China, car, vehicle
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According to Moody’s analysis, by the end of 2023, China is expected to surpass Japan and become the world’s largest auto exporter.
“China is gaining attention amid the pandemic as it overtakes South Korea in 2021 and Germany in 2022 to become the second-largest auto exporter,” the credit rating agency said in a report last week.
China is now closing in on Japan, the report said, adding that there was an average shortfall of about 70,000 vehicles in the second quarter, compared with about 171,000 a year earlier.
“At this pace, China is on track to overtake Japan by the end of this year,” wrote Moody’s economists. Japan has held the global ranking since 2019.
A surge in demand for electric vehicles has pushed China’s overall car exports past pre-pandemic levels.
In the first half of 2023, China’s electric vehicle export revenue will double year-on-year. In contrast, Japan and Thailand’s overall auto exports (both conventional and electric) have yet to recover to pre-pandemic levels.
China has a competitive advantage in lithium-ion battery production, which Moody’s sees as a factor in why its automakers have an advantage in producing electric vehicles.
China produces more than half of the world’s lithium supply due to lower labor costs compared with rivals Japan and South Korea, according to Moody’s forecasts.China also owns more than half of the world’s Refining capacity for metal.
As a result, some of the world’s largest auto companies have set up production facilities in China, including tesla and BMW. However, Moody’s noted that foreign brands have not overshadowed local brands such as Chery and SAIC.
“In fact, China’s speed at adopting new technologies in the auto industry is unparalleled,” said the economist.
Moody’s emphasized that the recovery in auto exports in the Asia-Pacific region, home to the world’s largest auto exporters such as South Korea, China and Japan, has been uneven.
Still, EVs accounted for nearly 30% of all passenger car sales globally last year, up from less than 5% before the pandemic.
EV sales will jump to more than 10 million by 2022, with China leading the way, accounting for about 60% of the market, according to April figures from the International Energy Agency.
Moody’s attributed the rise in demand for electric vehicles in part to “significant price cuts by Chinese manufacturers and generous government support”. For example, electric cars have been exempted from the 10% purchase tax on new cars since 2014.