The Montreal Auto Show opens its doors to the public on Friday. Twenty-two manufacturers from around the world are exhibiting their latest models. Asia is well represented with brands from Japan and Korea. There is even a Vietnamese company, VinFast.
On the other hand, no Chinese manufacturer participates here in the great annual fair of beautiful tanks. By contrast, at the Munich Auto Show last September, one of the most popular in the world in the city of BMW and Volkswagen (VW), eight Chinese brands arrived in force and we made the buzz with their electric vehicles. BYD even took advantage of the German show to launch a family SUV and its high-end Denza brand on the European market.
The management of the Montreal show refused to grant an interview to Duty on the subject. Regardless, the incontrovertible fact remains: Chinese manufacturers are now those experiencing the strongest growth in the sector.
The signs fool no one. China is expected to have exported more than five million automobiles in 2023, more than Japan. BYD, the standard bearer of this great industrial change, is today the leading automobile brand in China itself, after dislodging VW which had been in the leading position since 2008.
We continue ? BYD (for Build Your Dreams) sold 500,000 electric cars last quarter, more than Tesla. The manufacturer is preparing the opening of an assembly plant in Hungary. Another proof of its incessant growing strength: the brand will be an official sponsor of Euro 2024, again replacing VW.
Rare earths
“It is not surprising to see this development of the automobile sector in China since this country is an important manufacturing power in the world,” comments Yan Cimon, professor of strategy at the Faculty of Administration Sciences of the ‘Laval University. “China also has a thriving domestic market. A few years ago, this industry was very fragmented, with hundreds of manufacturers, and I’m hardly exaggerating. Today, there are quite a few remaining, including BYD. »
The professor also points out that the country has rare earths in abundance, strategic metals essential in high-tech manufacturing processes, but also low-cost mass manufacturing capacities, more and more robotic. One of the factories of Nio, another Tesla competitor, manufactures 300,000 electric vehicle motors per year while employing only 30 technicians.
Projections predict that Chinese manufacturers will capture a third of the global market by the end of the decade. This development is taking place and will take place under very high state perfusion. It has been calculated that each of the 8,000 cars sold each month by Nio currently costs $48,000 in public subsidies.
“The Chinese vehicles offered in Europe at the moment are not bad,” says Professor Yan Cimon. They can be compared to the first Korean vehicles to enter this market. They had their relevance, but they had to improve in quality and safety before becoming vehicles mainstream that they have become. The majority of inexpensive Chinese vehicles that we see are in this category, but in the years to come, the country’s manufacturers will develop more interesting products. »
More threats
This meteoric growth in Chinese industry could signal a new wave of deindustrialization in the West, this time in a highly technological sector. The United States outsourced more than a million jobs to Asia between 1997 and 2011. This destructive outsourcing linked to the globalization of the economy may have had effects even in the opioid crisis and the election of Donald Trump.
Even battery projects like that of Northvolt in Quebec could be affected by the rise of manufacturers like BYD and Nio. “That means, realistically, that there is a portion of the market that we will not be able to capture,” predicts Professor Cimon. We will not be able to compete head-on with the Chinese, if only because of their advantage in terms of the cost and control of rare earths. That said, having quality products, configured for multiple uses, always innovative, will ensure the success of the battery sector. »
The magazine The Economist, a benchmark for the world’s business sector, recommended at the beginning of the month that Westerners not react by imposing customs barriers. Professor Cimon thinks no less, hoping that the change will stimulate innovation. “The old protectionist reflex has not served us in the past,” he points out. The Americans imposed restrictions on the Japanese, who responded by exporting vehicles with more added value, luxury vehicles. »
In addition, the auto sector itself is globally interconnected. Vehicles stamped “ made in Canada » include many components from Asia. A Tesla designed in the United States, purchased in Quebec, was probably manufactured in Shanghai.
Even more cars
There remains the ecological question. Consumers certainly welcome the arrival of Chinese electric vehicles sold at prices that defy any American-Canadian competition. In China, the cheapest BYD sells for CA$16,000 compared to CA$53,000 for a Tesla.
However, is it good news for the environment and urban planning to see cars raining down at the price of a motorcycle?
Professor Pierre-Olivier Pineau, holder of the Chair of Energy Sector Management at HEC Montréal, points out that there are more and more vehicles on Quebec roads and that they are increasingly heavier , longer and longer, higher and higher and wider. “Cheap Chinese cars can not only affect investment profitability here, but also contribute to our unsustainable mobility, by making active and collective transport solutions less attractive,” he writes to Duty. They could push us even further into our overmotorization tendencies. »
It instead favors “penalties”, registration taxes which could limit sales of individual vehicles and finance public transport. “Imports could be curbed by border tariff adjustments reflecting lower carbon costs in China. This is what Europe is putting in place to counter the differences in competitiveness between countries implementing carbon pricing policies aligned with the objectives of the Paris Agreement and countries not implementing them. »