Chinese EVs will take over the world?

[ncbill]

None of the Chinese-made vehicles so far have come anywhere close to meeting safety standards here in N. America...that's the biggest hurdle they've still got to overcome.

 

[Major Tom]

The challenge with new battery factories is that even if raw materials such as lithium is plentiful on earth there is not that much mining capacity. And building new mines is a very slow process.

I am not really qualified to fully participate in this thread, but couldn't help noticing that, apparently, the Salton Sea in the Southern California desert is a rich source of lithium. Moves are already underway to establish extraction operations. The California Energy Commission has estimated that 600,000 tons of lithium could be produced every year. This is significant, as worldwide production of lithium in 2019 was 85,000 tons. There are many articles online about this, but here is one from Autoweek -

https://www.autoweek.com/news/green...ithium-from-the-salton-sea-to-make-batteries/

 

[calmloki]

I envision the Chinese playing a normal long game. Learn to produce something, sell it cheap or at a loss until the competing country's manufacturing base starts buying product from them and rebranding, continue improving the product and then take over all production, as the competing country has given up manufacturing as not cost effective. Raise prices as desired.

 

[Midpack]

Add to that limiting factor the current lack of generating capacity to meet future EV demands, the already highly stressed grid systems, along with solving how apartment dwellers will charge their vehicles.

Of course all these obstacles/limits can be overcome, but they will all be a drag on growth to one degree or another.

While true, the demand for EV charging won’t be completely additive? Many/most EV owners will charge at night at home, and if they’re at all smart they’ll charge off peak when rates are lower, that can be done automatically pretty easily. That’s currently unused power generation capacity that would actually help power stations better balance their loading. I could not find how the numbers work out, what’s additive and what’s not, but a partial mitigating factor.

In addition, when people cite the lack of charging stations as a barrier, charging away from home will be the exception (vs at home) for many EV owners. Only when they’re making a longer than typical trip. So while charging infrastructure is indeed an issue, the demand for charging station capacity is also not completely additive.

 

[OldShooter]

None of the Chinese-made vehicles so far have come anywhere close to meeting safety standards here in N. America...that's the biggest hurdle they've still got to overcome.

That's almost certainly because their marketing plans do not include the US market right now. I don't think there is anything so special about US safety standards that would make designing to meet them particularly difficult. IOW I think it's a hurdle they will just step over when they are ready.

Back to the post about Kia and Hyundai being "bargain" brands, from 2017 Kia has had a fairly impressive luxury GT, the Stinger. I drove one a year or two ago but passed on it because rearward visibility is very poor. I think they will have a tough time as people don't generally go to a Kia store for a luxury GT but they are making a serious effort.

 

[NW-Bound]

Speaking of lithium battery for EV, the batteries in Tesla cars use cells made by other makers, which are then assembled into modules by Tesla. In the US, the cell production by Panasonic is colocated with Tesla battery assembly, in the so-called Gigafactory, which is a JV (Joint Venture) between Tesla and Panasonic. In China, Tesla has been buying cells from other makers, such as CATL.

Tesla is experimenting with a new process of making cells, which was announced on Battery Day in Sep 2020. This "dry process" of making the separator for the lithium cell, in contrast with the traditional "wet process", promises a lower production cost. However, many cell makers are pursuing this idea, and Musk admitted in the 2020 presentation that there was a lot of work left. I have not seen any update on this. Until Tesla gets successful with this process, it still buys cells made by other cell makers.

Other car makers have formed JVs with cell makers to secure batteries for their EVs, for example GM and LG, Volkswagen and Northvolt, Geely and CATL (both are Chinese), Samsung and Bosch and Delphi, etc...

So, who are the large cell makers in the world? Things are happening fast, and I have found only some outdated info about their production line output in GWh.

A123 - 1.5 GWh (2018)

BYD - 30 GWh (2019)

CATL - 12 GWh (2018)

LG Chem - 4.5 GWh (2017)

Northvolt - 8 GWh (2021)

Panasonic (for Tesla) - 23 GWh (2019)

There are many other smaller cell makers, whose production are not known publicly. And in the next few years, there will be several factories coming on line, in the US as well as in Europe, and of course China.

