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Why Is China Able To Create High Quality Evs For So Much Cheaper Than The Us?
There are 4 core things you need in order to make a profitable EV business. Tesla got as big as it did with only 2 of them, BYD has got everything.
Firstly, you need good and cheap batteries, which can easily be 50% of the cost of the entire car. For a long time these two adjectives were at conflict. Nickel-Cobalt-Manganese batteries were good (long range, quick charge) but not cheap (price and limited global supply of metals). Lithium-Iron-Phosphate barriers were cheap, but not good. Two different philosophies hence emerged. Western, Japanese, and Korean manufacturers focussed on NCM batteries which give them very high profit margins and tried to make them cheaper. Chinese manufacturers focussed on LFP batteries which had very low profit margins and tried to make them better. The Chinese chose correctly. It was much easier to make LFP better and slightly more expensive, to the point where the performance difference is small. In the meantime, a key weakness in NCM batteries, namely the fact that they are super flammable emerged, making them even more expensive especially to ship. The West was originally better at making both battery types, but after 10 years of diverging specialisation, the Chinese completely dominate LFP technology and are getting progressively better at it too.
Secondly, you need to sell enough volume to have enough scale. This isn’t unique to EVs or even cars, and has been the secret to US success up to this point. The US has 300 million middle income consumers within a single integrated region. To be a successful company for anything just needs you to sell successfully in the US. China is the only other place in the world where this is true, and that is quite new and getting better each year. China right now has about 400 million middle class each with purchasing power about a quarter of the US, so equivalent to only about 100 million US consumers. This is more than enough. While American drivers already have established habits about the cars they own and drive, the Chinese consumer is a blank slate. There is no established product loyalty or brand loyalty, and car penetration to begin with is low. When you sell an EV to an American consumer you have to persuade him to first sell or scrap his current car, then to move to a completely different type of car, and then to pay up for features he has lived without up to now. Selling to a Chinese consumer is much easier, and means that the BYDs and Xiaomis of the world can very rapidly hit production volumes that are profitable.
Thirdly, you need to have some way to differentiate your product. ICE cars largely got by on brand loyalty, with consumers willing to pay different amounts for perceived differences in performance, feel, and look. The actual differences were relatively minuscule but the market structure was effective at making you pay more for a Ford than for pretty much the same Toyota. For better or for worse, the EV market has not operated like this especially in China, and brands are now differentiating on genuine innovations. Companies like Li Auto are specialising as family cars that are essentially small limos with all manner of amenities and features like massage chairs and beds; others like Huawei’s AITO are banking on self driving systems far more advanced than Tesla; BYD is just trying to do everything pretty well but really cheap. Only Tesla has really succeeded in the West in doing anything like this (and maybe the Porsche Taycan), while everyone else really can only sell a generic product at the same price.
Fourthly, you need good charging infrastructure. Here China, Japan, and Korea have the unique advantage of new power infrastructure combined with dense populations. The new infrastructure makes it cheap to expand, while the later urban population makes short range batteries viable and don’t need you to build charging infrastructure in the middle of nowhere. Europe has the first problem while the US has the second.

Rescued Him At 8 Weeks But In Reality He Rescued Me And Has Been My Best Friend Throughout This Pandemic. Whole Lotta Love For My 18 Month Old Goober


































