end, what makes China successful in these industries remains the same: huge market, abundant cheap engineer, high R&D investment both private and public, favorable industry policies etc. I would bet my money on China winning in all these areas in 1 or 2 decade.

China already passed Japan as largest car exporter first quarter 2023😂

waiting for how prices will come out in the long term after setting up dealership and spare part networks. selling an ev is easy, supporting it through it's lifetime and achieving quality products is a whole other ballgame.

China surpassed Japan in auto exports in the first quarter or January-April to become the world's largest auto exporter. From January to April in 2023, the top 10 auto export brands: SAIC Motor exported 313,000 vehicles, ranking first; Chery Automobile exported 244,000 units, ranking second; Tesla ranked third with 128,000 exports; Changan Automobile exports 117,000 units ranked fourth; Geely Auto exported 76,000 units, ranking fifth; Great Wall exports 74,000 units ranked sixth; Dongfeng Motor exported 66,000 units, ranking seventh; Jac exports 58,000 units ranked eighth; Byd exports 58,000 units, ranking ninth; Beijing Auto exports 50, 000 units ranked 10th.

Honestly good for China. Bravo for grtting into EVs early and seeing the opportunity as soon as they did! Kudos!

I live in middle east, 5 years back you hardly see Chinese made vehicles here. Lots change now and the Japanese and Koreans car makers apparently in panic mode now😂

China is advancing in several areas, the fact that they do not completely dominate sectors that entered a little over a decade ago does not mean that they do not have the capacity to do so. If Chinese politicians and businessmen listened to Western economists, they would still be churning out plastic toys and cheap clothes. The point is that China has been growing in markets traditionally dominated by Americans and Europeans and if this doesn't stop the West will have serious problems for losing market shake in a few years.

I think China has a long way to go still, but they've come very far from where they were before, and I'm very happy for them. I used to refuse to buy appliances made in China because even if they were a fraction of the cost, they were so unreliable that I'd spend more money over time replacing them. But a few years ago I decided to go out on a limb and buy a Midea washer/dryer combo to replace my old ones. Well it's been 4 years now and I haven't had any issues with them, and they were about half the cost of any other set that I could've bought. So don't sleep on Chinese manufacturing quality, and assume that it's all shit and won't ever be able to compete with Western (+Japanese/Korean) brands.

Thank you Joeri for a other amazing video. Both informative and entertaining. Superb research :) best regards from (today) rainy Poland

All of Joeri's finger-counting was spot on in this video. Learning by doing!

Loved your performance at Eurovision Joeri!

Chinese brands are also taking a different approach now. Rather than fighting on price, they are positioning themselves as luxury options with lots of features. BYD cars are priced almost double in Europe compared to China. I think they learned from earlier attempts like SsangYong, although it might be a harder sell for now. However, it is clear to me that the attempts to block/delay regulations is only going to make the demise of European OEMs more inevitable. Prepare for huge bailouts as more people want EVs and Tesla, BYD and other Chinese players are there to meet demand at scale. Once ICE sales start to decline, the economics also start to turn around. Within a couple of years, those profit generators will incur losses and only those OEMs that built capacity to build 100% EV (of current numbers) have a chance to survive and thrive.

China's car companies mostly build for their own market. Most of their brands have not gained much market share in the West.

What gets in the way of survival. Ignorance and arrogance, like Nokia and Kodak

Good morning, Dr. Joeri Schasfoort. I am in love with your videos. Think about talking about the economy of Singapore, mister. From Brazil - Paulo Souza.

That Ausfahrt was a nice touch 😃

Recent Shanghai auto show kinda presents a new perspective, that China is playing a different game that ICE cars. Maybe in 5 years we can already see how far and get it can go.

Great podcast [as always], as I am budgeting your podcast to my monthly expenditures. However, [Track 2:20-3;30] hits smack on the publication: The Innovator's Delimma, which is the title of an excellent book by Clayton Christensen [of HBS and the 'father of modern day economics]. The dilemma itself is the fact that though large innovators have some motivation to innovate, they also have a strong disincentive from doing so as new products will undermine their existing ones. Exemplary Use Case: Toyota and GM. The way in which Toyota made its entry into the North American car market (at the expense of GM) is a classic example of the Innovator's Dilemma. Toyota, when they entered North America and Europe, they didn't enter our market with Lexus's. They came in with rusty little subcompacts - the Corolla. I believe we are in for a repeat of history. I continue to be fascinated on how Western economy hegemony [ being a paralysis by analysis] is comparable to "frog in the low flame pot of water'. In a world of multipolarity, Western Metropols continue within this 19 Century Conference of Berlin mentality. Take off your blinders [befor its too late] and accept Global South economies as PARTNERS.

