Age of the EV
We’re entering the age of the electric vehicle, and global trade is keeping pace. Around 20% of all cars bought in the world in 2023, a total of almost 14 million, were electric, and there are now 40 million on the road, according to the International Energy Agency. Total trade in electric vehicles amounted to around $150 billion in 2023, up over 50% from 2022. The EV market is concentrated in the world’s top three economic poles: In 2023, 95% of EV sales were in China, the U.S., and the EU. These economies have the battery and automotive supply chains they need to maintain a robust EV manufacturing capacity.
Germany v. China
During this decade, Germany and China, now the world’s top two overall car exporters, have been running neck-and-neck in electric vehicle (EV) exports. In the first quarter of 2024, Germany exported $8.9 billion of EVs and China shipped out $8.1 billion, according to TDM data. South Korea, in third place, exported $3.4 billon, followed by Belgium ($3.2 billion), Japan ($1.7 billion), and the U.S. ($1.5 billion).
Americans Buy
For all its purported troubles, the U.S. is still, in many ways that count, the world’s top consumer economy. The U.S., which shipped in $20.4 billion worth of EVs in 2023, is the world’s top importer of EVs, followed by Germany, the UK, Belgium and France. The U.S.’s top sources are Germany ($6.2 billion), South Korea ($4.4 billion), Mexico ($3.8 billion), Japan ($3 billion), Belgium ($1.5 billion), and Hungary ($600.9 million). China ($367.8 million) ranked seventh.
The China EV Booms
Like Japan in the 1980s and South Korea in the 1990s, China has dramatically expanded its automobile export capacity. Unlike those two economies, it’s benefitted from foreign investment and from a revolutionary new technology, electric vehicles. The auto industry is a massive part of the global economy, representing around 3% of total output. China has been the world’s top producer and market for cars since 2009. Thanks to massive investment and solicitation of foreign auto producers, China has been a net auto exporter since 2021. EVs now represent 44% of total Chinese auto exports, up from less than 1% in 2018.
Here Come Tariffs
Fearful of getting crushed by Chinese EV imports, the U.S. and EU have been throwing up protectionist walls against Chinese EVs. In May, the U.S. announced 100% tariffs, up from 25%, on imports of Chinese EVs.
In early July, the European Union imposed provisional tariffs of up to 37.6%, in addition to the EU’s standard 10% duty on auto imports, on Chinese EVs entering the 27-nation bloc. Chinese EV companies have advanced technology and produce their vehicles roughly 30% more cheaply. The EU duties are set to last at least four months. Chinese trade officials have said they will retaliate by slapping tariffs on U.S. and European goods.
Around half of Chinese car exports are made by Western companies like Tesla, Volkswagen, and Volvo, now China-owned, or in cooperation with Chinese firms. Tesla has said its Shanghai factory is it top export hub. In 2023, China was the world’s second largest exporter of automobiles, up from sixth in 2018.
How China Fights Back
Five of China’s top ten destinations for EVs in 2023 were EU members: Belgium, Spain, Germany, the Netherlands, and Slovenia. The other six countries in the top ten markets were the UK, Thailand, Australia, Canada, and Israel. The U.S. was China’s 22nd biggest market.
How will it cope with tariffs? China’s real weapon is that it has diversified its auto export base. In 2023, it exported over a billion dollars’ worth of cars, trucks and part to 38 different countries. The Chinese automobile industry’s top customer: Russia. In 2023, it imported $22.5 billion worth of autos and auto parts, up from $6.3 billion in 2022, leapfrogging from fourth to first. However, only a small percentage, around a quarter-billion dollars’ worth, was EVs.
Chinese exports of EVs to Brazil skyrocketed to $1.1 billion from around $20 million in the first five months of 2024. This year, Brazil has been China’s third biggest market for EVs, up from 22nd in 2022. The U.S. so far in 2024 has been China’s 29th biggest market, with only $57.4 million in exports.
John W. Miller is TDM’s Chief Economic Analyst. For more information visit tradedatamonitor.com