The term “electric vehicle” (EV) refers to both solely battery electric vehicles (BEVs), which use a battery and an electric motor instead of the tradition gasoline tank and internal combustion engine, and plug-in hybrid electric vehicles (PHEVs), which use a combination of both a battery, electric motor, gasoline tank, and internal combustion engine. However, some use “EV” and “BEV” interchangeably. Electric vehicles have consistency received enormous and ever-increasing attention from consumers, producers, and policymakers worldwide. In 2020, global EV sales grew by 43% from the previous year, increasing the global industry market share to 4.6%. The increase in electric cars is followed by similar trends in electric bikes, scooters, and even buses.
Dominating the industry are China, Europe, and the US who together represented around 94% of total EV sales in the first half of 2021. Although the US is home to some of the leading companies in global EV sales, including Tesla and General Motors, they only represent 11.19% of total sales, trailing behind Europe and China holding 39.94% and 43.44% respectively. Similarly, the US represented 18% of total EV production from 2010 to 2020 while Europe and China held 25% and 44% respectively.
China’s EV market looks very different from the US’s. While recognizable players like Tesla dominate the US, the industry in China is home to nearly 400,000 businesses related to “new energy vehicles”, causing extreme market fragmentation. However, there are a few contenders ahead in the race including BYD, NIO, Li Auto, and Xpeng Motors. Interesting enough, Warren Buffett backed automobile manufacturer BYD’s total November 2021 sales equal that of Tesla, NIO, Li Auto, and Xpeng combined.
The success of the cleaner energy automobile in China can be partially attributed to the support of public policy. Starting in 2009, the government gave out subsidies for EVs that were eventually phased out in 2020. Replacing them were mandates imposed on automobile producers that required a certain percentage of all cars sold to be battery powered. Other encouragement came in the form of tax exemptions, increasing charging infrastructure, preference for EVs when distributing licenses plates, preferred EV parking, among others. The Hainan province even announced that it would ban fossil fuel cars in their jurisdiction starting in 2030.
Another way the Chinese dominate the industry is their role in battery production. The most expensive part an electric vehicle is often the rechargeable lithium ion battery which replaces the gasoline tank. For a typical EV, this can cost as much as $6,300, increasing with premium models. As 80% of chemical refining of the raw materials in batteries occurs in China, the country is responsible for 70% of total battery production with Europe trailing in second. Most of that market share belongs to Contemporary Amperex Technology Co. Ltd (CATL), the world’s largest EV battery producer in control of 30% of production by September 2021. Worth more than General Motors and Ford combined, CATL sells to automakers like BMW and Tesla.