I feel the issue you’re missing if China controlled the lower market and eventually the mid market , that will leave the rest of the companies competing on the smaller high end segment which will lead to a bunch of European brands to collapse

I mean not only China, South Korea and Japan today achieve economical growth success through active targetted market intervention and industrial policy. I dont think this disproves standard economics as the fundamentals are similar but I do think its outdated at modern times, like somehow we still think nation state still exists in this globalised era, although deglobalization is happening, it still doesnt deny that Globalisation made the world more like states within a nation rather than complete independent nation states, basically like a global less regulated, slightly more disconnected EU

This is very interesting. Thanks for this video.

Excellent video, thanks for creating ❤

It's like they've changed a competing area, not competing with the ICE cars, but with EV. Also because of the stubborn german and us carmakers like VW that refuse to change and only want to buid EV based on their ICE cars, they can not keep up. But Chinese carmakers still have a lot to learn and if they want to be successful in the long run.

This is a super hyper classical example of disruptive innovation. You start out with "crappy", but based on a new paradigm/idea, and quickly surpass the "best"

The most important factor for the successful of any industry is the establishing a value chain preferably internal, either vertically or nationally. The other is a knowledge base, in universities and an experienced and trained population.

There's CHINESE MONEY 💰 in BMW group AG, the largest MERCEDES BENZ Investor is also CHINESE, to make the matter even worse CHINESE bought the legendary KUKA, robotic systems that Germany use to manufacture those high end cars, recently they even took over PIRELLI. i think the CHINESE are enjoying a good margin.

You explained this in an excellent and approachable fashion.

Germany car company and Toyota just look like kodak

Actually, the growth of Tesla was also majorly subsidized by the environmental policy of the US government

Wuling cheap EV is also taking its market share in Indonesia where EV is becoming a necessity in Indonesian cities.

I wasn’t ready for Yilong Ma's appearance here 🤣

Just ordered a Chinese car yesterday in the Netherlands! However, due to high demand and current supply chain status, I need to wait 4-5 months

The latest gen cars(EV or PHEV) like a bigger smart device(such as mobile phones), focus on the autopilot, merge lots of sensors' data and real-time processing, it's not the traditional cars now, it's live with OTA fuction, cars become smarter and smarter with the rapid update of the new firmware like a mobile phone update. You know which countries are good at smart devices, surely not the Japan or Germany.

Main reason why nobody was able to beat Germans in Internal Combustion Engine (ICE) cars is that ICEs are very hard to master. It requires a delicate balance between metalurgy and mechanical engineering to electronics to get an efficient yet powerful, durable yet easy to maintain engine. You can definitely build a B- rated engine quicky, but A+ engine requires enourmous experience and technology which Germans have since before WW2 times. They simply iteratively got better by pouring a lot of man-hours and building their industrial capacity around that. This lead is now eroded overnight by Elon Musk's Tesla and they're trying to catch up ever since. They're still good at building the chasis and aerodynamically shaped cars but these are very easy to do with powerful software. Design and utility are definitely their strong suit too. It'll be interesting to see what the future will bring.

2023Q1: China is the largest car exporter.😊

There is another big problem for European ICE carmakers on the Chinese markets. As of July a new emission policy comes into force that will make a lot of their cars unselable in China. This is on the top of the problems they already have due to China's massive switch to EVs. Will be interesting to see what happens this decade! Btw, these are electric and not electronic vehicles. Apologies for the remark, but it bothered me quite a bit :P

The subscription model made the prices of the car very affordable. Along with the subsidy those brands could soar ahead. The model, the charging infrastructure, the availability also are part of the fact why the ev movement worked in China.

China are implementing a marketing strategy called penetration, which basically means selling their products (cars) in a very competitive price while adding good value, the intention behind this strategy is to enter new markets and increase their market share, and in a few years they will export new and expensive vehicles to those penetrated markets.

