Why Chinese car prices are so low

A gap has emerged in the transition to electric vehicles (EVs) as Chinese carmakers continue to outpace their Western counterparts in the production of these cars.

This is the main conclusion of JATO Dynamics' latest report, 'EV price gap: A divide in the global automotive industry', which analyses how Chinese carmakers have made huge strides in their ability to produce EVs at competitive prices, triggering a shift in market dynamics.

Made in China costs half as much

The information shows that in 2015, the average list price of electric cars available in China was 37% and 26% higher than cars in Europe and the US, respectively. Since then, the trend has reversed to the point that today (first half of this year) the average list price of an electric car in China is €31,165 (approx. £27,145) compared to €66,864 (£58,240) in Europe and €68,023 (£59,250) in the US.

Electric cars continue to be quite expensive outside the Asian giant, despite the ongoing efforts of Western car manufacturers to produce more affordable models. For example, a European consumer would have to spend at least €18,285 (£16,000) to get the most affordable EV available today (excluding incentives). The same consumer would have to spend €24,400 (£21,250) in the US. And what is even worse is that these figures are 92% and 146% higher than the cheapest new combustion cars available. By comparison, in China the cheapest electric car costs 8% less than the cheapest car with a combustion engine.

With their affordable electric cars, Chinese manufacturers are finding it easier to gain market share in emerging markets. They have become the preferred choice of consumers, accounting for the majority of BEV sales in Israel (61%), Russia (91%) and Thailand (79%). In other countries such as Brazil, Malaysia, Mexico, the Philippines, Chile and Indonesia, Chinese electric cars accounted for more than a quarter of total sales.

Chinese electric vehicles compete not only on price, but also on quality and power. Their offer includes electric cars with 200-300 bhp at an average price of only €30,500 (£26,565). The BYD Seal is a good example. It is a mid-size saloon with a 201 bhp engine that is priced at €24,106 (£21,000) in China in the Elite trim. This is a price close to that of a brand new electric Renault Twingo Equilibre in Europe, a city car.

Presiding over segments

The other reason for the growing success of Chinese electric vehicles worldwide is their ability to be present in all segments. With 170 local brands, China is making sure to offer its electric cars in every single segment, responding to the preferences of consumers around the world.

This approach is different from that taken by European, American, Japanese and Korean car manufacturers who have historically positioned their electric cars as premium cars.

For example, of the 235 BEVs (Battery Electric Vehicles) available in China in the first half of 2023, only 23 per cent were priced above €40,000 (£35,000), while the figure was 77 per cent in Europe and 82 per cent in the US.

Why are they so cheap?

In a nutshell: regulation and labour costs. Over the past decade, the Chinese government has provided strong support to the domestic electric vehicle industry through the New Energy Vehicle Industry Development Plan (2021-2035), with subsidies totalling $57 billion between 2016 and 2022.

Chinese consumers have also benefited from significant tax breaks for purchasing an electric car. China's advantage over the US and Europe in the production of cheap electric vehicles can also be attributed to the country's relatively low labour costs.

---

---

While European countries generally have the highest labour costs in the world, with an hourly minimum wage of around €30 (£26), Beijing has the highest hourly minimum wage in China, at only 26.4 renminbi or $3.7 (£3.0). Eight times lower.

The latest Motor1 Numbers analysis:

The future of small cars around the world

Automakers debuted 45 new vehicles globally in Q3 2023

BEV boom in Europe has two winners: Tesla and MG

Tesla's five big challenges to overcome

The author of the article, Felipe Munoz, is Automotive Industry Specialist at JATO Dynamics

We want your opinion!

What would you like to see on Motor1.com?

Take our 3 minute survey.

- The Motor1.com Team