Daily Update: China’s EV Expansion Accelerates Global Auto Market Growth

Today is Monday, December 16, 2024, and here’s your curated selection of essential intelligence on financial markets and the global economy from S&P Global. Subscribe to be notified of each new Daily Update. 

China’s rise to global dominance in the automotive market is an astonishing feat. Historically known to rely heavily on reverse engineering to design cars, the country has emerged as the world’s largest auto market in terms of vehicle production and sales, and it’s leading the charge in electric mobility. Given China’s strong emphasis on electric vehicles, its auto growth momentum is expected to gain more strength as the world transitions to renewable energy sources.

The domestic car market in China started to pick up after opening to foreign investment in the 1990s. By attracting external capital and setting up joint ventures with long-established car brands, Chinese automakers gained access to foreign technology, and auto parts became localized, strengthening the domestic market’s manufacturing capabilities. Shortly after China joined the World Trade Organization in 2001, its auto market experienced a massive ramp-up amid increased competition, catapulting it to become the biggest car-producing country in 2009 and for the next 15 years. In 2023, China also became the world’s top car exporter, overtaking Japan.

China’s electric mobility dreams are a key driver of the country’s accelerated auto growth. A greater number of cars on the road in China comes with a greater necessity to address the problem of air pollution and hedge against price hikes on imported oil. Recognizing this, China shifted its focus to electric cars and other new energy vehicles (NEVs) from internal combustion engine (ICE) vehicles. The Chinese government introduced regulatory frameworks and offered subsidies to spur the widespread adoption of NEVs. In 2020, China set a target for EVs to make up 50% of cars sold across the country by 2035. Helped by these stimulus measures, China's sales of NEVs, including pure and hybrid EVs, hit an all-time high in September with 1.29 million units sold, according to the China Association of Automobile Manufacturers.

Aside from the environmental benefit, the focus on NEVs allows Chinese car companies to compete globally, especially as the energy transition progresses. Whereas many Chinese automakers previously lacked the ability to develop cars from scratch, more homegrown brands are now racing to innovate in the EV space amid the growing emphasis on sustainability. Chinese EV players such as BYD, which stands for “Build Your Dreams” and counts Warren Buffett as an investor, are leading the way in electrification and battery technology and are quickly gobbling up global market share as they move to expand overseas.

With China holding large reserves of key energy transition materials, domestic manufacturers also have the first-mover advantage over their foreign counterparts, which still largely specialize in ICE vehicles and are facing a slowdown in EV adoption due to concerns over pricing, range and charging infrastructure. Thanks to substantial government support, low production costs and the availability of affordable products, China is leading the West in EV adoption.

When China emerged as the world’s largest car-exporting country in 2023, Europe was a key destination for Chinese EVs. Chinese original equipment manufacturer MG overtook Tesla to become the No. 1 brand exported to the continent that year. Other Chinese brands such as Nio, Xpeng and Chery Omoda are in the early stages of their expansion into Europe. China is also shaping up to be a dominant force in autonomous vehicles, bolstered by government efforts to devise regulations, set up pilot zones and issue licenses.

It’s not all smooth sailing for China’s auto industry, as geopolitical winds are shifting, but the long-term outlook for Chinese EV brands remains optimistic. As the country accelerates toward EVs and takes steps to diversify its portfolios and localize production in expansion markets such as Europe, Sidong Fan, a senior research analyst with S&P Global Mobility, wrote in a blog post that the landscape for EVs in Europe is more challenging, but that “Chinese brands are poised to make a lasting impact.”

Today is Monday, December 16, 2024, and here is today’s essential intelligence.

Written by Pam Rosacia.

Sustainability

Carbon Intensity in the Middle East — An Index Perspective

In December 2023, the COP28 UN Climate Change Conference was hosted in Dubai, once again putting the spotlight on global climate change action and handing the Middle East hosting responsibilities. Describing the current period as “the beginning of the end” of the fossil fuel era, this iteration of COP not only gave us the first global stocktake of progress against the 1.5°C by 2023 global warming target, but more specifically a unique opportunity to assess how the host region, the Middle East, stacks up in terms of both contribution to global warming and reduction of corporate carbon emissions.

—Read the article from S&P Dow Jones Indices

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Economy

Emerging Markets Monthly Highlights: Rising Protectionism Will Challenge Resilience

S&P Global Ratings expects rising trade protectionism among major economies to hurt GDP growth in most emerging markets, though its impact will depend on policy specifics. Trade diversion and potentially tighter rules of origin are two factors that could influence macroeconomic conditions in emerging markets in 2025.

—Read the article from S&P Global Ratings

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Capital Markets

Private Equity Investment in US Solar Declines as Global Inflows Rebound

Private equity and venture capital activity in the US solar industry is poised to hit a four-year low in 2024, while private inflows into the sector globally have rebounded. Private equity inflows into US residential and utility-scale solar from Jan. 1 to Nov. 26 amounted to $3.1 billion, about 24.6% lower than the total reached in 2023 and making up just 7.3% of the $42.54 billion amassed in 2021. Only four private equity deals in US solar have been announced thus far in 2024.

—Read the article from S&P Global Market Intelligence

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Global Trade

Listen: Returning Russian Gasoline Exports, Implications for Global Product Markets

The Russian government's announcement of the partial resumption of gasoline exports by the country's refineries comes at a time when global oil product flows are constantly evolving. In this episode of the Platts Oil Markets podcast, Francesco Di Salvo is joined by Elza Turner, Robert Perkins and Matthew Tracey-Cook to discuss the reasons behind Russia's decision and what it means for product trading patterns along the length of the oil barrel and across global markets.

—Listen and subscribe to the podcast from S&P Global Commodity Insights

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Energy & Commodities

Morocco Turns to Black Sea Wheat; South America Dominates Corn Demand

Morocco's protracted drought has severely impacted domestic wheat production, leading the country to anticipate record imports for the 2024-25 marketing year and sourcing more from the Black Sea over traditional suppliers like France due to quality concerns. Although not a major corn consumer, Morocco ranks among the top 20 global corn importers, with imports projected to rise 1.5% to 2.7 million mt this season, according to US Department of Agriculture.

—Read the article from S&P Global Commodity Insights

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Technology & Innovation

Transportation Companies Face Increasing Cyber Risks

The transport sector's digitalization and increased connectivity have delivered huge efficiency improvements but also exposed companies to greater risk of disruptive and widespread cyber events. Cyber incidents affecting transportation groups have increased markedly in recent years, and threat levels are likely to remain high amid geopolitical tensions that have encouraged attacks. As such, although rated transportation companies have avoided significant credit quality impairment from cyber incidents to date, S&P Global Ratings expects this risk to increase going forward, particularly for those with weak cyber hygiene.

—Read the article from S&P Global Ratings

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Events & Webinars

Webinar: Navigating the New NAIC Bond Definition Framework (Jan. 14, 2025)

The NAIC's Principles Based Bond Definition (PBBD) changes, set to take effect on January 1, 2025, represent the most significant changes to insurer investment schedules in decades. Bonds will now be categorized into two major groups: asset-backed securities and issuer credit obligations. Certain securities may not qualify as "asset-backed" under the new guidelines, resulting in higher capital charges related to Schedule BA reporting. Both insurers and the asset managers that service the industry are actively working to understand and adapt to these changes.

—Register for the event series from S&P Global Market Intelligence

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