7:07 Actual salesfigures tell chinese cars are sold in a few 1.000 in Germany. Supposedly it is similar in other EU markets. We have to wait another five years or a decade before the EV wave arrives here, i guess.

AI: experts believe China leads or co-leads in most categories with the US. In 2015 they were nowhere in sight Aerospace: first domestically produced commercial aircraft is flying and being sold now Microchips: 7NM mass production started late 2022. In 2015 this was unfathomable. Most experts now believe China can achieve 5NM technology by 2025 which would have shocked the world in 2015 - and this is despite US sanctions. So I'd say they got plenty for their money

BYD: Build Your Dumpsterfire since BYD evs are FAMOUS for burning to a crisp

Just a detail folks: the Chinese car market is more than 90% of the US and Europe car markets COMBINED.

The Chinese car makers market price positioning is already starting to bear fruits in 2023. In Malaysia, BYD's growth has spurred massively this year. Although BYD's battery range may lag behind the luxury German car makers, smaller range battery would appeal to city travelling urban consumers. However, it would be interesting to find out in the future how well EV drivers cope with their car's battery replacement - which in many countries at this juncture would still amount to a downpayment for a new car.

There’s a component to the Tesla story in China you missed. Tesla’s entry into China enables China to build up supply chains much the same way Foxconn did for the phone market. This allows smaller players to come up and take advantage of the supply environment. Excellent planning on the part of China. Probably the main reason why Tesla got 100% ownership of Tesla China.

If you have a home charging station, living in the suburbs to work in the city center, with a daily commute of 60 kilometers, charging only 5 RMB, less than 1 USD. It's cheaper than taking the subway. Electric vehicles only require maintenance once a year due to their simple structure, costing approximately 350RMB 50USD.

German car industry was boosted by government too. And VW was helped by the regime of a party more totalitarian than CCP. But german industrial policies still exists.

Cars used to be more expensive in China than in USA. Now the opposite is true. Just look at Tesla's price in China. Model Y base model with full self driving cost $62,740 in USA, 327,900 RMB ($45,709) in China. Price in China is cheaper even after $7,500 tax rebate in USA which not all people qualified for.

Industrial policy as controversial??? Please 😂😂. What are all the tax subsides provided by Western governments? (For evs in the us?) Or the inflation reduction act? Industrial policy is foundational to modern economies

Just the few pictures of Chinese cars that you put out have already attracted me

Old mate completely missed the impact of subsidies on both the value chain (steel, glass, aluminum) and the factories themselves (local government free land or free lease years, loans to build factories dont have to pay back, free or low cost electricity)

The USA lead the way with early market adoption with high income suburban living and with private houses and garages allowing for early adoption at high cost, before infrastructure existed to charge EVs but once mass market adoption is on the table then China takes the lead easily with a Giant urban and dense population making infrastructure easy and short commute from house to work. The USA is now struggling with the challenge of long distance commute, low density suburban areas with limited infrastructure

No worries, the US can just declare that Chinese cars are dangerous (like they may send data of your location or can be remotely controlled) and force all alleys to ban them.

Swappable battery for EV is great.

I've worked in gemany automobile industry R&D sector 15 years ago(VDO and Bosch). We knew at that time already how strong was BYD in E-Mobility and battery. I guess those politicians knew also the fact. They kept silent and said nothing until........

Chinese automotive industry is currently heavily subsidised. They can't compete without the subsidies yet.

I like the content. I do think there may be too much downplaying though of current chinese EV export. The Tesla's are still created in china with Chinese components. Mote importantly, the big Polestar-chunk in export is not European as suggested. Polestar is Volvo owned which in turn is Geely owned, i.e. its Chinese.

Didn't expect to see Yi Long Ma in this video

Iteration isn't really the same as "learning by doing" i would argue that it's in fact the opposite: design iteration means doing cars the same way in order to save costs, and learning by doing would instead suggest to change once in a while in order to challenge your views and improve

German car manufacturers are having a Kodak moment

Thanks Jeroen. Very interesting indeed.

