Chinese Economy

Economy|Automotive Industry

China EV wars: BYD mounts 'big challenge' to petrol-guzzling rivals with its new fuel-efficient hybrid technology

▶ Two new models fitted with the updated tech will 'bring young consumers a new option as they pursue high-quality new-energy cars,' says BYD

▶ The Qin L and the Seal 06 can go as far as 2,100km on a single charge with a full tank of petrol, BYD claims

The Qin L and the Seal 06  ‘will mount a big challenge to petrol-powered cars, becoming the new benchmarks for mid-size models,’ says BYD.
The Qin L and the Seal 06 ‘will mount a big challenge to petrol-powered cars, becoming the new benchmarks for mid-size models,’ says BYD.

BYD has unveiled a new and improved version of its plug-in hybrid technology that it hopes will encourage more widespread adoption of electric vehicles (EVs) in the world's largest automotive market, ratcheting up pressure on traditional carmakers like Volkswagen and General Motors.

The world's bestselling EV builder, backed by Warren Buffett's Berkshire Hathaway, said two brand new models to be fitted with the new technology will become pioneers that help propel a transition to electrification on China's roads.

"They will mount a big challenge to petrol-powered cars, becoming the new benchmarks for mid-size models," the Shenzhen-based company said in a statement on Wednesday. "They will bring young consumers a new option as they pursue high-quality new-energy cars."

The two new models fitted with the latest DM (dual model) technology – the Qin L and the Seal 06 – can go as far as 2,100km on a single charge with a full tank of petrol, BYD claims. The batteries used to power the basic versions offer a driving range of up to 80km.

The fuel consumption per 100km, when the batteries are depleted, is a record low 2.9 litres, the statement said. In comparison, a typical plug-in hybrid car uses 3 to 5 litres of petrol for every 100km travelled.

China’s BYD overtakes Tesla as world’s largest EV maker
China’s BYD overtakes Tesla as world’s largest EV maker

BYD said the new models can save owners an annual 9,682 yuan (US$1,336) in fuel costs compared to petrol cars.

DM is the fifth generation of the technology developed by BYD since it launched its first plug-in hybrid car, the F3, in 2008.

Both the Qin L and Seal 06 are mid-sizes sedans that will compete with the likes of VW's Sagitar and Toyota's Corolla, which are powered by petrol engines.

Entry-level versions of the Qin L and Seal 06 are both priced at 99,800 yuan, compared to the Sagitar's 127,900 yuan and the Corolla's 116,800 yuan.

"BYD's new models will be a big threat to established carmaking giants in China," said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. "An increasing number of budget-conscious consumers will view [BYD's] pure-electric and hybrid models as top choices since they are attractive in pricing and fuel efficiency."

At present, four out of every 10 new cars taking to the roads of mainland China, the world's largest EV market, are powered by batteries.

VW, the mainland's bestselling carmaker, handed 3.2 million vehicles – the vast majority petrol-powered – to Chinese customers last year, up 1.6 per cent from 2022.

It narrowly beat BYD which delivered nearly 3 million battery-powered cars on the mainland last year.

BYD posted a record net profit of 30.04 billion yuan for 2023, up 81 per cent from a year earlier.

Its founder and chairman, Wang Chuanfu, told an investors' conference in March that the carmaker is targeting sales of 3.6 million units in 2024, up 20 per cent from last year.

The projected year-on-year increase would represent just a third of the 62.3 per cent jump recorded in 2023.

In February, BYD fired the first salvo in an EV price war on the mainland, slashing the prices of nearly all of its cars by 5 to 20 per cent.

Since then, the prices of 50 models across a range of brands have dropped by 10 per cent on average, Goldman Sachs said in a report last month.


Great Wall for Yuan

How China Prepares for Currency War Against the Dollar – The 3 Strategic Moves, Trade and Sanctions

Ever since the 2008/2009 financial crisis, the Chinese government has allocated resources to develop a yuan-based financial infrastructure.

Financial security has become an integral part of China's national security strategy since the Asian financial crisis of 1997 - when the so-called Asian Tigers collapsed.

Rising geopolitical tensions with the US and the West in general since 2018 and Western economic sanctions against Russia have further prompted Chinese policymakers to strengthen the economy's financial defenses by reducing the centrality of the dollar in its economy and developing an alternative system for international transactions that would protect it from any "attack" on its financial system.

To this end, the Chinese government has pursued three main strategies:

First, China has supported and promoted regional and multilateral monetary and economic cooperation through regional or otherwise non-Western partnerships.

In 2000, he supported the launch of the Chiang Mai Initiative in the wake of the Asian financial crisis and the Bank for International Settlements Regional Liquidity Arrangement in 2022 in response to the economic shocks of the Covid-19 pandemic.

The Chinese government has also worked with him ADVERTISEMENT Shanghai Economic Cooperation Organization and other BRICS countries (Brazil, Russia, India and South Africa) to promote the use of local currencies in trade, investment and development finance, writes Zongyuan Zoe Liu, Associate of the Maurice R Greenberg Institute for China Studies at the Council on Foreign Relations in her related study.

