Watching Stella Li, executive vice-president of BYD, tell the BBC at the Beijing Auto Show that “history suggests not all will survive” in the global EV race seems almost surreal. She spoke in a casual manner, similar to how someone might bring up the weather. And the figures underlying that serenity are beginning to feel more like a verdict than a forecast. Last year, Chinese EV brands accounted for 27% of the domestic market. The United States was at 8%. At 13, Europe stalled. Wall Street is attempting to make sense of that disparity, which is more than three to one against America.
This divergence is peculiar because it has nothing to do with the cars. Yes, the cars are nice, but the structural benefits are more profound. Chinese automakers have been designed with a tighter supply chain and an unwavering focus on the domestic consumer in mind, practically from the chassis up. The history of BYD provides all the information you require. In 1995, the company began manufacturing batteries; it didn’t enter the automotive industry until 2003, when it acquired a small state company in Xi’an. The company didn’t introduce its first model until 2005. That order is important. BYD already had control over the priciest part of any EV by the time it began selling vehicles. For ten years, American startups have been pursuing this integration, but they have yet to catch up.
In the past, Tesla was the clear counterargument, the only Western brand capable of claiming both a true cost advantage and something approaching vertical integration. It is more difficult to make that argument now. The Trump administration’s reduction of federal EV tax credits hurt Tesla’s U.S. sales, and the difference between BYD’s and Tesla’s growth rates has shrunk to the point where even Tesla supporters have given up trying to spin it. It appears that investors now view Tesla’s premium as a software and FSD wager rather than a manufacturing one. They might be correct. Additionally, it’s possible that BYD’s pricing pressure will become apparent in the next two earnings cycles, affecting even high-end brands.
However, there is a sense that something significant is overlooked by the China-versus-America framework. In fact, domestic demand for EVs in China is declining. The price war in Shenzhen and Hefei is fierce, Beijing reduced consumer subsidies, and BYD’s domestic sales have begun to falter. Export demand, especially from Europe and Brazil, is impeding the Chinese players, according to Li, who stated that BYD’s order book is “much higher than what we can supply.” For shareholders, that is a comforting statement, but it depends on tariffs not closing too many doors at once. The countervailing duties imposed by the European Commission on Chinese electric vehicles are already severe. The market in the United States is practically closed. Therefore, the question arises as to whether the rest of the world can absorb the amount that China was meant to consume.
The easy narrative is complicated by a finding from the BCG survey conducted earlier this year. Similar to China, over one-third of consumers in the United States and Europe say they plan to purchase a BEV. There is interest. The infrastructure for charging and the price-performance match are what’s lacking. Range-related concerns were cited by about 80% of American owners who stated they wouldn’t purchase another EV. Chinese brands haven’t found a solution to that issue. Chinese brands are less affected by this issue, in part because their cities are denser and their charging networks were designed rather than haphazard.
It’s difficult to ignore the fact that plug-in hybrids and extended-range EVs, rather than pure battery cars, are currently the most intriguing growth category in both China and the United States. Since 2020, PHEV and EREV sales in China have increased at a compound annual growth rate of about 104%. Silently, American consumers are choosing the same option. The speed at which Western automakers can adjust their portfolios will determine whether or not Chinese stocks maintain their three-to-one advantage. As this develops, Detroit’s prospects don’t appear promising.