00:00:00
[Music]
00:00:00
this video was sponsored by
00:00:02
S this year Bloomberg forecast Global
00:00:05
demand for lithium iron batteries to be
00:00:07
at 1.6 tatt hours meanwhile Chinese
00:00:10
firms alone have announced that they'll
00:00:11
have about 6 tatt hours of production
00:00:14
capacity built by the end of that same
00:00:16
year that is three and a half times as
00:00:18
much as the global demand forecast which
00:00:20
already assumes optimistic growth for
00:00:22
the year of course regions like Europe
00:00:24
and North America have pledged big build
00:00:26
outs of their own on top of that too
00:00:28
which while smaller than China's would
00:00:30
still be able to cover most of global
00:00:31
Demand on their own now importantly
00:00:34
plant capacity doesn't have to equal
00:00:36
actual production many plant build outs
00:00:38
end up failing even when they are built
00:00:41
plants don't always work at 100% output
00:00:43
and companies often pledge more than
00:00:45
they actually end up building especially
00:00:46
when State subsidies are on the line but
00:00:49
Chinese battery factories were already
00:00:50
running at just 51% capacity in 20122
00:00:54
and then at 43% capacity in 2023 so when
00:00:58
they promise even more over Capac going
00:01:00
forward that hardly seems out of
00:01:02
character as one might expect prices
00:01:04
have already started collapsing as a
00:01:06
result with Bloomberg reporting sell
00:01:08
prices briefly hitting just $53 per
00:01:11
kilowatt hour recently that is a price
00:01:13
that they formerly projected that we'd
00:01:15
only reach in 2030 or 2035 meaning that
00:01:18
we might be 5 to 10 years ahead of the
00:01:20
expected price curve and with batteries
00:01:23
making up somewhere between 20 to 40% of
00:01:25
the value of an electric car the
00:01:27
resulting collapse in EV prices has
00:01:29
started too while we still pay more for
00:01:32
E than their equivalent combustion
00:01:34
engine counterparts in the West in China
00:01:36
the opposite became true starting in
00:01:38
2022 already even before the various
00:01:41
purchase subsidies from the government
00:01:43
and electric car prices have only
00:01:45
dropped since affordable models cost
00:01:47
just10 to $20,000 while a nice upper
00:01:50
mid-range one like the xiaomi su7 for
00:01:52
example starts at under 30,000
00:01:55
unsurprisingly then Chinese cities
00:01:56
already have an incredibly High share of
00:01:59
them I've back to Shenzhen where I used
00:02:01
to live about 10 years ago to visit some
00:02:02
friends and seeing the change here has
00:02:04
been pretty mindblowing standing right
00:02:06
next to a massive Street and not being
00:02:08
completely drowned out by engine noise
00:02:10
is definitely not how things used to be
00:02:12
and with the massive overcapacity
00:02:13
driving prices down globally next we can
00:02:16
expect the same to start happening in
00:02:17
the rest of the world soon too
00:02:19
Volkswagen for example recently started
00:02:21
offering the electric ID3 for just
00:02:24
€249 a month on leasing here in Germany
00:02:27
which is now significantly cheaper than
00:02:29
the €400 or so that you'd have to pay
00:02:31
for an equivalent golf while this price
00:02:34
drop was partially driven by Volkswagen
00:02:36
having to meet government imposed EV
00:02:37
quilas the trend is there and it's very
00:02:40
likely that Chinese car companies could
00:02:41
already sell their electric cars in the
00:02:43
west that would undercut combustion
00:02:45
engine ones if we let them so how did
00:02:48
China become the global superpower in
00:02:50
batteries and EVs and can the rest of
00:02:52
the world catch up or should they even
00:02:54
try
00:02:56
[Music]
00:03:00
as the home of byd the country's largest
00:03:02
electric car maker and also the world's
00:03:04
second biggest battery company Shenzhen
00:03:06
has of course embraced an electric
00:03:07
future way faster than many others when
00:03:09
I left the city almost 10 years ago
00:03:11
electric taxis made by BYT were already
00:03:14
pretty common while the city with its
00:03:16
population of 18 million people actually
00:03:18
completed its transition to 100%
00:03:21
electric taxis and city buses around 5
00:03:23
to six years ago while shenen has been
00:03:26
especially quick even for Chinese
