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Net Zero’s Global Winner is — China! ‘US hasn’t noticed yet that China-Made cars are taking over the world’ – Poised to become No. 2 exporter of cars, surpassing US & S. Korea

Via Net Zero Watch:

1) The US hasn’t noticed yet that China-Made cars are taking over the world
Bloomberg, 26 January 2023

2) North Asia cranks coal imports to fuel industrial reboot
Reuters, 24 January 2023

3) Green Britain: UK car production collapses to lowest for 66 years
CNN, 25 January 2023

4) Net Zero in a nutshell: Rolls-Royce ‘a burning platform’, says new boss
The Times, 27 January 2023

1) The US hasn’t noticed yet that China-Made cars are taking over the world
Bloomberg, 26 January 2023

China is poised to become the No. 2 exporter of passenger vehicles, surpassing the US and South Korea and risking new tensions with trading partners and rivals.

“It turns a lot of heads, partly due to its color, partly due to people not knowing what it is,” says Tatt, who waited four months for the vehicle to be shipped from Luqiao in eastern China. “I did have some concerns that the build quality may not be the best,” he says. “Upon test driving, any doubt of quality issues was put to rest.”

As China’s auto brands woo more and more foreign customers like Tatt, the nation is poised to become the world’s No. 2 exporter of passenger vehicles, a milestone that could reshape the global auto industry and spark new tensions with trading partners and rivals.

Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, according to data from the China Passenger Car Association. That’s only a whisker (about 60,000 units) behind Germany, whose exports have fallen in recent years. China’s numbers, behind Japan but ahead of the US and South Korea, herald the emergence of a formidable rival to the established auto giants.

Chinese brands are now market leaders in the Middle East and Latin America. In Europe, the China-made vehicles sold are mostly electric models from Tesla Inc. and Chinese-owned former European brands such as Volvo and MG, and European brands like Dacia Spring or the BMW iX3, which is produced exclusively in China. A raft of homegrown marques like BYD Co. and Nio Inc. are ascending as well, with ambitions to dominate the world of new-energy vehicles. Backed by Warren Buffett’s Berkshire Hathaway Inc., BYD is already charming EV buyers in developed countries such as Australia.

It’s just the beginning, according to Xu Haidong, deputy chief engineer at the state-backed China Association of Automobile Manufacturers. The target is to sell 8 million passenger vehicles overseas by 2030—more than twice Japan’s current shipments, he says.

The trend underscores that China has moved beyond being the “world’s factory” for low-cost consumer electronic devices, appliances and Christmas toys. By shifting to more complex and sophisticated products for competitive, highly regulated markets, Chinese companies are moving up the value chain in manufacturing—a key driver of growth that transformed the once-struggling communist economy into today’s quasi-capitalist $18 trillion juggernaut. Indeed, the Economic Complexity Index compiled by the Growth Lab at Harvard University, which analyzes the range of products a country exports, ranks China 17th in the world, a rise from 24th a decade ago.

“We have to have them on the radar screen, without counting out the usual suspects,” Mercedes-Benz Group AG Chief Executive Officer Ola Kallenius said during the Paris Motor Show in October. “The competitive intensity is increasing. It’s the most fun time to work in automotive since 1886”—the year that Carl Benz, the father of the automobile, rolled out the first car powered by a gas engine—“but it’s also the most uncertain time.”

The surge in car exports has largely gone unnoticed in the US, partly because it happened during the coronavirus pandemic and partly because Chinese carmakers are mostly focused on Europe, Asia and Latin America. General Motors Co. did sell about 40,000 of its China-made Buick Envision compact SUVs in the US in 2021, but political tensions, the continuation of Trump-era tariffs and subsidies aimed at boosting domestic EV production have diminished the appeal of that market.

Entry into Europe had long been a goal for Chinese companies, which started exhibiting at motor shows on the continent in the early 2000s. A series of failed safety tests around 2007 dashed those hopes. “Frankly, I thought that was it, forever,” says Jochen Siebert at JSC Automotive, a car consulting firm in Singapore.

