‘Asian EV makers enjoy some advantages over Tesla’

As it has happened in the internal combustion engine (ICE) vehicle industry, the Asian automobile makers are expanding their offering and enjoy certain advantages over Tesla, said S&P Global Ratings in a research report.

The market is fast moving, and S&P Global Ratings expect more intense competition over the next few years to shift the competitive landscape.

“Tesla is a strong competitor to Chinese automakers. The company was ranked as the No. 3 EV seller in China in the past three years, benefiting from good brand image and product functionality,” notes S&P Global Ratings report.

Tesla’s entry into the China market helped to accelerate the upgrade of the local EV supply chain and enhanced industry competition.

Chinese domestic producers such as NIO Inc. and Li Auto Inc. also compete in the premium segment adopting the asset light model by outsourcing production to other automakers there.

Due to a good understanding of local consumer preferences, NIO and Li Auto have been increasing sales and have gained a foothold in the market, the report said.

Chinese domestic producers dominate in the low-end and mass market segments.

For example, the low-price Wuling Hongguang mini EV is the best-selling EV model. Guangzhou Automobile Group Co. Ltd. and Xpeng Inc. provide EVs with good technology offerings at a mid-level price range.

Producers like BYD offer EV models in different price segments.

As a matter of fact, BYD has overtaken Tesla in the first half of 2022. Apart from battery EV, they also offer plug-in hybrid EV (PHEV), which lowers consumers’ concerns around driving range.

BYD also benefits from a more vertically integrated business model compared with peers amid supply-chain disruption.

Incidentally BYD has a car plant in India.

In their domestic market, the Chinese EV producers compete in all the price segments. The low-priced mini EVs are well received in the local market because affordability is an important consideration for consumers.

“These models currently account for about 30 per cent of total EV sales in the country. With increasing new EV models and higher EV adoption, we believe the percentage of mini EVs will trend down,” S&P Global Ratings report notes.

As compared to pure play EV players the traditional vehicle makers are better positioned at this stage, given their production capability, established supply chain and distribution network.

They also have an edge in plug-in hybrid EVs (PHEV), given their expertise on engines. Their internal combustion engine (ICE) car business also provides internal funding source for the development of EV business, which needs heavy R&D and capex, said S&P Global Ratings.

South Korean automakers Hyundai Motor Company and Kia Corporation are also aggressively expanding EV product line-ups. The group was ranked the world’s top five players in terms of sales volume in the first half of 2022.

In India too vehicle makers are getting into EV manufacturing with Tata group already selling a car model. Maruti Suzuki is betting on hybrid and commercial vehicle makers are also getting into play.

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