00:03:27
standards the country as a whole also
00:03:29
reached a very high 47% of EVs and
00:03:32
plug-in hybrid sales already and is
00:03:34
growing rapidly given that China is the
00:03:37
largest car market in the world by far
00:03:39
handily outselling others like the US
00:03:41
and the EU and given that batteries are
00:03:43
the most expensive component in EES it's
00:03:46
clear that just Chinese electric cars in
00:03:48
China alone have already turned
00:03:50
batteries into a huge business at energy
00:03:53
storage which is now growing even faster
00:03:55
than the category of EVs and we're
00:03:57
looking at a veritable battery boom
00:03:59
China for example more than quadrupled
00:04:01
its battery Fleet for energy storage in
00:04:03
2023 and passed policy mandates
00:04:06
requiring wind and solar plants to
00:04:08
install a certain rate of storage but
00:04:10
meanwhile batteries are now getting so
00:04:12
cheap that even Market players without
00:04:14
government support are starting huge
00:04:15
build outs of them even in places like
00:04:17
Texas and Germany and in this $ 130
00:04:21
billion battery industry China has
00:04:23
increasingly become the Undisputed
00:04:24
leader six out of the 10 biggest
00:04:27
producers in the world are Chinese
00:04:28
including the two larg largest ones by
00:04:30
far catl and byd and China dominates
00:04:33
every single process from making the
00:04:35
final sales to components and also
00:04:37
Upstream processes like Mining and
00:04:39
materials refining the energy storage
00:04:41
Market is completely dominated by
00:04:43
Chinese firms whose big focus on lowcost
00:04:45
lfp Technologies turned out to be a
00:04:47
perfect match for this segment and
00:04:49
meanwhile in EVS even Brands outside of
00:04:51
China from Ford to Tesla and Volkswagen
00:04:53
to BMW have basically agreed that they
00:04:56
have to buy at least large parts of
00:04:57
their batteries from Chinese suppliers
00:04:59
while some brands have gone even further
00:05:01
Volkswagen for example has bought shares
00:05:03
in the local EV maker xang and started
00:05:06
co-developing whole cars with them while
00:05:08
Mazda recently introduced an Eevee that
00:05:10
it called the Mazda 6E where the whole
00:05:12
car turned out to be just a reskinned
00:05:14
Chinese model called the changan deal L7
00:05:17
with some cosmetic tweaks and Mazda
00:05:18
logos it's clear to anyone in the
00:05:20
industry that China's dominance in
00:05:22
batteries and also their Associated
00:05:24
dominance NS is almost absolute and that
00:05:26
the rest of the world sort of
00:05:28
sleepwalked into a massive alliance with
00:05:30
them and how exactly we got here mixed
00:05:32
for a fascinating
00:05:35
story China's big battery story started
00:05:38
in 2000 3 years before the company Tesla
00:05:41
was founded and something like 8 to 12
00:05:43
years before the first proper EES rolled
00:05:45
off their production lines in the rest
00:05:46
of the world depending on your
00:05:48
definitions a man named wangang gave the
00:05:50
Chinese government a proposal he
00:05:52
previously studied abroad at a German
00:05:53
University and worked on research and
00:05:55
development for Audi and now he urged
00:05:57
his home country to embrace clean new
00:05:59
energy as the leap forward for the
00:06:01
country's automobile industry which the
00:06:03
state actually took seriously he was
00:06:06
invited back to China first to research
00:06:08
his idea and then in 2007 he was made
00:06:10
the country's minister of Science and
00:06:12
Technology to officially Implement his
00:06:14
plan Wong gang realized years before EES
00:06:16
were commercially proven that not only
00:06:18
would they become viable eventually but
00:06:20
also that China had three massive
00:06:22
reasons to make this happen one Chinese
00:06:25
cities were notoriously covered in Smoke
00:06:27
I moved away from Beijing in large part
00:06:29
because when I lived there we wouldn't
00:06:30
properly see the Sun for weeks at a time
00:06:32
and I had respiratory issues all the
00:06:34
time this was one of those issues that
00:06:36
regular people actually openly and
00:06:38
frequently complained about which is
00:06:39
especially dangerous for a government
00:06:41
like China two China has long been
00:06:43
