Driving the Dragon: Exploring the stratospheric rise of the Chinese EV industry…

… and how the West gets it wrong.

“Let China Sleep, for when she wakes, she will shake the world”, is a quote oft-attributed to Napoleon Bonaparte.

Whether or not the pint-sized dictator actually uttered these words is up for debate and of no particular concern here. Yet when it comes to the electric cars, it’s a line that hits a little too close to home for European legacy manufacturers.

It’s been happening gradually over the last three or-so years. In supermarket car parks, you began to notice inoffensively-designed EVs with mysterious names like Jaecoo and Omoda. Just last year, BYD replaced Volkswagen as one of the official sponsors of the Euro 2024 as the tournament’s official e-mobility partner.

Soon enough, motoring journalist types were raving about unknown brands such as Leapmotor and Geely offering unparalleled value. These same people were then praising Xiaomi – a company best known for producing smartphones – for the design and performance of its Tesla Model 3-rivalling SU7.

Remember that but a few years ago, none of these tech firms existed as car manufacturers in the Western world.

BYD’s watershed moment

Then, in May this year, the inevitable happened. BYD – the world’s largest EV maker which didn’t even operate in Europe until October 2022 – outsold Tesla, the most recognisable and successful electric car brand on the planet.

It wasn’t just Tesla people who were left scratching their heads. The likes of Audi, Mercedes-Benz, BMW, and Ford – all established names with skin in the EV game were left dumbfounded. How could BYD, a company that’s a battery maker first and a car manufacturer second, pull off such a mighty feat? And how are so many other nascent Chinese brands making such rapid inroads?

To answer the “million dollar question” beyond the headlines, EV Powered reached out to Mark Andrews. A photographer and motoring journalist who moved to China at the start of the 21st century, Mark spent from 2007 until recently testing Chinese cars at source. Without hesitation, he points to BYD as his starting point.

“BYD is the big boy on the block, because they have huge vertical integration,” he explains. “They don’t just produce the car’s batteries themselves, almost 80% of everything in the vehicle is produced by BYD themselves. It blows Tesla out of the water in this respect, and so with that, they control prices.”

How BYD became China’s foremost EV maker is open to interpretation. Founded in 1995 as a rechargeable battery maker by Wang Chenfu, it expanded into automotive in 2003 after acquiring the now-defunct Xi’an Qinchuan Automobile. It then used its battery expertise, in-house supply chains, and took advantage of Chinese government subsidies for manufacturers seeking to pivot to New Energy Vehicles – a catch-all term for EVs and hybrids.

Political connections, zombie brands, and a race to the bottom

As recently as 2024, BYD received £2.9 billion in government subsidies to help it dominate local – and international – EV markets. As to why BYD became the recipient of China’s largest-ever EV handout is unclear.

It’s been suggested in some circles that Chenfu’s membership of the ruling Chinese Communist Party may have played a role. Other suggestions include the brand’s alignment with Chinese national economic interests.

Chenfu – currently China’s richest man – isn’t single-handedly responsible for BYD’s success. During the COVID-19 pandemic, the brand’s fiery and outspoken CEO, Stella Li, oversaw the retooling of a BYD manufacturing line to produce N95 facemasks.

As the rest of the world slept, BYD added over $1 billion to its coffers, thanks to international PPE contracts with the State of California and Japan’s SoftBank Group Corp.

Hot on the heels of BYD’s success, the Chinese EV market began to resemble something of an electrified Wild West. Chinese automotive giant Geely Auto wanted in on the government-subsidised pie, as did newcomer Xiaomi. There are currently around 130 domestic car makers in China, many founded on the back of government support.

The result has been cut-throat competition that has stimulated innovation and a race to build high-tech cars even cheaper. For example, Xiaomi’s Tesla Model Y Performance-rivalling YU7 Max offers 681bhp and cutting-edge charging tech for less than £34,000 in its homeland.

Abroad, too, China’s EVs are typified by heavy specification levels and prices that undercut established local brands.

Mark says this competition helps drive down prices domestically and abroad, but typifies a destructive “involution” which allows the biggest players to dictate terms.

“If BYD cuts prices, then other companies have to follow,” he explains. “This creates a system called ‘involution’ where it’s a race to the bottom between companies to try and be as cheap as possible when it comes to cars.

