China’s EV market will slow in 2023. That still leaves it ahead.

China’s rip-roaring electric-vehicle industry will probably downshift a bit in 2023. But it will remain far and away the largest global market—a fact that gives it formidable advantages in the race to dominate the global EV supply chain.

Sales of new-energy vehicles in China, which include plug-in hybrids, more than doubled from a year earlier in the first 11 months in 2022 to more than 6 million units, according to the China Association of Automobile Manufacturers. Around a quarter of cars sold in the country are now EVs. That makes China the undisputed EV leader: It accounted for more than half of all EVs sold globally in 2022.

EV pioneer Tesla is doing well in China, but many domestic brands have also delivered solid performances—particularly BYD. Wuling Hongguang Mini EV, a small car that starts at around $5,000, has been a surprise winner thanks to its affordable price tag. It is made by a joint venture of General Motors, Liuzhou Wuling Motors and the state-owned SAIC Motor. 

On the higher end, local upstarts such as Nio Inc. and Li Auto have rolled out new models that have outcompeted the offerings of many foreign auto makers, which were late to the EV market. Restrictions on issuing new license plates in China’s major cities have also helped boost EV sales because EVs are exempted.

SENATE PROBES MAJOR AUTOMAKERS OVER ALLEGED LINK TO UYGHUR FORCED LABOR IN CHINA

Ticker	Security	Last	Change	Change %
TSLA	TESLA INC.	357.09	+11.93	+3.46%
GM	GENERAL MOTORS CO.	55.04	-0.55	-0.99%
BYDDY	BYD CO. LTD.	67.28	+1.37	+2.08%

EV sales slowed in recent months owing to the nation’s strict "zero-Covid" policies. Auto makers including Tesla cut prices to attract customers. But sales picked up again slightly in December after the abrupt U-turn in China’s pandemic policies. 

Unfortunately, that renewed vigor may prove temporary: EV subsidies for purchasers in China will expire at the end of 2022. Many buyers likely brought forward their purchases to take advantage of the subsidies. 

China’s EV subsidies helped kick-start its market, but have gradually been wound down in recent years. And while the end of the zero-Covid policies should eventually provide much-needed support to China’s economy, the near-term impact of rising Covid-19 cases could hit sentiment hard. 

Intensifying competition has also led to worries about the rapid cash burn of Chinese EV makers. Share prices have plunged in 2022, even more steeply than the broader market.

WITH NEW EVS ARRIVING, BRAND LOYALTY GOES OUT THE WINDOW

Exports, however, have been a bright spot, and one that could prove more durable. China’s new-energy vehicle exports have more than doubled year-over-year in the first 11 months of 2022, according to CAAM data collected by Wind. 

That includes foreign car makers exporting made-in-China EVs to Europe and other parts of the world. Tesla has begun shipping Model 3s and Model Ys to Europe from its Shanghai factory. 

BMW and Renault are also making some EV models in China for export. And Chinese brands are also making some inroads in the export market—especially because many legacy car makers seem to be struggling to make affordable EVs.

Ticker	Security	Last	Change	Change %
BMWYY	NO DATA AVAILABLE	-	-	-
RNLSY	RENAULT SA	8.55	+0.33	+4.01%

CLICK HERE TO GET THE FOX BUSINESS APP

Tesla might start to meet more demand in Europe from its Germany plant, which opened in March. But China’s early lead in the EV market gives it an advantage as the world starts to electrify its auto sector. The country dominates the supply chain for battery materials, and its vast market gives EV makers a more viable path to success.

China’s EV market will slow further in 2023. But that still, for the most part, puts it miles ahead of the competition.