news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Text丨Steve Man

Editor: Wu Haishan

As more and more Chinese automotive original equipment manufacturers (OEMs) expand their production bases in Mexico, the influence of Chinese automakers in Mexico continues to grow. Although most Chinese auto parts suppliers in Mexico provide highly commoditized parts that are not related to electric vehicles, such as seats, interiors, and die-castings, the increasing penetration of Chinese brand cars in Mexico also provides broader opportunities for automotive OEMs.

At the same time, we believe that although Chinese automakers do not have assembly capabilities in Mexico, their mature parts supply chain can quickly support product launches and mass production.

Currently, Chinese cars are sold at an average price 36%-50% lower than similar products in the United States and Europe. With the launch of more models in 2024, Chinese automakers are expected to maintain sales momentum.

First five months

China's electric vehicle exports to Canada increased by more than 80% year-on-year

As of now, Chinese auto brands have not started exporting to Canada, and Chinese cars may not be exported directly to Canada. Instead, they will consider using Mexico as a transit point to enter the North American market through the United States-Mexico-Canada Agreement with lower tariffs and taking advantage of Mexico's well-established supply chain and free trade agreements with the United States and Canada.

There have been recent reports that Canada is considering imposing additional tariffs on Chinese electric vehicles, following the lead of the United States and the European Union. If Canada imposes new tariffs on Chinese-made electric vehicles, the most affected countries may beTesla——Only Tesla andPole StarDirect exports of Chinese-made electric vehicles to Canada account for almost all of the market share. In the first five months of this year, China's electric vehicle exports to Canada (in US dollar terms) increased by 81.6% compared with the same period in 2023, possibly due to Tesla's increased exports from Shanghai in response to possible tariff increases.

all in all, Mexico could serve as a transit point until the tariff issue is resolved. Chinese automakers can quickly support product launches and mass production thanks to their mature parts supply chain.

Localized production

Another ticket to the North American market

For Chinese automakers, entering the North American passenger car market may also be a Can rely on localized production and investment in the region. ifBYDDirectly exporting electric passenger vehicles could be seen as affecting local labor and investment, leading to tariffs in Canada and the U.S. However, local production could be welcomed as it facilitates technology transfer and benefits the local workforce. The company's U.S.-made electric trucks are eligible for state incentives, such as California's hybrid and zero-emission truck and bus voucher incentive program.

Attracting investment and production from Chinese automakers could also promote technology transfer and benefit the local supply chain. Since the enactment of the Bipartisan Infrastructure Act of 2021, the U.S. auto industry has invested about $154 billion in this field. Through economies of scale, efficiency and advanced manufacturing to narrow the cost gap with Chinese electric vehicle companies, the U.S. auto industry needs not only temporary market protection, but also technology transfer, such as lithium iron phosphate technology used by Chinese electric vehicles.

Battery cost reduction

Providing room for electric car manufacturers to cut prices

in addition, China also has the world's largest manufacturer of electric vehicle batteries. CATL accounts for more than one-third of the global electric vehicle battery market in terms of GWh, making it the world’s largest electric vehicle battery manufacturer. As its electric vehicle battery prices fall, we calculate that by the end of the year, Tesla,NIO、auspicious、BMWandBAICElectric vehicle battery prices for CATL's customers could fall 14%, nearly 30% below prices at the beginning of 2023.

CATL's second-quarter results showed that its average price per GWh of batteries fell by more than 26% year-on-year, following a 31% year-on-year decline in the first quarter. Our scenario analysis suggests that the price cuts appear sustainable as the company passes on EV battery cost savings from lower raw material prices and increased production scale to customers while maintaining stable profit margins.

Considering that batteries account for 15%-25% of the cost of a $45,000 pure electric vehicle (BEV), a 25%-30% reduction in CATL's battery prices could save $1,500-3,300 per vehicle.

At this year's Beijing Auto Show, CATL launched the "Shenxing PLUS" battery, which aims to address consumers' main concerns about pure electric vehicles. This new technology provides 621 miles of range, twice the range of current typical electric vehicle batteries, and can achieve 370 miles of energy in 10 minutes, greatly shortening the 9-12 hours required for Level 2 chargers.

We believe that CATL, together with BYD, is leading the battery industry's shift to more economical lithium iron phosphate batteries, thereby reducing the cost of raw materials for electric vehicles.

(The author is an analyst at Bloomberg Industry Research. This article was published in Securities Market Weekly on August 24. The article only represents the author's personal views and does not represent the position of this magazine. The individual stocks mentioned in the article are only for example analysis and are not investment advice.)