Would you please park the car? Lately, we've been hearing a lot of this. You've got companies like Nio, companies like Li Shan,
these Chinese, EV makers that are frankly as Good if, if not better than Tesla right now. This I know people will say Americans won't buy
Chinese. You know what you ask somebody, do you want to pay
$9,000 for an SUV, or do you want to pay 19 or 20,000 For an SUV? No contest. And this is causing some. Concern to the likes of Elon Musk and Tesla and a
number of other carmakers. China is the largest auto producer in the world. 1 in 3 cars is built there. In fact, it has become so productive its own market
can't absorb the inventory. And so the age of the much feared Chinese auto export
has begun for Americans. It's hard to process that because we don't see Chinese
cars on American roads. Trust me. Go to Australia, to Mexico, to Brazil, to
Israel, to South Africa. You're going to see Chinese cars all over the place. American trade groups and others worry that China will
do with cars. What it has done with countless other industries,
eradicate competition with cheap labor and materials, And abundant government support. Chinese firms are already pushing out competitors at
home. The Biden administration slapped a 100% tariff on
Chinese EVs in an effort to stop the Onslaught before it starts. Tesla got caught flat footed in the China market
because no one anticipated such a severe Turn to clean energy vehicles, and we're seeing the
effects of that. All the legacy automakers are scrambling. They're not just shopping them because they're cheap. They've super scaled the set of features that
consumers are demanding. So how formidable are Chinese EVs? How do they stack up against the world's most popular
model, the Tesla model Y. CNBC tried a few to find out. So this is the Tesla model Y. This is currently the best selling car in the world. Woo! The acceleration on these things is incredible.
Tesla is a really highly respected brand in China, but
homegrown Chinese automakers are really Catching up and in some cases surpassing. In fact, there are around 140 EV brands in the
country, and at least in China, some of them are outselling Tesla. This is Eunice Yoon, CNBC's Beijing bureau chief. She set out to try some of the Chinese crossover's
comparable to the Model Y, with a few technical Exceptions, like Chinese owned brands such as Volvo,
Polestar and Lotus. Chinese cars aren't available in the US yet. I was surprised myself driving these cars. First, let's address price. The BYD tang, for example, made by Tesla's biggest
Chinese rival BYD, is known for making cars very cheaply. One of BYD's big selling points is that they're able to
give you a car that is a seven seater, A little bit of a shorter range than a model Y, but at
the same time it's $11,000 cheaper. How do they get the cost down that much? Well, then you get into that kind of secret Chinese
superpower of state capitalism, Where you have entrepreneurs driving costs down,
innovating, designing better product while at the Same time getting tremendous support from city,
provincial and national political leaders Who want China to win. Between 2009 and 2023, the Chinese government handed
out an estimated $231 Billion in subsidies and tax breaks. Byd, which is not government owned, received $3.7
billion in direct subsidies Between 2018 and 2022, most of it in that last year. But one of BYD's biggest advantages is its ability to
drive down costs through vertical Integration. Byd sold roughly 3 million cars in 2023,
about half of them electric and Half plug in hybrid. This year they're forecasting 4 million. Contrast that with Tesla, which saw sales fall year
over year in the first two quarters of 2024. Byd is also one of the largest battery makers. About 40% of China's cost advantage is attributable to
its edge and batteries, which make up about 20 to 30% Of a vehicle's total cost. Byd has done a phenomenal job of making in-house 75 to
80% of the parts that go into their Cars, so they own the batteries and the battery supply
chains. That's clear, and it contributes to lower cost and
higher quality.
And then apart from batteries, pretty much across every
other category, BYD's costs are lower than its Chinese competitors, Tesla and drastically lower than
legacy competitors like Ford and GM. But all Chinese automakers benefit from low costs
and a localized supply Chain. This can be seen in the G6 from Xpeng, a
relatively small company that listed on the New York Stock Exchange in 2020. It hasn't done so well, although results were solid in
the last two quarters of 2023. What's their pitch to the consumer? What made them different from the others? Price. So they have a lot of other features in there as
well. So we were in the Xpeng G6. When you look at the specs and the dimensions, it's
almost identical to the Model Y, but at 27K it's almost $9,000 cheaper. This is crucial. Chinese cars aren't just cheap, they offer value for
money. What Henry Ford did to this industry is he took
something that was a rich person's toy and made it So that anybody working in a factory could afford it. China is democratizing the smart EV, and. Smart is the key word here. This means connected to the internet and loaded with
tech. Chinese EVs tend to have a lot of bells and whistles. For example, I can ventilate my seat to deal with the
summer heat. Oh yeah, I can feel it. I could change the settings so that this EV sounds as
though it's running on gas Oh. And I could tell the AI assistant to park the car
without me. This is very handy. Ev makers leverage these affordable tech features to
target specific customers. This could be said of the Li Auto L6 shares of its
Nasdaq listed Manufacturer. $20 billion market cap have had a rocky
time while the company carves out its brand Identity. Li auto does market itself as more of a family type of
car maker. To pull that off, the company offers extras you won't
find in a Tesla. Technically, this one wasn't an EV. It has a gas powered range extender on board.