11:30 thats a bit optimistic. EV's are still cars, not just battery packs with wheels. Large parts of it can be copied but actually running the production line and supply chain efficiently haven't gotten any easier. Even if someone doesn't like Tesla / Musk, its hard to argue what they did isn't impressive.

I totally appreciate your assessments, one German cars still makes way more money than Chinese, two Tesla is the reason for the large Chinese car export, therefore there is nothing for US to worry about and no need to sanction Chinese EV. How about some BYD, NIO or ORA for us in California? My street is full of Tesla 3, we need some choices and the fact Chinese makes less money on car is good for consumers, l like it.

12:55 Wrong! If you think Diesel cars are not efficient or reliable, then you've never owned a 4 Cylinder Diesel of Mercedes Benz! Those engines are extremely efficient and reliable which is why they were used in german Taxis for decades. EVs might get to the same point some time in the near future.

Btw China has surpassed Japan the first quarter of this year.

good analysis but.... it is electric vehicle not electronic vehicle

That is interesting and once again made a question come up I’ve never understood. How are Exports, GDP, and over all economy really measured. I would have thought that German car brands producing cars in China would 1. Count as German exports 2. Contribute to the GDP of Germany and 3. Were in general counted towards their country of origins economy. I guess what I always figured was that these numbers are attributed to wherever the country has its HQ. But then the GDP of Ireland, Luxembourg and the Cayman Islands would have to be ginormous. As far as I understand, Apple contributes all their revenue/profit to America’s GDP numbers. They certainly aren’t paying all their taxes there, that’s why their European market is served by the Irish “Apple mother” that gives out the rights to sell them in Europe and thus racks all the taxes right there with it, in Ireland. But now you say German cars produced in China count as exports from a China? I’m just utterly lost in all the loopholes..

In Mongolia, German cars cannot survive because there is not enough professional servicemen and auto parts dealers. BMW, Benz are worst in the winter of Mongolia.

2:03 is this point supposed to be in favour of Germany?

With all due respect, it's NOT ELECTRONIC cars, it's ELECTRIC cars. As someone who studied Electrical and Electronics Engineering, it drives me mad when people mistake one for the other. They are very different fields. Moreover, it's still too early to say EV cars are the future, because batteries, specially replacement batteries, for those cars will require enormous resources that are mined in ways that are far more polluting than IC engines.

For the record SAIC owns the MG, hopefully MG will build a manufacturing plant in the UK. Only fair since sooo many people in the UK have bought the best valued compact car in the world the MG 4.

I rented some chinese SUV and was pleasantly surprised of the quality. The interior quality felt no different from Mercedes. My issue is naming and brand recognition. China needs to hire an italian brand expert, choose proper names and stick with the same name for decades so that it becomes a recognizable brand.

What the Chinese EV companies are doing is no different to what the Japanese car companies were doing in the 1970s. Offer the world cars that are cheaper to buy and less expensive to use.

Some German brands like Volkswagen and Audi are actually owned by Porsche, which is Austrian. The Volkswagen-Group owns the brands, including Porsche, but the Volkswagen-Group itself is owned by Porsche SE. No idea if this is relevant, but just a heads up that the statistics could potentially be skewed if ownership is somehow included in the statistics.

A few points that I felt were missed or not highlighted in the analysis: 1) Every (lower cost) car that China sells, represents one less existing consumer that is accessible to any other company for at least 3 to 5 years. [displacement within existing market] 2) Being lower cost, families that were never considered a customer before (in Africa and Asia), are unlocked. [Growing the overall market] 3) China is the largest car market on the planet, get it right in China and the other markets become easier to enter. [strong home market to stimulate growth] We also should not forget that from the 70's to the 90's the (then unknown) Japanese and Korean auto-makers were able to penetrate the US and EU, initially based upon lower pricing but they quickly increased quality and built strong brands. This would appear to be the model that Chinese auto-makers will try to follow. Finally, there is one other point. Each time that BYD sells a car instead of Mercedes or Tesla, it is potentially a loss of $60K revenue for the Western brands, when this happens the other way around, it is a loss of only $20K to BYD. Yes the up-side is better for the higher value brands but dis-proportionally at the cost of the down-side.

14:00 you say "microchips" without similar success but there's been lots of news that they've already got the lithography down to 5nm which is insane.

Wow! An actual positive China vid?