PS. Warren Buffett is a long-time investor in BYD. Chinese companies specialize in LiFePO4 cell chemistry, which is safer than the other chemistry types. LiFePO4 is lower-cost, but does not have the same energy density, meaning EVs powered by them may not have the same range. However, Musk has been raving about LiFePO4 cells which he buys from Chinese makers. Panasonic does not make LiFePO4 cells that I know of.

 

[Christine]

Tesla is experimenting with a new process of making cells, which was announced on Battery Day in Sep 2020. This "dry process" of making the separator for the lithium cell, in contrast with the traditional "wet process", promises a lower production cost. However, many cell makers are pursuing this idea, and Musk admitted in the 2020 presentation that there was a lot of work left. I have not seen any update on this. Until Tesla gets successful with this process, it still buys cells made by other cell makers.

Tesla is currently building their own battery factories in Texas and Germany where they install equipment for the dry process - not for the more area demanding wet process. I have heard both 250 GWh and 1000 GWh as the eventual capacity at these plants. Either way more than the 23 GWh (in 2019) Panasonic make for them today in Nevada. And more than the dry process pilot plant in California which has a capacity of 30 GWh.


When Tesla eventually get these factories rolling they will continue to buy all the batteries they can get. So both Panasonic and Catl will continue to make batteries for Tesla.


While Tesla outsource some of their dry process batteries to others they can still keep their patents. So it's not a given that others can start using their proprietary tech.



There are many battery cell factories being planned - only here in tiny Norway we have 2-3 of them - and many more around the world.

 

[NW-Bound]

Tesla is currently building their own battery factories in Texas and Germany where they install equipment for the dry process - not for the more area demanding wet process. I have heard both 250 GWh and 1000 GWh as the eventual capacity at these plants. Either way more than the 23 GWh (in 2019) Panasonic make for them today in Nevada. And more than the dry process pilot plant in California which has a capacity of 30 GWh...

I have been very interested in Tesla's progress in this area, but have not been able to find any update.

Will you be kind to provide some links?

 

[6miths]

None of the Chinese-made vehicles so far have come anywhere close to meeting safety standards here in N. America...that's the biggest hurdle they've still got to overcome.

I agree with the Chinese playing the long game. The idea that NA markets are that important to the long game is somewhat comical. Everywhere I go in Africa (pre-Covid) there were Chinese everywhere - building, selling, buying, loaning... The US footprint seemed less and less and always with so many strings. The major markets in the world are largely becoming China, SE Asia, south Asia and Africa. The Chinese will sell their 'inferior' EVs into these markets and become more and more expert in the technologies. They will also gain access to more and more strategic materials and eventually start allowing manufacture of their products by local labour in all of these markets (just as the Japanese did).

Individual creativity and innovation will slow the transition but the lack of investment in early education and general education of large portions of the US population is negatively impacting this advantage. The US continues to attract the some of the 'best and brightest' from other countries but I don't think that this will last indefinitely. In my mind the die is already cast.

 

[Closet_Gamer]

Lurking underneath this thread are two questions:

1) Is China broadly "investable" given the inherent challenges they have on demographics, authortarianism, and growing antagonism with the rest of the world?

2) If the answer to #1 is "yes", is the innovation sector of China investable? Will we ever see products come out of China that are born in China rather than simply manufactured there?

Personally, I'm skeptical on both of those.

While their absolute economic growth remains strong (if you believe their numbers, which are suspect), there are so many underlying contradictions and problems that I'm not sure its sustainable. Particularly because the rest of the world is increasingly alive to the Chinese strategic threat on the military front.

On the product innovation front, they seem to be at the leading edge of places where an authoritarian government can force early, scaled progress. You WILL use electric charging stations. You WILL submit to this AI-enabled social tracking system.

But over the long haul, the inability to innovate away from the investment in early, 1st gen technology will drag them down. State-owned, monoply-anything eventually fades because it forestalls the creative destruction of capitalism and is able to gloss over inadequacies with pomp and unfulfilled plans.

Said differently, imagine if China in 1990 suddenly decided to become the world leaders in PC operating systems. They formed a crack team of OS scientists with unlimited state funds and published "Curtains 1.0." They forced this OS into every Chinese home & business by subsidizing 1B devices, also manufactured by a state-owned responsible for chip innovation & PC assembly, and requiring people to use them.