“This creates a problem where ‘zombie manufacturers’ like Lifan who really should have died out years ago never really go bust.”

Unconstrained by history

Having established how ruthless the Chinese EV landscape is, Mark cites China’s lack of a long-term car industry as a possible reason why it isn’t afraid to take risks. In his latest book, Driving the Dragon, he notes that China’s first car – the Dongfeng CA71 – only arrived in 1958.

This absence of an established automotive industry is why Chinese brands – unconstrained by history and a sense of what their cars should be like – take what could be described as a sometimes unorthodox approach to in-car design and tech.

As Li herself told Fortune: “European companies have a legacy; they have a lot of traditions.” With zero risk of destroying any automotive history it may have, China has room to firmly establish its own unique EV culture.

Given 78% of the country’s population is connected to the internet – that’s around 1.1bn people – the foundations of Chinese EV culture centre largely on technology. If you log onto any motoring website or pick up a car magazine, this screen-heavy, tech-laden approach doesn’t always endear itself to those in Western automotive media circles.

Examples include BYD’s infamous rotating screen, Xpeng’s in-built karaoke (with six microphones, no less!) and the Xiaomi YU7’s choice of either an in-screen capybara or otter. At best, they’ve been laughed off as a bit of lighthearted fun or silly gimmicks that detract from a car’s perceived lack of polish. At worst, they’ve been slated as dangerous, over-complicated distractions that put novelty ahead of ease of use.

A tech-savvy approach to car design

As Mark explains, these features – for better or worse – represent a fundamental cultural difference between East and West.

“I think this is partly down to how connected people are online, and partly being down to a matter of taste,” he says. “China has become very tech-based, and when I’m there, my phone is everything: I use it to take the subway, to order a meal, get a shared bicycle, whatever.

“Don’t forget that China’s tech scene is quite recent, so people have become really quite tech savvy – far more so than in Western countries, I would say. I recently had the experience of trying to get my father who’s 82 to try and use a smartphone – I’ll be honest, it wasn’t great. But in China, you see old people using smartphones all the time.”

While embracing tech for good, Mark does admit that it can be a “big problem” for motorists.

“If you get in a DiDi car, China’s equivalent of Uber, the driver will have their screen, then two mobile phones mounted to the dashboard displaying all sorts of things. These things are a distraction, and the people who are playing short videos or whatever on them should really be concentrating on driving.”

Whether non-Chinese OEMs in the West can resist screenification en-masse remains to be seen. Yet given the new Renault Twingo’s use of physical buttons, plus promises from the likes of the Volkswagen Group, Mercedes-Benz, Ford, Kia and Hyundai to slam the brakes on going 100% touchscreen, a tactile future looks promising – let alone safer.

What’s next?

With its ultra-rapid rate of development, trying to predict the future of China’s EV industry feels like a pointless exercise. Amidst the what if’s, though, Mark points to battery tech and the emergence of luxury car brands as two areas to watch.

BYD is said to be working on a solid state battery that can onboard 900 miles of range within 12 minutes of charging. A 150kWh semi-solid state unit developed by NIO is already being used in its ET7 saloon.

“China’s definitely pushing forward with the solid state batteries, and I think it’s a matter of who’ll get there first. Sodium batteries are also another big thing on the way. They’ll really come in as a replacement for lead acid batteries as starter motors in electric cars and motorbikes.”

The Western meaning of luxury is vastly different to the Chinese definition. Those who buy luxury EVs in the West seek refinement and quiet sophistication. On the contrary, their Chinese counterparts seek what Mark describes as “features”.

“One thing I mentioned in my book was that when I tested the second-generation Bentley Flying Spur, it didn’t have a heads-up display. That really surprised me, as this sort of thing was creeping into much cheaper Chinese cars. BYD’s premium brand, Yangwang, is really pushing hard in this area.”

Whether that’s enough to win over traditional luxury buyers remains to be seen but mainstream buyers appear to be falling for the low-cost, high-spec appeal of Chinese brands.

That’s perhaps just as well as reports indicate China’s domestic market is in turmoil – a turmoil created by the very fierce competition and cost-cutting which has helped these brands establish a foothold in Europe.

As Mark himself writes in Driving the Dragon, “the dragon may now drive an EV, but the destination is still far from clear”.

Driving the Dragon is available to purchase for £16.99 through its publisher’s site, www.veloce.co.uk.