China now produces two out of every three electric vehicles sold worldwide. How did this transformation of the global auto industry happen so fast, and what does it mean for once-dominant European carmakers? Is it an unfair advantage or simply smart strategising? CGTN Europe presents Shocking the System: Why China is winning the EV race—a documentary that takes you inside China’s EV revolution. We explore the supply chain dominance that’s slashed production costs, and the 'Corner Overtaking' strategy that has helped Chinese automakers leapfrog their global competitors. #ShockingTheSystem #ElectricVehicles #ChineseEV
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00:00Driving through the heart of the Italian lakes and with its beautiful scenery and stunning
00:20architecture, it couldn't be more European.
00:23But it's also where one Chinese car maker is making its bid for the European car market
00:30by launching two brand new electric vehicles here on the shores of Lake Maggiore.
00:39A statement of confidence in the European market.
00:43If you look at the electrification trends, Europe is ahead, so Europe presents the most
00:48opportunities.
00:49But even as poor electric vehicle sales contribute to cutbacks and strikes for European car makers,
00:56and despite the EU hitting Chinese-made battery-powered cars with steep tariffs to slow down their
01:02penetration of the European market.
01:05Europe is open to competition, but not for a race to the bottom.
01:11We must defend ourselves against unfair practices.
01:16This is what's alarmed the European Commission, Chinese-made electric vehicles, or EVs, loading
01:22for export in Shanghai.
01:26The number sold in the EU has risen nearly eightfold in the last four years.
01:31Globally, the picture's even starker.
01:34Two out of every three electric vehicles that are manufactured in the world are made in
01:37China, and three out of every four batteries used in electric vehicles are made in China.
01:44But many European car makers are against tariffs on Chinese imports.
01:49We do oppose tariffs.
01:51We don't think that's the right measure.
01:54And the EU's claim of unfair practices, rejected as unjustified by China, obscures other reasons
02:00for Chinese vehicle makers commanding lead in the race to the electric future.
02:06So what's really going on?
02:14We found our first big clue at the 2024 Paris Auto Show.
02:40Listen to two Chinese tech entrepreneurs turn car founders.
02:44Both talk about electric vehicles, like a Silicon Valley CEO would about software and
02:48silicon chips.
03:14Many Chinese companies also started producing advanced models packed with software features
03:34just as the pandemic hit, blindsiding Western car executives.
03:39Until the Shanghai Auto Show in 2023, most automotive executives couldn't enter China
03:46for two, three, four years.
03:48So what seemed like a blink of an eye, things changed.
03:52I was at the Shanghai Motor Show, and I saw these automotive executives see all these
03:58green plates, walk around the Shanghai Motor Show, and just were in total shock.
04:03They opened and closed the doors, make sure that the fit and finish was good, and then
04:07they got in the vehicles, looked at the software, you know, kind of played with the infotainment
04:13system.
04:14We're like, wow, this is crazy.
04:15They're beating us.
04:16And we're seeing some of that, the fear now.
04:21So a shock in China, and facing a huge challenge on their home turf in European markets.
04:29BYD is the biggest and best known Chinese electric vehicle maker, recently generating
04:37more revenue than Tesla globally.
04:39So I'm Imogen Vogel.
04:42I'm one of the presenters and producers on the Everything Electric Show and Fully Charged
04:46Show, which are YouTube shows dedicated to all things electric vehicles and clean energy.
04:51And you've decided that you will help me go through a test drive with this BYD because
04:54you're very experienced with the Chinese electric vehicles.
04:56I'll do my best.
04:57OK, thank you, Imogen.
04:58Imogen has road-tested lots of EVs for a popular YouTube show.
05:04I mean, this car, what do you think about the way it's driving?
05:07I'm experiencing it now for the first time, but you've had more experience driving the
05:10BYD car, as I imagine.
05:12It certainly feels very luxurious.
05:14I wasn't necessarily expecting that.
05:16I'd heard that.
05:17Well, that's the thing.
05:18The BYD vehicles are just absolutely brilliant.
05:20They are definitely really competitive from a price perspective as well.
05:24And it means that when you experience that really high quality and that really lovely
05:27drive, the really beautiful interfaces, there's somewhat of a surprise that, oh my goodness,
05:32you're getting this for a comparatively lower price point than you might expect.
05:38It's not just BYD.