Fast forward 30 years.
Who do you think is winning in the computing market?
Curtains 10.0 or Intel, Microsoft & Apple?

The current Chinese model would be to hack the heck out of Intel, Microsoft & Apple to try and keep up with the innovation...but that always keeps them at the trailing edge and forced to focus on manufacturing with an increasingly large, aging domestic installed base of infrastructure.

I will bet on capitalism.

 

[Midpack]

^^ May well be. But I wonder if automobiles is a different market? Unlike operating systems, many/most of the legacy automakers, domestic and foreign, have been dragged kicking and screaming into EVs, and they’re still more talk than tangible products. Those that have EVs for sale have laughable volumes and/or prohibitively high prices. There were no legacy operating system enterprises to speak of, it was a new market for all.

In fairness, the incumbent automakers have massive capital investments in ICE production to manage through a transition. Entrenched labor may play a role.

And odds are the switch to EVs will hit an inflection point where relative volumes between ICE and EV sales will move quickly - think big American cars to fuel efficient Japanese cars (and back again). Adoption will move slowly (present case), then much faster, and back to slower adoption. Very hard to manage for legacy automakers. It will be fascinating to watch, some will get it right, some will get it horribly wrong…

 

[OldShooter]

... I will bet on capitalism.

Me, too.

I'll guess that most Americans that pay attention at all see China as you do. IMO this is seriously outdated. The Chinese economic miracle that has slashed their poverty rate (https://www.bbc.com/news/56213271) and put them on a trajectory to become the world's largest economy is (gasp!) capitalism. Read here: https://hbr.org/2021/05/americans-dont-know-how-capitalist-china-is and particularly the paragraph titled "What is it that Americans don’t understand about China?" (Spoiler: The answer is "They don't know how capitalist it is.")

Of course the old line CCP philosophy is still holding them back, particularly in banking and heavy industry and they are struggling with "Capitalism with Chinese Characteristics" but capitalism is winning. In the past few months "Xi Jinping Thought" is probably taking them a few steps backward, but he's far too smart to kill the golden goose. Also, he appears to be concerned about avoiding the income inequality that has plagued (his view) Western capitalism. This, too, shall pass.

Re your (silly IMO) software strawman, I'll offer this: https://www.belfercenter.org/publication/china-beating-us-ai-supremacy

I am no China expert, but I do read the news. I especially read the weekly "The Economist," in which China's economy and political woes are covered frequently. If you're interested in the subject I recommend a subscription. https://subscribenow.economist.com/

 

[ERD50]

... many/most of the legacy automakers, domestic and foreign, have been dragged kicking and screaming into EVs, …

Or maybe they just don't think the market is large enough for the current state of the art in EVs?

Legacy automakers generally aren't going to be flexible enough to deal with low volumes (unless the profit margin is there, like I assume it is with the Corvette, 21,626 sold in 2020 ).

US EV sales are ~ 2% of total, split across the ~ 10 legacy makers selling in the US, that's seems like a pretty small slice of the pie (though obviously growing).

The US is the third-largest market for EVs, and its performance in 2020 reflected a tough year for automakers. Total new car sales were down by 23% in 2020 to about 14.6 million units, and sales of battery EVs fell by 11%, from 327,000 to 295,000.

The legacy makers may miss the boat, but I wouldn't rule them out, or base it on their production to date.

-ERD50

 

[aja8888]

Or maybe they just don't think the market is large enough for the current state of the art in EVs?

Legacy automakers generally aren't going to be flexible enough to deal with low volumes (unless the profit margin is there, like I assume it is with the Corvette, 21,626 sold in 2020 ).

US EV sales are ~ 2% of total, split across the ~ 10 legacy makers selling in the US, that's seems like a pretty small slice of the pie (though obviously growing).




The legacy makers may miss the boat, but I wouldn't rule them out, or base it on their production to date.



-ERD50

The legacy automakers are under an obligation to make money to satisfy shareholders and also keep the business viable. Moving into a new and technologically different product line has to be done with caution and carefully planned transition. Plus, the new models will more than likely take sales from existing and profitable models in their lineup. It's way more complicated than this from a business prospective.