Second, China has sought to expand the use of the local currency in international trade and investment while promoting international financial infrastructure based on the renminbi.

Since the 2008 financial crisis, the Chinese government has allocated resources to develop a yuan-based financial infrastructure.

In 2015, it launched the Shanghai-based Cross-border Interbank Payment System (CIPS) as a critical piece of financial infrastructure to promote the yuan's internationalization.

CIPS allows banks to clear cross-border transactions in the Chinese currency domestically instead of through offshore banks, providing a one-stop alternative to Swift and the New York-based Clearing House's interbank payment system.

CIPS was seen as China's alternative to its dollar-based financial infrastructure, even before Russian banks were barred from Swift in 2022 due to Western sanctions.

In this respect, CIPS is a financial infrastructure that can allow sanctioned entities to access global markets, although avoiding sanctions was not the motivation for introducing this system.

Third, China aims to upgrade the role of the yuan in global commodity pricing, especially in the context of the "clean energy" transition.

China has developed many trading platforms for commodities, such as the yuan futures market and commodity exchanges.

China rolled out 2018 yuan oil futures and 2020 copper futures on the Shanghai International Energy Exchange.

It also established the Ganzhou Rare Metals Exchange in 2019, in which the Chinese currency is used to set prices for spot trading of tungsten, rare earth products and critical minerals (such as cobalt) necessary for the "clean energy" transition ».

The oil-yuan

In the short term, China can capitalize on the energy transition to promote the "oil-yuan", enjoying the benefits offered by the petrodollar.

As the global economy transitions away from fossil fuels, China could also leverage its dominance of critical mineral supply chains and its cooperation with mineral-rich countries such as Russia.

The defense against sanctions

China's strategies for developing an alternative financial system are defensive rather than offensive – at least for now.

The aim is to minimize the negative consequences of comprehensive Western sanctions against China based on extreme geopolitical scenarios, such as a military conflict over Taiwan.

Expanding the use of the yuan in trade is less difficult than upgrading its status as an international reserve currency.

Capital controls are not necessarily a measure for wider adoption of the yuan in trade, as China is already a leading trading partner for more than 120 countries and the government is willing to facilitate exports by offering currency exchanges through swaps and trade finance.

However, at present, controls on capital flows, coupled with a lack of renminbi assets with significant hedging against risks, the relatively closed nature of the Chinese financial market, President Xi Jinping's preference for an alternative principle system to the rule of law and the further erosion of market principles are preventing the rise of the yuan as an international reserve currency that can openly challenge the dollar.

But there is an important line of defense to counter the excessive monetary privilege of the US currency.


Automotive Industry

Elon Musk floated robotaxi launch in China, Chinese state media says

Tesla CEO last month made an unannounced visit to Beijing for talks with Chinese Premier Li Qiang.

Tesla's Elon Musk has made multiple trips to China in recent years
Tesla's Elon Musk has made multiple trips to China in recent years

Elon Musk suggested testing Tesla's full self-driving feature in China by deploying it in robotaxis, Chinese state media has reported.

During Musk's visit to China last month, officials told the Tesla CEO that Beijing "welcomes Tesla to do some robotaxi tests in the country" and hopes it can "set a good example", the state-backed China Daily reported on Wednesday, citing sources familiar with the matter.

Chinese authorities, however, did not immediately approve Tesla's widespread use of the Full Self-Driving (FSD) feature, the newspaper said.

Tesla did not immediately respond to a request for comment.

The China Daily report follows an unannounced visit by Musk to Beijing late last month, during which he held talks with Chinese Premier Li Qiang.

During his visit, Musk received an endorsement of Tesla's data-security procedures from a top Chinese auto association and sealed an agreement with Chinese tech giant Baidu to use its mapping licence for data collection on China's public roads.

Tesla still needs to get approval from Chinese regulators to collect and transfer data used to train its software before it can fully roll out FSD, which the China Daily said was not discussed on Musk's visit.

Tesla operates its biggest manufacturing plant outside the United States in Shanghai, where about half of its vehicles are produced.

Musk has shifted Tesla's focus away from making affordable electric cars towards burgeoning technology, such as autonomous driving software, robotaxis and humanoid robots.

The electric car maker is struggling with falling car sales amid fierce competition from Chinese brands such as BYD.

Tesla's vehicle deliveries fell by 8.5 percent in the first quarter, contributing to a 40 percent slide in its stock price since July. The company last month reported profits of $1.1bn in the first quarter, down from $2.51bn a year ago.

Chinese auto giant BYD dethroned Tesla as the world's biggest electric vehicle maker in the last quarter of 2023, although the Austin, Texas-based company reclaimed the title in the first three months of this year.

Musk has made multiple trips to China in recent years, including a visit in June last year.


Because the price of oil is falling and China is building up huge reserves

The hope of a ceasefire in the Gaza war and thus an easing of the geopolitical situation in the Middle East is pushing prices down.

