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Xi's China dream for electric vehicles has come true. 10 years later, the walls are rising

 


Ten years ago almost to the day, while inspecting a handful of luxury sedans from one of China's largest automakers, SAIC Motor Corp., President Xi Jinping delivered a crucial speech that would put China on the path to dominating the electric vehicle industry.

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(Bloomberg) Ten years ago almost to the day, while checking out a handful of luxury sedans from one of Chinas largest automakers SAIC Motor Corp., President Xi Jinping gave a pivotal speech that would set China on the course to dominate the electric vehicle industry.

The path to becoming a strong automaking nation lies in developing new-energy vehicles, Xi said, according to a 2014 Xinhua report. Claiming a head start, or high ground, in this sector is key to the competition globally, Xi said.

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In 2014, China sold around 75,000 electric and hybrid vehicles and exported around 533,000 cars. The domestic market was dominated by international manufacturers such as Volkswagen AG and General Motors Co., which were allowed to enter by establishing joint ventures with local players in the 1980s and 1990s. This helped China move from a cycling nation to a car nation. Local automakers and brands that did not work with foreign partners were considered inferior and lagging behind when it came to engines and other automotive technologies.

To move forward and meet environmental challenges, Beijing has focused on fuel-efficient vehicles using alternative energy. The state had issued a guideline in 2012 that established ways to grow the industry by setting sales targets, providing subsidies and allocating resources for building charging infrastructure, among others. Xi's speech two years later showed China's determination to use this as a way to overtake traditional Western and Asian auto powers, particularly Japan, home of Toyota Motor Corp.

With the stage set, China needed a catalyst to boost consumer interest in electric vehicles, which in the early 2010s were mostly inexpensive cars with a short range. It ultimately came down to Tesla Inc., which became the first foreign automaker to establish a wholly-owned business in China. With this special permission, Tesla completed its Shanghai factory in 2019. Its entry into the market has motivated local players to offer better electric vehicles with longer range.

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Fast forward to 2024, China has become the world's largest auto market and sells more electrified vehicles than any other country, with 9.5 million cars delivered last year. It also controls the majority of the battery supply chain. Local champion BYD Co. dethroned Volkswagen to become China's best-selling brand and, in the final quarter of 2023, overtook Tesla as the world's largest producer of electric vehicles. China also overtook Japan as the largest auto exporter, sending 4.14 million units overseas, including 1.55 million electric or plug-in hybrid vehicles.

Read more: China's stranglehold on the electric vehicle supply chain will be difficult to break

These achievements proved that Beijing's industrial policy and investments have paid off. But they also add to tensions with the West. China's success in the electric vehicle sector, which could disrupt traditional auto supply chains that employ millions, has become a major source of discomfort in Washington and Brussels.

As a price war at home and slowing growth push Chinese automakers to seek buyers for their affordable, tech-rich electric vehicles elsewhere, they face trade barriers, particularly in the EU and in the United States, which is in the meantime trying to develop its own electric vehicle offering. Chains. Both accused China of exporting excess capacity.

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The US has quadrupled import duties on Chinese cars to more than 100%, while the EU is investigating Chinese electric vehicles to see if government subsidies have provided an unfair advantage. Brazil recently removed a tax break on imported electric vehicles and even Russia, arguably Beijing's biggest ally and the biggest destination for Chinese auto exports since the war with Ukraine, has asked Chinese automakers to consider localizing their production.

Beijing has threatened to retaliate, with the Chinese Chamber of Commerce telling the EU on May 22 that import duties on cars with large engines could be increased from 15% to 25%. The EU has until June 5 to inform Chinese exporters of electric vehicles of the preliminary findings and indicate whether customs duties will be imposed.

SAIC, the state-owned automaker whose facilities Xi visited 10 years ago, happens to be one of three Chinese automakers, along with BYD and Zhejiang Geely Holding Group Co., selected for further scrutiny by the EU in as part of its anti-subsidy investigation. SAIC owns the British-sourced MG brand, which is one of the best-selling electric vehicles in Europe.

At an event marking the 10th anniversary of Xi's speech on Friday, SAIC officials, including chief engineer Zu Sijie, said they remembered the president's instructions well and that the company had constantly innovated in the field of technologies such as intelligent driving and connected cars.

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Li Zheng, co-founder of SAIC Qingtao New Energy Technology Co., a SAIC-backed battery startup, took the opportunity to promise that executives won't settle for growing competition from electric vehicles, noting that progress in solid-state batteries, which have greater energy density and reduced fire risks will be a way for China to maintain its advantage.

New energy vehicles have become a strategic industry, hotly contested by countries around the world, Li said. They are a key supporting force for the revitalization of our country's green sectors.

A lot can happen in 10 years, but with SAIC investing about 150 billion yuan ($21 billion) in R&D in the past decade alone, even despite trade wars, the year 2034 is promising announcement.

With the help of Jinshan Hong.

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