 

[Closet_Gamer]

Me, too.

I'll guess that most Americans that pay attention at all see China as you do. IMO this is seriously outdated. The Chinese economic miracle that has slashed their poverty rate (https://www.bbc.com/news/56213271) and put them on a trajectory to become the world's largest economy is (gasp!) capitalism. Read here: https://hbr.org/2021/05/americans-dont-know-how-capitalist-china-is and particularly the paragraph titled "What is it that Americans don’t understand about China?" (Spoiler: The answer is "They don't know how capitalist it is.")

Of course the old line CCP philosophy is still holding them back, particularly in banking and heavy industry and they are struggling with "Capitalism with Chinese Characteristics" but capitalism is winning. In the past few months "Xi Jinping Thought" is probably taking them a few steps backward, but he's far too smart to kill the golden goose. Also, he appears to be concerned about avoiding the income inequality that has plagued (his view) Western capitalism. This, too, shall pass.

....

Re your (silly IMO) software strawman, I'll offer this: https://www.belfercenter.org/publication/china-beating-us-ai-supremacy

....

I am no China expert, but I do read the news.

Let's go in reverse order.

You may be surprised that I read the news too. Don't need subscription links. Thanks. (You're usually not that sarcastic BTW.)

I've read about China's AI supremacy and reviewed the article you sent. As I noted, they will have a lead for a while because they can force feed collection of data and use of personal data to drive algorithms/learning in ways we will rebel against. Yes, they will be even better at using AI-driven facial recognition to suppress dissent. Mao, Stalin & Hitler are all wondering why they couldn't have been born in 2000.

I applaud the yellow & red lights in our system that slow down the AI march to a more perfect authoritarian state. That is a strength, not a weakness.

In the West, we're staring down a day-of-reckoning with big tech due to its impact on citizens. China is doubling down.

Ultimately, I believe the govt control & lack of human rights related to this will be their undoing....though it will be brutal to watch along the way and may go on for decades.

Lastly, I'm quite aware that China learned a lot from the Soviets and leveraged some capitalist approaches. Their economic miracle over the last three decades is amazing.

But they've also leveraged massive state investments in ways that I suspect will cause the same capital allocation rot that infected the Soviets. Chinese debt to GDP is 250%. Hard to tell if their high speed rail is brilliant or Amtrak 2.0, but the debt on that infrastructure is huge. I've read (in the news!) that interest payments on their debt have exceeded operating profits. Chinese state railway alone is $850B in debt.

Their government is intertwined with companies and investment allocation in ways that will drag them down. They lack solid controls on basic property & intellectual property rights.

The whole thing is a giant capitalist/authoritarian-central planning contradiction.

In terms of size of the economy, the USA has a bigger GDP than Ireland. Raw GDP is not that useful as a metric. Other than looking at how much can be peeled away for govt initiatives like defense, who cares?

On a GDP-per-capita basis China remains pretty pathetic. World bank data says $63k/person in the USA with $10.5K/person in China. China's GDP-per-capita CAGR is stunning, but it will taper.

In the end, I look at it this way: list the products that were invented in China that you or your family have any interest in using...

1) TikTok. (Though that's just a derivative of social media which was invented in the West.)

2) Huawei...we're trying to get that out of the infrastructure as fast as possible due to its links to the Chinese govt.

 

[OldShooter]

... Ultimately, I believe the govt control & lack of human rights related to this will be their undoing....though it will be brutal to watch along the way and may go on for decades. ...

Well, we'll see. I think the system will slowly fail, possibly accelerated by slowed economic growth to come and definitely accelerated by leaks through the Great Firewall. Starlink or similar systems (Kuiper) will be illegal, of course, but may end up being the biggest leaks of all. I will be interested to see what they do, if anything, with geofencing.

 

[DallasGuy]

In the long run, the car maker that can produce an affordable EV ($25K or less) will sell the most vehicles. Right now, the average person can not afford an EV.

The other thing is that the tax credit incentives do not help many retired or lower income people because those people don't pay enough in taxes to take advantage of a $7500 tax credit. The tax credit is useless to me.

 

[kcowan]

Why do I think this is just the beginning?