05:40Chinese EVs have got a growing reputation for high-quality, competitive prices.
05:45And technology that some say could change car owners' relationship with their vehicles.
05:51I think they don't realise the potential that these electric cars have in their lives.
05:57At the moment, it's seen as, again, that transportation device from A to B needs to have some
06:02passion, some drivability.
06:04That's what the most important thing is for European consumers.
06:08But I think once they realise that this tech can be integrated with their phone, integrated
06:12with their house, it becomes so much more part of their life, they'll want more and
06:17more of this tech in the future.
06:20That's what Chinese company Leap Motors is betting on.
06:25In northern Italy, it unveiled two new models as it launched an international brand in partnership
06:31with global car maker Stellantis.
06:34This car is packed with features, a lot of safety features, technology features, as you
06:38probably expect from a Chinese car manufacturer.
06:41They're hoping that the European market will love all of these different features, but
06:44it is kind of complicated to get your head around it first.
06:47They reassure us that it's going to become intuitive.
06:52A favourable response from motoring journalists prompted some bold claims from Stellantis,
06:57the majority owner of the joint venture.
07:00So I think that the same thing will happen to every single consumer as soon they will
07:05step in a showroom, they test drive the car, and they will have this kind of life-changing
07:11experience and say, OK, I'm ready to take a leap.
07:14Salespeople will always talk up their product.
07:18But what explains that striking level of confidence?
07:25To find the answer, we headed to China.
07:29Just a few hours southwest of Shanghai is Leet Motors' production centre.
07:34So a car maker only founded 10 years ago, that grew from a tech company, and now has
08:04and produces 60% in-house.
08:07Compare that with this.
08:09So 5% of logistics, 10% of added value in our plants, 85% of parts that we buy from
08:16the suppliers.
08:18That was the global boss of Stellantis, owner of Chrysler, Jeep, Citroen, Fiat, Maserati
08:24and more, telling Italian MPs why it's so hard to bring down costs.
08:29A struggle that lost him his job soon afterwards.
08:35So it's not just what they make, but what it costs that makes Chinese EV makers like
08:40Stellantis' partner Leet Motor so confident.
08:45The key is what's known as vertical integration, control of the whole production process.
08:51So we're going to see where the batteries are made now.
08:53Of course, this is the heart of any electric car.
08:56And for Chinese car companies like Leet Motor, the heart, too, of their competitive advantage
09:01is having these battery plants on-site.
09:21These are the finished batteries going into the car?
09:24Yes.
09:25Can I see how many of these go into the car?
09:27Just one?
09:28No, there are four big modules and one small module in one car.
09:36Batteries are not just the core technology of an electric car, but on average 40% of
09:41its cost.
09:42So how you make them and how efficiently has a big effect on the final price of a vehicle.
09:48We saw how Leet Motor buys individual cells and combines them into batteries.
09:54That allows it to create its own electronic architecture, the foundation of an electric
09:58vehicle.
09:59So arguably, this is what makes Leet Motor not just a car manufacturer, but a battery
10:04manufacturer too, because while they're buying in battery cells from other factories
10:09around China, it's the way that they put them together, the circuitry and other elements
10:15that they say gives them a competitive and a unique edge.
10:19And the batteries have just meters to travel to the assembly line next door, turning out
10:231,000 vehicles a day.
10:41So no expensive legacy from producing fossil fuel engines, their own advanced technology
10:47produced in-house, cheaper labor costs.
10:50Little wonder Stellantis wanted to team up with and learn from companies like Leet Motor.
11:14So how did Chinese EV makers get so far ahead?
11:20The sheer scale of China's domestic market is one reason.
11:24In August 2024, it became the first country to hit a million EV sales in one month.
11:29It was just 24 years ago that total sales of all cars passed a million a year for the
11:36first time in China.
11:38The central government became concerned about pollution, energy security and the ability
11:43of Chinese car makers to compete internationally.
11:46So it made a key decision.
11:48There has been a policy since the turn of the century that prioritized weaning away
11:54the dependency on internal combustion engine propulsion in prioritizing investments in
12:00the next generation of whatever would replace the internal combustion engine.
12:05China decided early in this game that it was going to guide this industry toward alternative
12:10propulsion technologies, which is why now, today, China makes two out of every three
12:15of the world's electric vehicles.
