Will Chinese BEVs be a gamechanger in Europe and the US?

Battery Electric Vehicles (BEVs) have the potential to eliminate the lion’s share of the 15% of global GHG emissions attributed to road transport and are central to any decarbonisation scenario. Regional BEV sales penetration rates are very uneven, however, with sales in China soaring but modest (and stalling) in Europe and the US.

I asked Prateek Biswas and Milan Thakore, from our Electric Vehicle and Battery Supply Chain team, whether Chinese BEVs might be the catalyst to accelerate switching in these markets.

How far ahead is China on BEV sales?

China leads by a country mile. Global penetration of EVs is around 25% of sales, including BEVs and PHEVs (plug-in hybrids), but in China sales already exceed 50% and are on an upward trajectory. Of the 2.74 million EV units sold globally YTD to end July, China accounted for 73%. In Europe penetration is 24%, in the US just 9%.

Why is China so far ahead?

Ultimately, it’s down to the value proposition. Chinese BEVs are well-made and cost-competitive, offer advanced software functionalities and are supported by a well-developed public charging ecosystem. Fundamentally, Chinese BEVs are perceived as technologically advanced, the product of a government-led strategic approach to the entire BEV value chain. This centred on building an integrated BEV industry at scale from scratch. In contrast, most western manufacturers initially chose to retrofit their existing ICEV platforms to produce EV model variants (BEV and PHEV), an approach that allowed them to stay entrenched within their existing supply chains built over decades.

Many of China’s leading automakers have focused exclusively on BEVs – developing their clean-sheet platforms with large scale output and low unit production costs, adopting agile product development processes that allow them deliver model refreshes faster, and continually enhancing the all-round user experience, particularly cockpit software.

Another key factor has been committing to lithium-iron phosphate batteries. LFP provides less range than the nickel-based cells favoured by Western automakers but are safer and more scalable at the cell and battery pack level. Critically LFP costs around one-third less. Altogether these factors give Chinese BEVs a significant design advantage.

Will western automakers go for LFP batteries?

Yes, and the pivot is already underway with acceptance of LFP’s range capabilities. The challenge is that China has an effective monopoly on LFP capacity and Chinese companies are only now building LFP plants in Europe. Alternative sources of production elsewhere in the world will take time to reach scale - South Korean battery manufacturers like LGES and SK On are just beginning to build out LFP capacity – leaving western automakers wanting to use LFPs with little choice but to buy from China.

Could Chinese BEVs be a gamechanger in Europe?

Last year’s Munich Motor Show opened consumers’ and dealers’ eyes. So far, though, it’s yet to translate to meaningful sales volumes. Penetration of 4% in the Western European car market through 2024 has only recently ticked up to 5% with BYD tripling its sales to 12,000 units/month. The 2025 show currently underway is another chance to ramp up impact.

Chinese BEVs are price competitive in Europe despite import tariffs as high as 45%. To avoid these tariffs Chinese brands are rapidly setting up assembly lines outside China.

However, the big challenge for Chinese brands will be building brand equity needed to compete with the established players with decades of goodwill based on the quality and dependability of their ICE vehicles. That said, where cost is the consumers main priority, Chinese brands have the potential to catch up with legacy brands rapidly.

Will Europe achieve its BEV targets?

It’s highly unlikely the EU and UK will reach the target of 100% ZEV sales by 2035, even if Chinese EV sales pick up. Wood Mackenzie forecasts 59% of sales in the Europe will be EVs by 2035, of which 52% will be BEVs and 7% PHEVs.

European governments need to address legitimate industry fears of massive job losses through the ICE supply chain. In all likelihood, the answer will be to push back the target date by a few years and adopt a more gradual pathway. The industry has to do its bit too to speed up progress. One clear opportunity is to forge partnerships with China’s automotive tech leaders and embrace their agile approach, much as VW and Stellantis did between 2023-24.

What about the prospects for more rapid US EV penetration?

Poor and fading. BEV sales were flatlining even before policy changes under the Trump Administration, notably the removal in the OBBBA of the US$7,500 consumer tax credit for buying an EV. The administration has also unwound regulation that supports EV adoption including fines for not complying with fuel economy norms, as well as California’s right to set its own emissions standards. It is also trying to remove the Obama-era designation of carbon dioxide as an air pollutant, permanently preventing them from falling under federal emission standards. It’s set to be an uphill struggle for BEVs in the USA, Chinese or otherwise.

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