But thanks to increasing automation and resulting standardization— Goldman Sachs Group Inc. says new auto plants in China have the highest levels of robot usage in the world—those concerns are now history. As quality improved over the past decade, Chinese cars started acing European safety tests. China’s tough curbs on air pollution have also helped most of its cars meet European emissions standards.

“To fight the Chinese, we will have to have comparable cost structures,” Stellantis NV CEO Carlos Tavares said on Dec. 19, speaking to reporters at a powertrain plant in Tremery in northern France. “Alternatively, Europe will have to decide to close its borders at least partially to Chinese rivals. If Europe doesn’t want to put itself in this position, we need to work harder on the competitiveness of what we do.”

In a watershed year for China-made cars, exports to the European Union surged 156% in 2021, to 435,000 units, according to Eurostat. But the rapid rise in EV shipments from the country risks provoking a political backlash in the European Union, according to Agatha Kratz, a director at Rhodium Group. “Part of this is just Chinese companies are getting better, but some of it is overcapacity in China,” she says. “This is going to be a pain point. It could generate a really strong reaction in Europe in terms of trade protections.”

The premium-priced Polestar that Tatt purchased is an exception: China tends to export relatively cheap cars. At around $13,700, the average price of an exported China-made passenger vehicle was about one-third that of a German car in 2021, and about 30% less expensive than a Japanese make, according to data provided by UN Comtrade. That means Chinese cars are most likely to pose a threat to cheaper Japanese and South Korean models, rather than to German marques.

Authorities in Beijing aren’t too concerned, at least for now. “It’s been proved that the strength of one country’s auto industry will be finally tested by the international market,” says Gao Yang, a director of foreign investment at the Ministry of Commerce. She added that the government will encourage Chinese automakers to acquire foreign companies.

Having demonstrated that it’s a reliable manufacturing hub for industry majors, China has been leading the charge on the next frontier: EVs. Local carmakers have found the electric platform relatively easy to master compared with the complex internal combustion engine.

“The switch to battery means the motor is no longer a differentiator,” says Alexander Klose, executive vice president for overseas operations at Aiways Automobiles Co., a pure-Chinese EV maker, which has sold several thousand vehicles in Europe. Technologically, “it’s created a level playing field,” he says.

A global push to cut carbon emissions and save the planet has prompted Beijing to encourage EV makers and buyers with subsidies, while a robust local supply chain has made it cheaper to make an EV in China than in any other place. Tesla’s Shanghai factory produced almost 711,000 cars last year and accounted for 52% of the company’s worldwide output. The measures have also spawned dozens of domestic manufacturers like Aiways. Many have barely made a dent, but BYD, Nio and XPeng Inc. are among standouts with potential to shine on the global stage.
BYD, which also makes its own batteries and chips, is the biggest EV producer at home. It has ambitions of becoming the Toyota of EVs for the world’s budget buyer, and it’s betting its own cells and semiconductors will help it reach that goal.

Tesla Inc.’s biggest competitor is likely to be a Chinese company, Chief Executive Officer Elon Musk said on a call with analysts following the electric-vehicle maker’s quarterly earnings.

Asked about Chinese car companies, Musk said they “work the hardest, and they work the smartest,” describing them as the most competitive in the world. “If I were to guess,” he said, “probably some company out of China is the most likely to be second to Tesla.”

“We’re not hiding the fact that we are Chinese and Europeans are slowly getting used to the fact that products from China are high quality,” says Alan Visser, the global head of Lynk & Co., a Geely-owned EV brand that says it has more than 180,000 registered users in Europe for its rental services. Geely said its total exports were 190,000 vehicles in 2022 and the target is 600,000 a year by 2025.

From selling just a few thousand cars in the mid-1980s, China’s carmakers have come a long way. Up until 2018, when Tesla was allowed to fully own its China plant, foreign carmakers had to form partnerships with local companies to manufacture in China. While foreign companies guarded their most advanced technology, local players became competitive by learning processes from their partners and via acquisitions of brands such as Volvo and Lotus. A rapid pace of growth in domestic demand made China the world’s biggest auto market in 2009.