12:19This is a fuel cell car.
12:21The fuel cell car uses hydrogen and oxygen to generate electricity.
12:26The policy became known as the corner overtaking strategy.
12:31Its intellectual driver was this man, Wang Gong, a former engineer for Audi, who proposed
12:36it in a paper in the year 2000.
12:39He became China's science and technology minister in 2007.
12:43In an interview two years later, he was already sounding upbeat.
12:47When I was listening to you talk about new energy vehicles, I had a question.
12:50Is it possible for the automobile industry to compete with developed countries one day?
12:55This is our goal.
12:57I came back to China to work because of this situation.
13:01At the time, we were thinking about cross-border development.
13:05As you just said, when will we be able to compete with them?
13:10I can say that now we have this kind of prerequisite.
13:14We are not talking about the current level of competition.
13:18We are talking about whether we will be able to compete in five years' time.
13:23Wang Gong is now known as the father of China's EV because of his extraordinary success in surpassing that goal.
13:30It was achieved with investment in battery research and production,
13:34cheap credit, land use permits, infrastructure investment, and subsidies.
13:40But foreign companies could get those, too.
13:44Tesla's Gigafactory in Shanghai, built in 2019 with central government backing,
13:49is credited with jolting Chinese companies into upping their game.
13:55There's a Chinese proverb that is like the catfish effect.
13:59You throw a catfish in a pond with lazy fish,
14:03and all the fish get stronger because of the catfish.
14:06I think a lot of people use that as an analogy with Tesla entering the China market
14:12because it strengthened all the other players.
14:22Shenzhen is absolutely spectacular lit up at night.
14:25You really feel that you're in the center of China's technology heartland.
14:30We're here because it can tell you so much about modern China.
14:35By night, a coordinated light show along the waterfront.
14:40By day, it's the streets that are buzzing.
14:46There's no better place that really captures two key Chinese characteristics,
14:53entrepreneurial energy and a love of technology, than these markets in Shenzhen.
15:00Shenzhen's also an important part of this story.
15:08The city started electrifying public transport in 2011
15:12and by 2017 had electrified all of its 15,000 buses.
15:18Its 21,000 taxis followed soon after.
15:22That switch generated data and contracts for battery and EV companies
15:26and helped change wary public attitudes.
15:51You can see the results on the streets,
15:53not just in taxis and buses,
15:55but in all the green number plates on privately owned cars.
15:59And at this charging station, run by BYD and Shell,
16:02with outlets for 258 vehicles,
16:04it is the largest in China and second largest in the world.
16:09So does the role of central and local government in all this
16:12back up EU and US accusations of unfair practices?
16:17A misconception, according to Chinese carmakers.
16:20We can't say there's absolutely no compensation.
16:23Especially at the start of this industry,
16:26the government has been leading the way.
16:31But as our industry develops,
16:36we have basically already given up on compensation for EVs.
16:43We only have individual tax payments.
16:47In the West, that kind of government support
16:50is known as industrial policy,
16:52something that fell out of favour with the rise of free market doctrine.
16:57But it's gaining renewed respectability.
17:00There is no nation that has built a competitive transportation sector
17:04that didn't have a heavy hand of government intervention.
17:08I mean, the nationwide US highway system
17:11was not built by the government.
17:13The nationwide US highway system
17:16was not the creation of the automotive industry, right?
17:19The securing of the energy supply chain of oil and gas
17:23is not the creation of the automotive industry.
17:26That's a creation of securing the supply chain of Middle East oil
17:30toward the Western economies of the world.
17:34So the idea of the government having a role
17:38in the shaping of the decisions being made in the market
17:42there's ample precedent for that everywhere in the world,
17:45not just in China.
17:47And if that's in the strategic interest of your industry,
17:50if it makes your domestic competitors more competitive
17:53versus the global auto industry,
17:56then so be it.
17:58That's what policy should be guiding.
18:01China's already moving ahead
18:03with the next stage of intelligent driving.
18:05Autonomous road sweepers, refuse trucks and buses
18:09follow each other down the road.
18:11Now the low-altitude economy
18:14is also beginning to take off
18:16with drone deliveries
18:18and flying vehicles
18:20all operating below 1,000 feet.
18:23Wow.
18:25I would like one of these in the boot of my car, I have to say.
18:28That's incredible.
