China’s electric vehicle revolution reshapes global auto market

The increasing dominance of China’s electric vehicles is sending shockwaves to many parts of the world, with a panel of industry experts at the HSBC Global Investor Summit attributing China’s EV success to rapid technological advances, strong consumer demand, and fierce domestic competition.

They also discussed challenges faced by foreign brands, new monetisation opportunities, and the future of autonomous driving.

China’s automobile market has expanded rapidly in recent years. Domestic sales have reached 31.4 million units, with brand-new EVs accounting for 41% of the country’s total sales¹.

There is a distinct preference in China for local brands – especially in the EV segment, where consumers are attracted to the way homegrown carmakers have integrated technology into their vehicles.

Highlighting the scale of China’s transforming auto industry, Bill Russo, Founder and CEO of Automobility Limited, said: "All of the growth of the 21st-century auto industry is in China. In the past five years, local brands have gained significant market share, while foreign brands have lost more volume than they currently sell in China."

One key reason why foreign brands are losing ground is an inability to be digitally relevant to Chinese consumers. Over the last decade, smart devices have swept through China and its internet economy has played a vital role in dis-intermediating the business-to-consumer relationship.

Passengers now book local rides through apps. And digital platforms run by local champions such as Tencent and Alibaba are merged into the mobility ecosystem. But while the population is hooked to their devices, foreign brands have been unable to penetrate the digital realm and be relevant to consumers.

“If you don't have app-based digital relevancy, you're not on the shopping list of most Chinese consumers,” said Russo. That's the reason why the foreign brands, even if they make an EV, are not getting noticed, he said.

Battery supply-chain

Over the years, China’s EV market has benefitted hugely from the country’s advantage in battery supply chains. China boasts the world’s largest and most advanced battery production infrastructure, which allows local automakers to achieve cost parity and drive early adoption of EVs, said Yuqian Ding, Head of China Auto Research at HSBC.

Moreover, China’s EV market has become very competitive. As various carmakers race to enhance consumers’ digital experience, they are pushing the convergence of hardware and software to the next level.

China’s youth, often referred to as the "iPad generation" or as “AI natives”, have played a pivotal role in shaping the EV market. This tech-savvy segment is demanding vehicles that are not only more efficient, but have a flashy and innovative look. This has pushed automakers to deliver designs and experiences that appeal to this segment, creating a positive spiral of growth and innovation.

Chinese EVs are also increasingly being viewed as "rolling smartphones on wheels" as they integrate seamlessly with consumers’ digital lifestyles. And automakers are beginning to monetise this.

Data on commuting patterns, consumption behaviour, and food consumption is being leveraged to explore revenue opportunities through digital, mobility, and energy management services. These opportunities are attracting tech giants like Huawei, Xiaomi, Tencent, and Alibaba to the industry.

Dr. Brian Gu, Vice Chairman and President of XPENG, said that in future, autonomous vehicles could generate revenue from services including ride-sharing, package deliveries, and even errands. "The car of the future will no longer be a cost of ownership. It will be a revenue-generating tool," he said.

Era of autonomous driving

China’s EV industry is also leading the way to autonomous driving, having made significant advancements in AI and machine learning. Companies such as XPENG are pioneering new developments, focusing on sophisticated autonomous driving systems that use big data and advanced algorithms.

"We are getting very close to achieving Level 3 autonomous driving capabilities in mass-produced vehicles by the end of this year. Limited Level 4 scenarios, such as low-speed autonomous driving, could be commercially viable within three years," Dr. Gu said.

China’s approach to autonomous driving combines cloud-based large language models with powerful on-board computing capabilities. This allows vehicles to process vast amounts of data in real time, delivering safer and more efficient driving experiences, he said.

“The development of autonomous driving in China is no longer constrained by computing power or algorithms. The key lies in big data, which is generated through commercialisation and large-scale deployment," Dr. Gu added.

The future: global expansion and cybersecurity regulation

What does the future hold for Chinese automakers? They are rapidly expanding into global markets. This trend is being accelerated by the imposition of US tariffs, which have prompted Chinese automakers to build manufacturing facilities in countries such as Hungary, Turkey, Thailand, and Brazil.

Tariffs have not blocked China, but actually sped up its globalising progress, Mr. Russo said. This only allows Chinese automakers to further scale up production and create new market demand. XPENG, which already has a strong presence in Europe, Southeast Asia, and Israel according to Dr. Gu, serves as proof of such a trend.

While Chinese automakers expand globally, concerns about data privacy and security are rising. Dr. Gu emphasised that Chinese companies are committed to adhering to stringent data protection regulations. Such a commitment will be crucial as Chinese automakers navigate the complexities of global markets, where data privacy remains a sensitive issue.