critically reliant on oil imports it's
00:06:45
the world's largest importer in fact
00:06:47
then of their Imports 70 to 85% even
00:06:50
have to sail through the geopolitically
00:06:52
risky straight of Mala the country is
00:06:54
obviously nervous about this dependence
00:06:56
and three the leadership was long
00:06:57
frustrated with being simply a lowcost
00:07:00
Factory of the world but found that
00:07:02
especially with extremely complex
00:07:03
Industries like that of the combustion
00:07:05
engine it never managed to catch up to
00:07:07
the established players and their
00:07:08
essentially old leads batteries and
00:07:10
electric cars were a potential solution
00:07:12
to all three of these problems meanwhile
00:07:15
China also realized that it had huge
00:07:17
structural advantages in this
00:07:18
transformation and that much of the rest
00:07:20
of the world would also be particularly
00:07:21
vulnerable to being disrupted using a
00:07:23
Sprint and Marathon approach and if
00:07:26
you're wondering that's not some
00:07:27
official term I came up with it myself
00:07:29
but I think it describes the process
00:07:30
really well because China was so early
00:07:33
it had a unique chance to First Sprint
00:07:35
ahead and establish itself as a
00:07:36
technology leader in this field before
00:07:38
most of the rest of the world even woke
00:07:40
up and thought about seriously pushing
00:07:42
back see in the early 2000s batteries
00:07:44
were seen as a fairly uninteresting
00:07:46
industry overall especially in Europe
00:07:48
and in the US before their use in cars
00:07:51
and energy storage these were a tiny low
00:07:53
margin commodity products the associated
00:07:55
mining refining and Manufacturing often
00:07:57
also involved environmental and labor
00:07:59
issues so we are happy enough to let the
00:08:01
industry migrate to countries like Japan
00:08:03
Korea and especially China together with
00:08:05
most of electronics manufacturing and so
00:08:07
China could double down on this industry
00:08:09
without it even really registering as a
00:08:11
threat to many early on and beside
00:08:13
batteries the West also completely
00:08:15
underestimated Chinese car companies
00:08:17
that's not entirely surprising given
00:08:19
that China had famously been trying and
00:08:21
failing to build competitive car brands
00:08:23
for decades by the early 2000s they
00:08:26
forced every major International brand
00:08:28
entering the country to set up a 50/50
00:08:30
joint venture while there were also
00:08:32
massive technology sharing agreements
00:08:33
and many reported cases of Ip theft and
00:08:36
still nothing really worked the car was
00:08:38
seen as just both so technologically
00:08:40
complex and also so heavily reliant on
00:08:43
decades old Brands and the country's
00:08:45
historic performance with both was so
00:08:47
poor that Chinese Brands simply weren't
00:08:49
seen as credible threats the world
00:08:51
underestimated China's Eevee and Battery
00:08:54
Ambitions so much that wang gang for
00:08:56
example was happily invited to tour
00:08:58
argon National Labor atory in the US to
00:09:00
quote learn about chemical recipes for
00:09:02
batteries and was also invited by Nissan
00:09:05
the maker of the Nissan Leaf nobody was
00:09:07
truly wary yet while that was the case
00:09:09
China could Sprint ahead and build up a
00:09:11
critical lead
00:09:14
unnoticed kickstarting this industry
00:09:16
initially came from the government
00:09:18
simply buying EVS itself first in the
00:09:20
form of taxis buses and government
00:09:22
vehicles sure there were constant
00:09:24
complaints from taxi drivers about the
00:09:26
lack of charging infrastructure and much
00:09:27
of this was far from profitable as first
00:09:29
but it created guaranteed demand that
00:09:31
companies like byd could base their EV
00:09:33
foundations on in for context just the
00:09:36
city of Shenzhen alone had 16,000 buses
00:09:39
and 22,000 taxis when it went all
00:09:42
electric so as you might imagine the
00:09:43
whole country had plenty of government
00:09:45
vehicles to give the industry an early
00:09:47
boost with anyway once the tech was
00:09:49
developed enough the government turned
00:09:50
to the private Market with massive
00:09:52
incentives buyers of so-called new
00:09:54
energy Vehicles received Direct Cash