18:30This is what Xpeng calls the land aircraft carrier.
18:34Out of it comes this supersized drone
18:36which can carry two people.
18:38We didn't get it off the ground
18:40but the man who created it
18:42told me it's easy to learn to fly.
18:54I did at least get to fly it, virtually.
18:57I did at least get to fly it, virtually.
18:59So today we are going to experience the manual mode.
19:04Okay.
19:05So you can...
19:07Test out how good I can fly it?
19:09Yes.
19:10Let's see.
19:11Okay.
19:12And if I crash?
19:13Normally no.
19:14Okay, normally no.
19:15Oh yes.
19:16First time for everything.
19:17Just don't land in the water or in the mountains.
19:21On the mountains.
19:22Is it mountainous where we are?
19:24Yeah, okay.
19:25Xpeng Aero HT just started building a factory
19:28to produce 10,000 of these.
19:30The founder says they've reached that point
19:32thanks to all the work done building China's EV industry.
19:55The power, the flight control, the autonomous driving
19:58and the entire supply chain are perfect.
20:02It's easy for flying vehicles to develop in China.
20:08So while China's EV industry is taking off
20:11legacy car makers in Europe
20:13are struggling with a huge structural challenge.
20:19To understand that, it helps to go back to where it all started.
20:25It was Karl Benz who developed
20:27the gasoline-powered automobile in 1886
20:30setting off a global revolution
20:32in transport and the environment.
20:35This museum in southern Germany
20:37takes you through the history
20:39not just of his company
20:41but of an industry which has been a mainstay
20:43of European and other Western economies
20:46built on an invention whose basic principles
20:49haven't changed for well over a century.
20:52This is an internal combustion engine from 1886.
20:55It really is an early example
20:57of a technology that has fundamentally
20:59shaped our world over the last 130 years.
21:02But that history is now coming to a close
21:05and a new future is being written
21:07for legacy car makers in Europe and elsewhere
21:10that are struggling to find their place in it.
21:15Some say they've been complacent
21:17because the glamour attached to their design history
21:19has sustained demand.
21:22True or not, there has been
21:24widespread emotional resistance
21:26to abandoning storied European brands
21:28and their noisy internal combustion engines.
21:37So the challenge for the industry
21:39is to electrify much-loved historic brands.
21:44Fiat's converted its iconic 500.
21:47Launched in 1957, for decades
21:49the 500 has been celebrated
21:51as the car of the ordinary Italian.
21:58But now Fiat workers are striking
22:01in part because poor sales of the electric 500
22:04are pushing them out of work
22:06and they say even they can't afford to buy it.
22:21With batteries nearly half the total cost of an EV
22:24Stellantis is trying to make them cheaper.
22:29But the workers place much of the blame on the EU
22:32which is tightening regulations
22:34on emissions from 2025
22:36and effectively banning fossil fuel cars from 2035.
22:39Too fast, they say.
22:41Low-demand meant Stellantis
22:43was forced to abandon its iconic 500.
22:45Launched in 1957, for decades
22:47the 500 has been celebrated
22:49as the car of the ordinary Italian.
22:51With batteries nearly half the total cost of an EV
22:53Stellantis is trying to make them cheaper.
22:55With batteries nearly half the total cost of an EV
22:57Stellantis is trying to abandon its iconic 500.
22:59Launched in 1957, for decades
23:01the 500 has been celebrated
23:03as the car of the ordinary Italian.
23:05It's a bit slower than what they've done so far.
23:10Low-demand meant Stellantis' main production lines
23:12were shut down when we visited.
23:14But this gearbox plant they showed us
23:16also illustrates the struggle facing legacy carmakers.
23:20Stellantis says it will meet EU deadlines
23:23and is committed to the electric future.
23:25But it's still making units like these
23:27for petrol-hybrid electric vehicles.
23:30Like many European carmakers
23:32for now it's hedging its bets
23:34because of the slow uptake of full EVs.
23:37During this period
23:39we have to move in parallel
23:41we have to move in parallel
23:43because obviously we have to make flexibility
23:45we have to be flexible
23:47regarding the customer demand.
23:51For Europeans it's a painful irony
23:53that there have been previous failed attempts
23:55to go electric.
23:57Like Fiat's own X1-23
23:59launched in 1972
24:01now sitting in the company's museum in Turin.