The extender appeals to road tripping families or the
many drivers stuck for hours in the city's Notorious gridlock. Li Auto L6 is about the same price as a Model Y, but
has a longer range at 893 Miles. So we are driving during rush hour in Beijing
traffic. But this five seater is designed for families in a
Chinese context, that means That a lot of extra creature comforts are common in
the cabin family. In the front seats can watch TV or get massage by
their chairs. And if you want a cold drink, there's a fridge in the
back. At the higher end. There are innovations that companies
like Tesla have only talked about. Take Nio for example. It was a hyped IPO on the NYSE back in 2018, but
shares are down 90% from a 2021 high due to sluggish sales growth and high cash
burn. The company is relatively small, with a $9 billion
market cap, and it only sells electric vehicles, About 160,000 of them in 2023. Nia has had its own way of dealing with charging
challenges battery swapping, something that Tesla had Considered. Nio actually did it. If you want to swap your battery first, you find a
station. You check what batteries they have, and then you place
the order. There are 3500 battery swapping stations around the
country, most of which are Neos. So we're 92% charged. And that took a little less than ten minutes. Well, they say three minutes. My experience was about a little under ten. It's not difficult to find charging points here in
Beijing. This map says eight out of the ten near me are
available. China currently has 3 million public charging
facilities. A lot of China auto industry analysts say the tech
forward features in and around these cars are really Where Chinese automakers have a leg up on global
competition. They are turning cars into connected devices that can
work within the larger Internet of Things. The AI assistant Nomi is a draw as well. While other car AI systems respond to direct voice
commands such as turn off the air conditioner. People on social media say that Nomi sounds more like
a person. Hey, Nomi, I feel so cold. Well, Han.
Long. So, for example, instead of saying turn off the air
conditioner, I would say, oh, I'm Feeling really cold right now. And then it would say, oh, okay And then it starts and
it's like, how about I just turn down the air Conditioner? You know, and then it would also make
some jokes sometimes. So. So, you know, when it was signing off, it was
like, bye. It's no longer how many units of hardware you sell. It's all the data and analytics and aggregation and
monetization of services That happen after you sell the car. That's the new business model. If you look. At a company like Apple, they sell us things that we we
didn't know we needed, and they Charge a 35% premium for it. Does it really feel like you're in some sort of space
age? Uh, you know, cabin or something? Were there any that really stood out in terms of, you
know, being like especially tech heavy? No. And I think actually, that's the point. All of these Chinese EV makers are trying to
distinguish themselves somehow. So they keep putting in all these different technology
features. Some of them were really, really fun. But then there were some that weren't were not as as
useful. And in fact, um, didn't really work very well. So we in two different cars, we tried the auto parking
and it was a little stressful. So please park the car. So that didn't quite work. We're about 7 or 8in from the car next to us. We didn't hit it, so that's a good thing, but I think
we're going to have to try parking again. When we speak to a lot of analysts, they say that
Chinese drivers really like These technology features. But on the on the other hand, it's unclear how these
tech features are going to Resonate with drivers outside of China. But driving a tech forward Chinese EV comes with its
own costs. What struck me about all of these Chinese EVs is how
they didn't
Focus as much on performance, and it kind of showed
when I was in the model Y, you could have a pretty good control in the car,
and that wasn't really the case on the Whole for the cars that we were in that were from the
Chinese EV makers, you Didn't have that same level of precision when you were
making A turn, for example. And in fact, that's a trend and something that is
almost common Knowledge among Chinese drivers. They'll talk about, oh, there's the Tesla, there's the
model Y, the model three there, the performance cars. And one reason Chinese carmakers can keep prices low
might be that they sometimes don't offer more bang for Buck. They make compromises. You could really tell the difference from the ones that
were pricier. They had nicer finishes. They had nicer interiors. They felt better. There weren't as many kind of junky or odd designs
that were inside the car. For example, in one of the cars that I was in, the,
the steering wheel was kind of off Compared to where I'd be sitting The windshield
Shields, wipers, was placed in an odd place for my Hand, and. Even the premium vehicles show signs that these are new
companies, new models, new designs, And automakers haven't worked out a lot of the kinks
yet. There's one car that I was in that had really nice
leather chairs, but the way that the chairs Moved it when you're driving, it's just squeaking the
entire time. One of the other models that I was in, you know, it
was it was so loud. Maybe these Chinese companies still don't have it
down. So are foreign automakers doomed in China? Some industry watchers have said they suspect it will
be hard for non-Chinese firms to compete when homegrown Brands are tapping in so well to the Chinese
preference for tech. And then there's the question of which of these
companies and which business model can succeed. The highly integrated firm that can just beat on cost,
or the highly connected smart EV maker that makes Money off of services and subscriptions? Byd is already established that the proof of concept
that they can execute on a Business model and be competitive with anybody
worldwide in terms of quality, design And cost. This other notion of a greater ecosystem built around
a digital system may very well be the future,
May be the TikTok of cars, but I'm not ready to say
absolutely they're going to run away with Everything because they have a better digital
experience. Don't know yet. And can they duplicate in different
languages and different Cultures a comparably high level of enjoyment as they
do at home for their own Consumers? That's a big cultural step for them to
take. And their own financial situation is by no means
secure. Most of these companies aren't profitable. That's another characteristic of tech. Most of the tech companies, until they reach a
critical mass or a certain inflection point from a Sales cycle standpoint, they're not going to be
profitable, and the price war is exacerbating that a Bit. So will Chinese EV makers dominate the global industry? For Chinese EVs, the big challenge is going to be to
convince People Overseas who have brand loyalty to the GM's and the
Toyotas and the VW, and to be able to convince them to switch not only
to EVs, but to Chinese EVs that they've never heard of. So that's, to me where the performance issues and also
these little odd Design quirks really count because a car is different
from a mobile phone, for Example. A car is something that you put your family
in. And then of course, there's the price. You know, you have all these discussions about, oh,
the government subsidies and there's so much Competition in the market. And I think all of that doesn't necessarily matter,
because at the end of the day, it's going to be the Consumers who decide who's really going to be ahead.
