China, automobile, vehicles
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According to Moody’s Analytics, China is set to surpass Japan as the world’s leading auto exporter by the end of 2023.
In a recent report, the credit ratings agency stated, “China made heads turn through the pandemic as it strutted past South Korea in 2021 and Germany in 2022, making it the second-largest car exporter.”
The report highlighted that China is now closing in on Japan, with a monthly shortfall of around 70,000 cars in the June quarter compared to almost 171,000 in the same period last year.
Moody’s economists stated, “At this pace, China is on track to overtake Japan by the end of the year,” ending Japan’s reign as the top auto exporter since 2019.
Competitive advantage?
A surge in demand for electric vehicles has propelled China’s overall auto exports beyond pre-pandemic levels.
In the first half of 2023, China’s electric vehicle (EV) export receipts doubled compared to the same period last year. Meanwhile, overall auto exports from Japan and Thailand, including both traditional vehicles and EVs, have yet to fully recover.
Maintaining a competitive advantage, China excels in lithium-ion battery cell production, leading to lower EV production costs for its carmakers. Moody’s identified China’s dominance in lithium supply, accounting for over half of the world’s production, thanks to its low labor costs compared to Japan and South Korea. Additionally, China possesses more than half of the world’s refining capacity for the metal.
Indeed, the speed at which China has embraced new technologies in the automobile industry is unparalleled.
As a result, major global automakers like Tesla and BMW have established production facilities in China. However, Moody’s noted that local brands like Chery and SAIC continue to thrive alongside foreign brands.
The economists from Moody’s remarked, “Indeed, the speed at which China has embraced new technologies in the automobile industry is unparalleled.”
Moody’s emphasized the mixed recovery in auto exports within the Asia-Pacific region, home to powerhouses such as South Korea, China, and Japan.
Nevertheless, electric vehicles accounted for nearly 30% of all passenger cars sold worldwide last year, a significant increase from less than 5% before the pandemic.
According to the International Energy Agency, EV car sales surpassed 10 million in 2022, with China leading the market at approximately 60%.
Moody’s attributed the rise in EV demand to “large price cuts by Chinese manufacturers and generous government supports.” For instance, EVs have been exempt from the 10% purchase tax on new cars since 2014.
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