00:09:56
subsidies often things like priority
00:09:58
parking and most importantly these green
00:10:00
license plates which they got almost
00:10:02
immediately and pretty much for free
00:10:04
meanwhile the blue license plates for IC
00:10:06
cars in many big cities often required
00:10:09
years of waiting winning a lottery and
00:10:11
paying thousands of dollars in many
00:10:13
cases this made Eevees a no-brainer
00:10:15
almost regardless of their early
00:10:17
economics probably the master stroke in
00:10:19
this plan though was the government
00:10:20
passing laws saying that those very
00:10:22
generous subsidies would only be given
00:10:24
to EES that used batteries made in China
00:10:27
this meant that not only Chinese car
00:10:29
brands but also almost all the
00:10:31
international ones like Tesla and
00:10:32
Volkswagen adopted almost exclusively
00:10:35
domestic suppliers in China and since
00:10:37
China was by far the most important EV
00:10:40
Market in the world and also where many
00:10:42
of the international Brands built their
00:10:43
cars for export to most EVS from All
00:10:47
Brands and even the ones meant for
00:10:48
international markets got standardized
00:10:50
around Chinese batteries and meanwhile
00:10:52
last in this Sprint phase were Chinese
00:10:54
firms like catl and byd going on buying
00:10:56
spree for mining refining and other
00:10:59
Upstream battery processes they bought
00:11:01
up and built huge capacities ensuring
00:11:03
that they had stable Supply and could
00:11:05
drive prices down relentlessly and with
00:11:07
that this phase was done before anyone
00:11:10
really gave it a thought China owned
00:11:11
many battery supply chains had
00:11:13
competitive EV brands of their own and
00:11:15
had even International brands from Tesla
00:11:17
to Ford and Volkswagen standardized
00:11:19
around their batteries of course
00:11:21
eventually the rest of the world started
00:11:23
waking up to this and realized that they
00:11:24
were unhappy about their complete
00:11:26
Reliance on China so this is when we
00:11:28
enter stage to the
00:11:32
marathon in the 2010s every car brand
00:11:35
already agreed that the question was no
00:11:36
longer if EVS would eventually be
00:11:39
dominant but rather when that would
00:11:40
happen and how we'd get there the race
00:11:43
was on but luckily for China they had
00:11:44
structural advantages at this stage too
00:11:47
that allowed them to outmaneuver the
00:11:48
competition much has been talked
00:11:50
recently about researchers finding that
00:11:52
China has spent a minimum of2 to30
00:11:54
billion dollar on EV subsidies alone and
00:11:57
even more than that for batteries and
00:11:58
other related projects as well but even
00:12:01
more important to companies early on
00:12:02
than the specific subsidy amounts was
00:12:05
the confidence that the central
00:12:06
government would pick this direction and
00:12:08
stick with its overall support for it
00:12:10
for decades to come this predictability
00:12:12
gave people the confidence to establish
00:12:14
200 100 plus firms making EVS as tons of
00:12:18
entrepreneurs wanted to give the once in
00:12:19
a-lifetime Opportunity of a full
00:12:21
Automotive reboot a real try now
00:12:24
obviously 200 is just way too many
00:12:26
Brands and the first ones have already
00:12:28
started to go out of business but having
00:12:30
this government supported competitive
00:12:32
frenzy meant that China could speedrun
00:12:34
through three of the biggest problems
00:12:36
electric cars have traditionally had
00:12:38
first the brands very quickly made
00:12:40
really competitive models for every
00:12:42
segment that you can imagine from huge
00:12:44
expensive SUVs to Luxurious minivans to
00:12:47
cars that can have their battery swapped
00:12:49
in 3 minutes to Tiny compact cheap cars
00:12:52
that can drive in weird ways to ultra
00:12:54
cars that can somehow even jump using
00:12:56
air suspension every form factor and
00:12:58
price point got covered just in case
00:13:00
there was a market for it second the
00:13:02
insane competition of course
00:13:03
relentlessly drove prices down and as
00:13:06
we've discussed made EES now even
00:13:08
cheaper than combustion engine cars and
00:13:10
third it also partially fixed charging
00:13:13
ironically because these 200 plus Brands