China endorses coal plants

China’s electricity shortage is rippling across factories and industries, testing the nation’s status as the world’s capital for reliable manufacturing. The shortage prompted the authorities to announce on Wednesday a national rush to mine and burn more coal, despite their previous pledges to curb emissions that cause climate change.

Mines that were closed without authorization have been ordered to reopen. Coal mines and coal-fired power plants that were shut for repairs are also to be reopened. Tax incentives are being drafted for coal-fired power plants. Regulators have ordered Chinese banks to provide plenty of loans to the coal sector. Local governments have been warned to be more cautious about limits on energy use that had been imposed partly in response to climate change concerns.

 

[Qs Laptop]

The other thing is that the tax credit incentives do not help many retired or lower income people because those people don't pay enough in taxes to take advantage of a $7500 tax credit. The tax credit is useless to me.

EV tax credits are "up to" $7,500. EV tax credits are based on the amount of income taxes you pay and the size of the vehicle's battery. Basically, that means if you pay $3,000 in income taxes you get a $3,000 tax credit and not $7,500. So, yes, the EV tax credit is useful for everyone, but not everyone will get the full $7,500 credit.

 

[explanade]

Average sales price of new cars is about $37k.

I don't know if that includes sales taxes or not.

So some EVs are not too much more than that ASP.

But the EVs now tend to be nicer cars with things like heated memory seats which tend to be options on many cars under $30k.

 

[RetiredHappy]

I have a hard time seeing any authoritarian government replacing the USA as the world leader in new advanced tech. They simply won't tolerate anybody in their country getting too powerful. Look at Russia and China these days. Any person who gets to powerful is cut down to size that the dictator/leader thinks is best. IOW, they will kill (or at least hobble) the goose that lays the golden eggs.

If China overtakes the USA it will be because the USA shot itself in the foot.

Except that in China, every large MegaCorp has military money backing it, i.e. the Chinese government owns a part of every large Chinese company.

 

[GTFan]

EV tax credits are "up to" $7,500. EV tax credits are based on the amount of income taxes you pay and the size of the vehicle's battery. Basically, that means if you pay $3,000 in income taxes you get a $3,000 tax credit and not $7,500. So, yes, the EV tax credit is useful for everyone, but not everyone will get the full $7,500 credit.

Yep, exactly. I wouldn't even consider the fed credit when buying an EV until it's refundable, and I think a lot of ERs here are in the same boat.

 

[2177V]

I am buying properties in China and I noticed China have low speed electric car or LSEV used by older Chinese folks in the country. Max speed is about 35 mph so it kinda remind me of a 50 cc city scooter or a golf cart. Prohibited on the Chinese highways and major Chinese cities….but in the country, it is a neat product that uses lead acid batteries. Safer than an electric bicycle or electric scooter and the low speed. This allows older folks in China more mobility to go shopping, connect to a high speed rail station, etc Cost only about $5,000 US dollars. Too bad LSEV are not allowed in the USA.

 

[2177V]

Without blaming either party, I sometimes wonder whether our (US) current two-party system is functioning that much better than some one-party systems. It's starting to feel less like a democracy and more like a kleptocracy. That can't be good for our long-term economy.

As a Chinese American, I love both China and USA and I want both countries to prosper. However, I am concerned about democracy in the USA and the problem is that democracy needs reform. Most Chinese top leaders are engineers and scientists and they had prior government service as a local leader and/or provincial government leader before being promoted. This is similar to a Fortune 500 company which there is no democracy and people get promoted based on accomplishments and not based on their political views.

The only requirement to become a US President is US citizenship and age 35. Sounds good…but there is no screening process, no experience required, no past accomplishments in government service. I favor getting the smartest and most qualified candidate on the US ballot than the most popular one. This means the candidate must have government experience as a city, county or state leader so voters can look at his or her accomplishments and not depend on a personality contest and the candidates ideological views.

When people believe democracy is “perfect”…then that mindset can be a fatal flaw because there is no reform in a changing and dynamic world. This means the industrial military complex and the industrial health complex controls the US government more than the US citizens due to special interest lobbying and campaign contributions.

 

[OldShooter]

As the thread lock comes over the horizon, I will just observe that I don't recall any Fortune 500 company head that has presided over a cultural revolution where millions of people died.