China’s New Energy Revolution and BYD’s Success

The Path to Industrial Upgrade: New Energy Revolution

The direction of China’s industrial upgrade is becoming increasingly clear: the most important path forward is the new energy revolution.

BYD’s Rapid Growth: A Case Study

Let’s start with a standout company: BYD.

In 2022, BYD sold 1.8 million vehicles, becoming the world’s largest new energy vehicle (NEV) manufacturer. However, few people realize that in 2020, BYD’s sales were only 410,000. In just two years, the company’s sales more than tripled. It is estimated that in 2023, BYD’s vehicle sales will exceed 3 million. How did this happen?

The Rising Acceptance of NEVs

The advantages of NEVs, including electric and hybrid cars, are now widely recognized. Acceptance of these vehicles is growing rapidly. By the end of 2022, the penetration rate of NEVs reached 30%, and it may approach 40% in 2023. This trend means that the sales of traditional fuel vehicles will decline. Although China is a major market for fuel vehicles, with annual sales of 27 million, domestic brands only hold about 50% (sometimes as low as 30%) of the market share. The rest is dominated by imported and joint-venture brands. While these contribute to GDP, the Gross National Income (GNI) they generate is smaller, meaning that the income from producing domestic vehicles is lower compared to that of domestic brands.

China’s Vehicle Exports: Heading to the Top

When it comes to exports, China exported 1.01 million vehicles in 2020, and by 2022, this number had soared to 3.11 million, a threefold increase in just two years. In 2023, China is expected to surpass Japan as the world’s largest vehicle exporter. Most of these exports are domestic brands, with Tesla being the only notable foreign brand. Currently, the global annual vehicle production is 80 million, with China accounting for 30%. As NEVs become more widespread, China’s vehicle exports could rise to 6-8 million units. Additionally, Chinese car manufacturers will set up factories overseas, generating GNI (profits) abroad, potentially boosting China’s GDP by $300-500 billion and its GNI by $1 trillion.

Infrastructure Investments and Economic Opportunities

This is just the beginning. The growing popularity of NEVs will drive demand for large-scale investments in high-power charging infrastructure and battery swapping stations. The biggest bottleneck for electric vehicles (EVs) remains charging and battery swapping, which could lead to investments worth trillions, including the transformation of existing gas stations. China’s power grid technology is world-class, presenting minimal technical challenges.

The “Three Electric Systems” and Industry Impact

The EV industry primarily revolves around the “three electric systems”: batteries, motors, and electronic controls. This shift will impact the chemical industry, particularly battery manufacturing. Traditional petrochemical companies will need to adapt as reduced demand for fuel lowers the need for oil and petrochemicals. This shift will also decrease oil imports, enhancing GDP. While the petrochemical sector may decline, companies in the new energy chemical sector, such as lithium mining and battery production, will thrive. Companies like CATL (Contemporary Amperex Technology Co., Limited) may eventually match the status of major oil giants.

Electric Motors: A New Growth Sector

Electric vehicles rely on electric motors, whose principles are simpler than internal combustion engines (ICEs) and transmissions. The electric motor industry has a much lower entry barrier compared to traditional ICE and gearbox manufacturing. This will boost the electric motor sector while leading to transformations in the engine and gearbox industries, generating significant investment opportunities and boosting GDP through import substitution.

The Role of Electronic Controls

The final element of the “three electric systems” is electronic controls. This area connects to industries such as computing, microelectronics, artificial intelligence, the Internet of Things, and 5G. While China still faces challenges in some of these fields, automotive chips prioritize reliability over advanced manufacturing processes, allowing China to bypass certain microelectronics disadvantages.

Power Generation and the Shift to Renewables

In addition to expanding the power grid, EV adoption will require more electricity generation. China has already announced a halt to new coal power plants during its 14th Five-Year Plan. However, the increased demand for electricity from EVs will remain. Who will meet this demand? New energy sources such as nuclear, solar, wind, and thermal power are the answer. China holds a technological and cost advantage in these fields, with world-leading efficiency in solar power, for example. However, renewable energy sources, particularly wind and solar, can create grid fluctuations, requiring energy storage and peak-shaving power stations. This, in turn, will drive significant infrastructure investments.

Conclusion: Unstoppable Momentum in the New Energy Sector

The broader vision involves massive changes across nearly ten industries, centered on EVs, new energy power generation, and smart grids. While this transformation will not happen overnight, most of the technical hurdles have been overcome. With advantages in market size and cost, China’s progress in the new energy revolution appears unstoppable. Assuming continued development, China is poised to lead this industrial upgrade and energy revolution, significantly enhancing its global competitiveness.