00:13:16
now literally couldn't sell many of
00:13:17
their cars unless there were enough
00:13:19
charges for them they themselves started
00:13:21
building out their own networks much
00:13:23
like Tesla I visited a parking lot in
00:13:25
Shenzhen where I could see for example
00:13:27
exclusive rows of chargers erected by
00:13:29
the likes of Zer xang Lee Alo and more
00:13:32
plus even a Neo battery swapping station
00:13:34
all in one place these networks are a
00:13:37
big boost on top of the public
00:13:38
infrastructure in short the whole
00:13:40
country smelled opportunity and pounced
00:13:42
on it not only due to their own policies
00:13:45
but also because they realized that
00:13:46
existing car producing nations would
00:13:48
have structural disadvantages in making
00:13:50
similarly aggressive moves our car
00:13:52
companies are slower to Electrify
00:13:54
because they want to milk their existing
00:13:56
combustion engine businesses for as long
00:13:58
as possible our labor unions might end
00:14:00
up with fewer jobs in an electric future
00:14:02
so they want to slow things down too and
00:14:05
our politicians fear losing elections if
00:14:07
they push things too aggressively as a
00:14:09
result we of course kind of draged our
00:14:11
feet on the issue our EES while they are
00:14:13
getting better are just a little less
00:14:15
exciting and a little more expensive
00:14:17
while our charging networks are a little
00:14:18
too sparse compared to China's 2 and as
00:14:21
a result we're slowly falling behind
00:14:23
China in this Marathon phase 2024 sales
00:14:26
data for EVS shows the results of this
00:14:28
approach European sales actually briefly
00:14:30
declined by 3% last year as politicians
00:14:33
temporarily flip-flopped on subsidies
00:14:35
and also slapped tariffs on Chinese
00:14:37
Imports and while us and Canadian sales
00:14:39
were up a bit they are at risk of
00:14:41
slowing under Trump too meanwhile the
00:14:43
rest of the world but especially China
00:14:45
is absolutely racing ahead once again
00:14:48
with growth of 40% looking at this chart
00:14:51
showing Global sales by month and by
00:14:53
country we can see just how much Chinese
00:14:55
sales are starting to dominate and also
00:14:57
that Chinese growth on its own basically
00:14:59
made up for all the weaknesses from
00:15:01
Europe and the us this year resulting in
00:15:03
25% Global growth overall and given how
00:15:07
competitive Chinese EVS are it's easy to
00:15:09
see why while many in the west have been
00:15:11
disillusioned by their choice of EVS I
00:15:13
talked to a bunch of private ride haing
00:15:15
drivers like this guy who drove an
00:15:16
electric car from the Chinese brand Arc
00:15:18
Fox and they all said that they drove
00:15:19
electric simply because both buying and
00:15:21
operating them was that much cheaper
00:15:24
given the prices and the sheer variety
00:15:26
you really have to start explaining why
00:15:28
you drive anything else but a Chinese EV
00:15:31
in China at this point and a scary
00:15:33
thought that you might had is that well
00:15:35
sure a lot of this was achieved by
00:15:36
Decades of subsidies and government
00:15:38
support that is kind of a sunk cost by
00:15:40
now the car companies exist their
00:15:43
vehicles are great the costs are below
00:15:45
those of IC cars and it's hard to
00:15:47
imagine how this Genie would ever be put
00:15:49
back into its bottle again this of
00:15:51
course is a massive headache for legacy
00:15:53
car brands who used to completely
00:15:55
dominate the Chinese market but who have
00:15:57
all half ased their e transition
00:15:59
Volkswagen for example was the leading
00:16:01
brand in China and at some point they
00:16:03
made around 50% of their Global profits
00:16:06
Here China was Volkswagen's country to
00:16:08
lose but their weak electric lineup saw
00:16:11
them quickly lose massive share to their
00:16:13
domestic competitors that is a huge loss
00:16:15
and more important to Volkswagen's
00:16:17
bottom line than all of its other
00:16:19
International troubles combined
00:16:21
meanwhile just about every other Legacy
00:16:23
car brand saw similarly poor results as
00:16:25
they all failed to Electrify fast enough
00:16:28
for China and while Tesla did great in
00:16:30
the market initially by now they have