The price of oil closed at the end of the previous week with a 7% drop. A decline that the market has not seen since the first week of February.

Brent, Europe's benchmark, is now below $83 a barrel. US crude at $78

During a visit to Israel, US Secretary of State Anthony Blinken expressed his determination to achieve a swift ceasefire in the Gaza war and the release of more hostages from Islamist Hamas.

In addition to the situation in the Middle East, the phenomenal increase in strategic oil reserves in the US also contributed to the decline in the prices of black gold.

In the world's largest economy, they rose by 7.3 million to 460.9 million barrels last week. Analysts, however, had expected a drop of 2.5 million barrels.

In addition, in the United States, demand for gasoline is lower than expected, just before the season of increased consumption, which usually brings summer. Another element that could weigh on the mood of investors and contribute to the fall in prices.

A rift in OPEC

OPEC+ will meet in a month, and analysts see a growing possibility that OPEC+ will extend its deal until the end of the year to keep crude oil production low. This is what 90% of analysts polled by Bloomberg expect.

In Citi's view as well, OPEC+ is currently in a comfortable position to extend the supply cut again and keep it until the end of the year. According to analysts at the US bank, the oil market is now in balance, with supply and demand well matched, which will allow the cartel to keep supply tight without losing too much market share to other producers.

In fact, according to JP Morgan, the United Arab Emirates, Kazakhstan and Iraq are preparing to increase supply by 300,000 barrels per day, an amount capable of affecting barrel prices.

Bank of America analysts now place the price of a barrel in the current price range, between $80 and $90. Based on the latest moves, they even consider $90 to be a ceiling for oil.

China supplies a lot of oil

At the same time, however, China appears to be pursuing a concentrated and deliberate effort to accumulate strategic oil reserves for a possible, uncertain future.

According to traders and analysts, China has been implementing a very specific plan for months to prepare for a possible rise in international tensions or, even worse, to stave off the consequences of a more or less global conflict.

Considering that, in peacetime, the Asian giant consumes nearly 14 million barrels per day, there are those who wonder why such a buildup.

According to what the Bangkok Post reported, from the beginning of 2024 until today, many oil tankers have docked at the port of Dongying in eastern China to unload Russian crude oil.

Russian oil exports to China rose by about a quarter last year to 2.14 million barrels per day.

However, Beijing's accumulation of oil reserves is only the tip of the iceberg. China is also buying other raw materials in bulk, in a move that could be aimed at helping China be self-sufficient in the face of any future war or international sanctions (such as those that might result from a possible Chinese invasion of Taiwan).

The possible plan

Mike Studeman, former commander of the US Office of Naval Intelligence and director of the US Indo-Pacific Command, argued on the website War on the Rocks that this pooling of strategic resources is part of a much larger process.

"Chinese leader Xi Jinping is preparing his country for a showdown, for a potential high-intensity war."

Part of that preparation, Studeman argues, includes building up strategic stockpiles of essential goods and resources, protecting China from sanctions like those imposed on Russia after its invasion of Ukraine — or even a military blockade, as part of a regional or global war. In any case, the Chinese government has learned multiple lessons from Russia's experience in Ukraine.


China's economy beats expectations, growing 5.3 percent in first quarter

Statistics agency says economy has made 'good start' to the year under the leadership of Chinese President Xi Jinping.

China's economy grew faster than expected in the first three months of the year, a boost for policymakers grappling with a property-sector crisis, weak consumer demand and mounting government debt.

Gross domestic product (GDP) grew by 5.3 percent in the first quarter, data released by the National Bureau of Statistics (NBS) showed on Tuesday, comfortably above forecasts and up from a 5.2 percent expansion in the previous quarter.

By sector, industrial production and agriculture grew by 6.1 percent and 3.8 percent, respectively, while services grew by 5 percent, according to NBS data.

The NBS said in a statement that the economy had made a "good start" under "the strong leadership" of the Central Committee of the Communist Party of China and President Xi Jinping.

"As a result, the policies continued to take effect, production and demands maintained stable and witnessed an increase, employment and prices were generally stable, market confidence continued to boost, and high-quality development made new progress," the statistics agency said.

The stronger-than-expected figures came days after China reported that exports and imports declined 7.5 percent and 1.9 percent, respectively, in March, missing expectations.

The world's second-largest economy has struggled to sustain a recovery from the COVID-19 pandemic amid a range of longstanding structural challenges, including a hugely indebted real estate sector and a shrinking population.

Fitch Ratings earlier this month downgraded China's sovereign credit outlook to negative, citing "increasing risks to China's public finance outlook" as Beijing attempts to move away from real estate-led growth.

Beijing last month set a 5 percent growth target for 2024, a rate that would beat most developed economies but be among the country's slowest expansions since 1990.

Officials have unveiled a number of fiscal and monetary policy measures to boost the economy, including $1.8 trillion in spending on major construction and infrastructure projects.