24:03So why when that failed
24:05are EVs the future now?
24:08Nobody was interested to purchase this car
24:10because of the limited range
24:14of potential use of the car
24:18in terms of autonomy of the batteries
24:20but because the idea
24:22to have a battery-powered vehicle
24:25was not really compelling
24:27in comparison with the
24:29internal combustion packages.
24:31So that's why
24:33the concept has remained
24:35a one-off
24:37and has remained on the shelf in some ways.
24:39What has changed is that
24:41electric cars now are really
24:43resembling and representing
24:45a substantial solution
24:47comparable to
24:49internal combustion packages.
24:52But now everyone can offer that solution
24:54in Europe.
24:56Chinese manufacturers like BYD
24:58are offering it under the nose
25:00in Turin.
25:01But the relatively slow consumer uptake
25:03of EVs in Europe
25:05is even causing challenges for them.
25:07The Italian government
25:09introduced some incentives
25:11to the buying of electric cars
25:13but they ended up in June.
25:15At the moment we are facing
25:17a difficult moment
25:19because there is less
25:21interest in electric cars
25:23compared to
25:25hybrid or petrol engines.
25:27So people aren't yet
25:29buying enough electric vehicles
25:31to meet the EU's target.
25:33That's because they're too expensive.
25:35But it's also about
25:37charging capacity.
25:39Europe is building
25:41electric infrastructure
25:43but at nowhere near the pace of China.
25:45One recent report
25:47said China had more than three times
25:49as many chargers as the EU,
25:51United Kingdom and European Free Trade Area
25:53combined.
25:55It all adds up to an existential
25:57challenge for car makers across Europe.
25:59Workers at VW,
26:01the EU's largest manufacturer,
26:03have also been striking.
26:05But some industry observers say
26:07it's time to face up to brutal reality.
26:09Do you think we'll see
26:11the collapse of one of the legacy car makers
26:13in the near future?
26:15It's very sad.
26:17I think it's inevitable.
26:19I don't think in the near future
26:21those companies are so enormous
26:23that it will take a while.
26:25But I think it's inevitable
26:27that if they don't adapt
26:29the arguments about
26:31whether the future is electric
26:33are basically non-existent anymore.
26:35It's boring. Who cares?
26:37If you really believe that,
26:39then please carry on.
26:41The future is electric.
26:43Electric motors, as a machine,
26:45are so much more efficient.
26:47If it's OK with people
26:49to import toxic fossil fuel
26:51that costs a lot of money
26:53and then refine it,
26:55and then transport it,
26:57and then put it in a car
26:59and then burn it once
27:01for a few thousandths of a second
27:03and then it turns into a gas that's toxic.
27:05If that's OK,
27:07then I won't argue with you.
27:09But I think the arguments
27:11against that old technology
27:13now are overwhelming.
27:15Chinese EVs lined up
27:17with European models
27:20with tough business conditions.
27:22I would also say
27:24tough political conditions.
27:26They knew they faced
27:28some big challenges.
27:30Re-engineering their entire industry
27:32while facing high labour and energy costs
27:34as well as Chinese competitors
27:36without those same issues.
27:38But would tariffs help them
27:40beat Chinese competition?
27:42Bullshit. Sorry.
27:44It's bullshit.
27:46German manufacturers
27:48produce in China too.
27:50This is the first signal.
27:52The second aspect
27:54is
27:56we have joint ventures.
27:58German
28:00manufacturers and suppliers
28:02have joint ventures
28:04with companies in China.
28:06We do oppose tariffs.
28:08We don't think that's the right measure
28:10because at the end of the day
28:12this is going to be an escalating
28:14mechanism where nobody benefits
28:16and the competition at the end of the day
28:18if it's fair
28:20and if it's free
28:22is the benefit for consumers.
28:24Sustained investment
28:26over many years,
28:28an integrated supply chain,
28:30no encumbering history
28:32and a relentless focus on innovation
28:34have given Chinese manufacturers
28:36a head start in the race
28:38to the electric future.
28:40Can European carmakers catch up?
28:42If they do,
28:44but the benefits say Chinese company bosses
28:46will flow both ways.
29:14Europe and China are both aiming
29:16for an electric future.
29:18The question for the EU
29:20and for legacy carmakers
29:22is not just who has the largest share
29:24of the market
29:26but who is in the driving seat.