00:16:32
started to slip too in 2024 they fell to
00:16:35
just 2.9% market share in the country
00:16:38
and they're now far behind juggernauts
00:16:40
like BYT China is clearly the first
00:16:42
Major Market to become a big problem for
00:16:44
legacy automakers it won't be the last
00:16:46
one I'm in Bangkok Thailand right now
00:16:48
and I think this is the exact archetype
00:16:50
of a market that is flipping into the
00:16:52
favor of China right now here Japanese
00:16:54
brands have historically had about a 90%
00:16:56
market share but that started slipping
00:16:58
recently byd GAC xang and Co have all
00:17:02
started expanding rapidly Thailand
00:17:04
doesn't have domestic brands of its own
00:17:06
to protect and will therefore gladly
00:17:08
accept China subsidizing the living hell
00:17:10
out of their electric transition why
00:17:12
wouldn't they here too I've talked with
00:17:14
right haling drivers who have expressed
00:17:16
their clear economic preference for
00:17:17
Chinese Eves and the government of
00:17:19
course won't mind them either as long as
00:17:21
the Chinese firms build local car
00:17:23
factories to replace the Japanese ones
00:17:25
that they are displacing which they are
00:17:27
already doing it almost doesn't matter
00:17:29
Thailand is a large economy with 70
00:17:31
million people there are many countries
00:17:33
like Thailand and once the cost
00:17:34
advantages of Chinese EVS really start
00:17:36
hitting countries in places like South
00:17:38
America for example it's hard to imagine
00:17:40
that they'd say no to them on the long
00:17:42
term either the world is large and while
00:17:44
places like Europe and the US are now
00:17:46
protecting their own markets for now the
00:17:48
Volkswagens Toyotas and Fords of the
00:17:51
world have loads of other markets to
00:17:53
lose first now importantly of course far
00:17:55
from all developing countries are on
00:17:57
board turkey for example which has car
00:17:59
Ambitions of its own recently imposed
00:18:01
40% tariffs on their Imports while
00:18:03
Brazil passed new rules too which led to
00:18:05
Chinese Eevees clogging up Brazilian
00:18:07
ports at least temporarily and so
00:18:09
there's clearly a lot of push back to be
00:18:11
expected globally but China is betting
00:18:13
that time is on their side especially
00:18:15
when they've already reached cost-
00:18:16
Effectiveness with EVS While others are
00:18:18
still just theorizing about it and in
00:18:20
this environment having massive
00:18:22
overcapacity in things like battery
00:18:24
production is a kind of weapon wielded
00:18:25
by the country's most formidable
00:18:27
companies such as be ID a weapon that is
00:18:30
designed to both Drive weaker domestic
00:18:32
competitors out of the market eventually
00:18:34
but also one that should ensure that
00:18:35
International firms will have a
00:18:37
particularly rough time competing in a
00:18:38
market that they neglected for too long
00:18:42
okay for this video and my next I had to
00:18:43
travel quite a lot and my constant
00:18:45
companion throughout all of this was my
00:18:47
sponsor s s is a service that lets you
00:18:49
easily buy eims from over 180 countries
00:18:52
just by downloading an app no buying
00:18:55
physical SIM cards at the airport no
00:18:57
dodgy Wi-Fi just mobile data on demand
00:18:59
even when you are abroad and it's worked
00:19:01
great for me it's a single app that you
00:19:03
can download before you even start
00:19:05
traveling and you automatically get
00:19:06
connected in multiple countries plans
00:19:08
are super cheap with Thailand for
00:19:10
example starting at just
00:19:12
$2.99 and if you use my code Tech alar
00:19:15
you even get a 15% discount on top of
00:19:17
those already affordable rates modern
00:19:19
iPhone and Android devices both support
00:19:21
eims and you just need to download the
00:19:23
app with the link in the description to
00:19:25
set it up in a few tabs so use my link
00:19:27
s.com Tech alar that is Al AR for your
00:19:31
15% discount that is also linked down in
00:19:34
the description and remember that
00:19:35
there's also a 30-day money back
00:19:37
guarantee if something doesn't work so
00:19:39
there's no risk in giving it a try happy
00:19:41
travels and I'll see you in the next
00:19:42
video
00:19:46
[Music]
