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How China Plans to Crush Elon Musk in Electric Car Market

Chinese car companies could soon be moving into the US electric vehicle (EV) market, promising to provide immense competition to the likes of Elon Musk’s Tesla, as well as home-grown manufacturers branching out into the widening market.

Despite providing the potential for more affordable electric cars while the Biden administration is pushing the nation towards electrified transportation, Chinese firms are likely to face skepticism from consumers at a time when sentiments towards Beijing are politically charged.

They also face massive upfront costs to break into the market and attract customers, according to industry experts.

In January, Reuters reported, citing four sources familiar with the company’s thinking, that Chinese EV giant BYD—which stands for Build Your Dreams—was making a global push to become the country’s largest producer and had spent much of 2022 studying how to establish a distribution network in the US

Zhang Wei, one of the company’s key shareholders, told the outlet that “BYD at this point is already better positioned than Tesla in the EV era,” as it sourced and made most of its components domestically in China.

However, it fell short of a public announcement, owing to rising tensions between the US and China, and Biden’s incentives for domestic manufacturing, signaling that it was taking a “cautious approach.”

BYD represents a wider trend in that the Chinese EV market is already large and is eyeing outward expansion. Analysis by ING, a Dutch bank, found that EVs made up 27 percent of domestic Chinese sales in 2022, nearly doubling the number sold in 2021. BYD alone outstripped the sales of Tesla last year by more than 500,000 units.

“What happens in China will not stay in China,” Bill Russo, CEO of advisory firm Automobility, told Insider. His analysis of the market suggests a few strong contenders with established supply chains, such as Geely and Xpeng, were already emerging, and would likely look to the international market next. It could be very well that other Chinese manufacturers are doing the same as BYD.

“I’m in a sense delighted at the prospect of more electric cars,” Marc Geller, a spokesperson for the Electric Vehicle Association, told Newsweek. “The problem at the moment is lack of product. My understanding is there are tremendous waiting lists for, example, the Ford vehicles.”

While US EV sales increased 65 percent year-on-year in 2022, according to CleanTechnica, a green energy research outfit—of which Tesla models took the top two spots, followed by Ford’s electric Mustang—they still comprised just 5.7 percent of domestic car sales.

As the Biden administration has already pushed the US towards EVs through measures in the Inflation Reduction Act, and several states have brought in mandates for phasing out gas cars, supply presents a growing challenge, compounded by the limited supply of raw materials needed for EV batteries .

“The truth is, the legacy auto makers need a kick in the pants to move forward more rapidly,” Geller said. “They’ve all got electric cars in the market, but their production numbers are pretty small, certainly compared to Tesla.”

Newsweek reached out to Ford, Tesla and BYD for comment via email on Thursday.

Chinese manufacturers, who appear to be increasing their production at greater speed, could fill that gap. And there is precedent for foreign car manufacturers breaking into the US market: Japanese car makers such as Toyota and Honda gained a foothold in the 1960s and 70s, while South Korean manufacturers such as Hyundai and Kia made inroads in the successive decades.

Brian Maas, president of the California New Car Dealers Association, said those companies “entered the market slowly, they got consumers to understand and believe in the product, and they’ve done very well since.”

However, whereas those foreign manufacturers were competing in the traditional gas car market, Maas said Chinese EV manufacturers have to not only convince consumers to buy their car, but to buy into EVs in the first place.

“To enter the mass market at the lower prices,” he told newsweek, “You also have to convince consumers, in addition to buying your cheaper vehicle, to change their driving behavior and figure out how to charge it… that’s going to take a while.”

An issue raised with EVs generally is that of infrastructure. While single-family households are typically able to charge at home, there are limited resources for multi-family dwellings such as apartment blocks.

Geller mentioned that Chinese manufacturers, such as Great Wall Motor and SAIC, had already broken into the European market, adding: “Americans are going to be no slower to be willing to purchase Chinese cars than the English, or Norwegians, or Irish.”

Maas noted that the other foreign manufacturers that entered the US market previously began with affordable cars before working their way up to luxury models once they had brand approval—suggesting this is a well-trod path into America.

“They tend to start with low-cost cars and move up the ladder,” Geller agreed. “I don’t know if, when you’re introducing an electric car, you start at the low end or not; certainly, there’s a hunger in the market for lower-priced electric cars.”

Chinese car companies could soon be moving into the US electric vehicle (EV) market, promising to provide immense competition to the likes of Elon Musk’s Tesla, as well as home-grown manufacturers branching out into the widening market.

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