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See also the GWPF’s papers in China’s real geopolitical strategy on climate and energy:

Jun Arima: Eco-Fundamentalism as grist for China’s mill (pdf)

Patricia Adams: China’s energy dream (pdf)

Patricia Adams: The Red and the Green – China’s useful idiots (pdf)

2) North Asia cranks coal imports to fuel industrial reboot
Reuters, 24 January 2023Thermal coal imports into China, Japan and South Korea – three of the world’s largest coal users – hit their highest combined total in 16 months in December as the North Asian manufacturing powerhouses primed their economies for growth in 2023.Economic momentum in these countries – which collectively accounted for nearly half of all thermal coal imports in 2021 – was subdued in 2022 as China’s strict zero-COVID measures stifled industrial activity across the world’s largest manufacturing base.Japan and South Korea have extensive supply chain ties with China which meant that each country suffered slowdowns in both productivity and demand growth in 2022 as China’s COVID-19 curbs stifled movement of goods and people over much of the year.But thanks to a slew of stimulus and easing measures passed by Beijing that are designed to kickstart a revival in China’s economy this year, factories and industries throughout North Asia are now also primed for a pick up.

To feed that anticipated sustained rise in output and consumption, each country has stepped up imports of thermal coal, which generates power for electrical grids as well as plants producing everything from cement and ceramics to refined metals, chemicals, heavy machinery and fertilizers.

Combined thermal coal imports by the three countries totalled 43 million tonnes in December 2022, the highest monthly tally since August 2021, ship-tracking data from Kpler shows.

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3) Green Britain: UK car production collapses to lowest for 66 years
CNN, 25 January 2023

UK car manufacturing hit a 66-year low in 2022, as the closure of two plants, a global shortage of semiconductors and the effect of Covid lockdowns in China on auto supply chains crippled output.

Figures published Thursday by the Society of Motor Manufacturers and Traders (SMMT), an industry body, showed that the number of passenger cars made in Britain declined 10% year-on-year to hit 775,014.

That’s the lowest total since 1956, and 41% down on the 1.3 million cars made in 2019 before the pandemic.

The UK auto industry has suffered a series of setbacks recently, including the closure of Honda’s (HMC) Swindon plant in 2021 and BMW’s (BMWYY) announcement in October that it will end production of the electric Mini in Oxford this year. The plant will produce internal combustion engine vehicles until those are banned in 2030.

The latest blow came last week when homegrown battery startup Britishvolt entered administration, the UK equivalent of filing for bankruptcy.

Britishvolt’s demise poses questions about whether auto manufacturing has a future in Britain if it doesn’t have the batteries it needs to power electric vehicles.

The company was planning to build a £3.8 billion ($4.7 billion) gigafactory in the north of England, which once complete would have produced enough batteries for over 300,000 electric vehicles a year, equivalent to nearly 40% of current UK vehicle production.

Its failure leaves Chinese-backed Envision AESC, which supplies Nissan (NSANF), as the only UK-based manufacturer of electric vehicle batteries ahead of the looming ban on the sale of petrol and diesel vehicles in 2030. Hybrids are set to be banned from 2035.

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4) Net Zero in a nutshell: Rolls-Royce is ‘a burning platform’, says new boss
The Times, 27 January 2023

The new boss of Rolls-Royce has likened the engineering group to a “burning platform” and described the company’s performance as “unsustainable”.

Tufan Erginbilgic, who took over as chief executive from Warren East at the start of the year, told staff “we do have a burning platform, not because I say so but because of what I am going to share with you”.

The former BP executive said the company’s performance was “unsustainable”, adding that “it is at a level [at which] it cannot continue. Rolls-Royce has not been performing for a long, long time. It has nothing to do with Covid, let’s be very clear.

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“Covid created a crisis, but the issue in hand has nothing to do with it.”

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