Business

Chinese electric cars power ahead of ‘inferior’ US rivals

Better performance and affordability are driving the market Beijing’s way, according to battery materials maker Umicore

BYD electric cars waiting to be loaded onto a ship. The Chinese carmaker has overtaken Elon Musk’s Tesla as the world’s biggest producer of EVs. Photograph: Getty Images

Harry Dempsey and Edward White
Sun Mar 3 2024 - 15:28

US carmakers are struggling to sell electric vehicles (EVs) because its products are inferior, while the Chinese market powers ahead, according to one of the world’s biggest battery materials manufacturers.

Mathias Miedreich, chief executive of Umicore, said sales of Chinese electric cars were surging in contrast to the US due to better performance and affordability.

“They are simply good cars and people buy them,” he said in an interview, referring to Chinese vehicles. “The American ones [producers] seem to struggle to bring good electric vehicles [to market].”

The boss of the Belgian producer of cathode materials for EV batteries, which counts Volkswagen, BMW and China’s Envision AESC among its customers, added that US carmakers were also pulling back on factory expansion plans for electric vehicles because of weak demand.

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In China, electric car sales including plug-in hybrids surged 36 per cent to 7.7 million in 2023, up from 5.7 million in 2022, according to data from the China Passenger Car Association.

Electric vehicles made up more than a third of the 21.7 million new vehicles sold in China last year compared with 28 per cent in 2022.

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Although electric car sales including plug-in hybrids rose sharply in the US last year, the market is small.

US sales rose 58 per cent to 1.5 million in 2023, only 9.6 per cent of the total. This was an increase from 931,700 in 2002, 6.8 per cent of the total, according to consultancy CRU Group.

Chinese carmaker BYD, backed by Warren Buffett’s Berkshire Hathaway, has also overtaken Elon Musk’s Tesla as the world’s biggest producer of EVs, underlining the success of the country’s electric manufacturers.

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The weak demand in the US has prompted Ford to cut production of its F-150 Lightning electric truck and scale back on a battery plant in Michigan. General Motors and Tesla have paused some of their EV expansion plans.

However, there are cultural factors behind the success of the Chinese market compared with the US, which is considered a tougher nut to crack. This is because drivers in the US prefer larger vehicles, which motor analysts say need more expensive batteries, making them harder to sell.

“It’s a lack of affordable vehicles that is holding back more profound growth in EV adoption in the US,” said Sam Adham, an analyst at CRU Group.

Despite the majority of journeys being 50 miles or less, analysts say many US drivers bristle at the idea of buying an EV unless it can travel long distances on a single charge, commonly called “range anxiety”.

Consequently, Asian groups Toyota and Hyundai say solid-state batteries are key to unlocking the US market, Mr Miedreich said, as they have far greater driving range on a single charge than current batteries.

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He added that it could be difficult for Ford and GM to attract future customers for EVs “because from a product point of view, the market has made their choices already”.

The Chinese have “at the end of the day what the market needs”, he said.

Mr Miedreich’s comments also add to growing scepticism over whether the US Inflation Reduction Act (IRA), US president Joe Biden’s flagship climate change programme, has accelerated demand for EVs as much as expected.

“The end-market stimulation through the $7,500 [tax credit] was probably not enough because what was forgotten is you still need good products,” the Umicore boss said.

The IRA enables consumers of electric vehicles to claim a clean vehicle tax credit of up to $7,500 as long as the raw materials and components meet certain thresholds.

Umicore has been hit hard by the falling price of platinum, palladium and rhodium, which has affected its combustion engine business as these metals are components of catalytic converters.

It has cut capital expenditure plans to €3.8 billion from more than €5 billion for 2022 to 2026 and announced in February a slump in net profit of 32 per cent to €385 million in 2023, depressing its share price to eight-year lows.

– Copyright The Financial Times Limited 2024

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