Mid-2023 Vehicle Status Report

There have been big changes in the EV market this year and more changes are on the way. My prediction is that within the next 12 months most people who currently own a car in most places in the world will be able to find an electric car at a price they can afford. This isn’t because there will be inexpensive cars everywhere but because there will be inexpensive cars where they are needed.

Put another way, don’t expect inexpensive cars to enter markets where expensive cars are selling well. But inexpensive cars are being built and their distribution is going to be flooding markets where people cannot afford expensive cars.

First of all, most electric cars are currently built in China. Before you say I am wrong you need to remember that such iconic brands as MG, Volvo, and others are now owned by Chinese companies. Other “American” brands from General Motors to Tesla make cars in China — some in their own factories there but most in conjunction with a Chinese manufacturer. Why? Cheap labor is one reason but not the only one. For example, compare the effort Tesla had to put in to open a factory in Germany vs. in China.

If most new EVs are made in China it only makes sense that these companies would be looking for nearby markets. Thailand, for example. While the Thai auto market is not huge it is a place to escape from the competition. The same goes for Vietnam. Additionally, small cars — like are most popular in China — are far more popular than in the U.S. and even Europe.

While some Chinese manufacturers, BYD, for example, have entered the European market they have done it with their larger vehicles with price tags much higher than back in China. Initially this is a tough sell as someone in Germany is more likely to buy a German car than a Chinese one if the specifications and prices are close. In the US market there are even fewer Chinese manufacturers entering the market. BYD has already said it has no intention to enter the US market at this time. Who you will see is Volvo — because they are already there now.

The Latin American market seems like it will be the next step for Chinese manufacturers once they saturate Southeast Asia. Some manufacturers are here, BYD for example, but they seem to be focusing on their bigger vehicles, particularly in Mexico. The Dolphin and Seagull should sell like hotcakes here but I expect there is more profit to make on the larger vehicles.

What will likely change this whole picture will be the tiny Tesla which most call the Model 2. It will be made in Mexico but will not be available until 2025. It would seem that if BYD wants to grow big in the Latin American market they will need to get their smaller cars into much of Latin America before the Model 2 reaches serious production.

In order to mass produce inexpensive EVs, manufacturers will need to focus on battery technologies other than Lithium Ternary. Lithium iron phosphate (LFP) batteries are the most used technology in China and other manufacturers (Ford, for example) and switching to LFP. They currently have a lower energy density than Lithium Ternary batteries but they are getting close. Sodium batteries are just starting to ramp up which should offer cheaper batteries than anything Lithium-based.

There are over 100 EV manufacturers in China. The competition has driven the price down such that few (probably only Tesla and BYD) actually are making a profit on EVs. There is likely to be many manufacturers dropping out but the competition is what will drive the “EV at the right price” market over the next 12 months.

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