Winston Mok

The View | Why Chinese green tech firms can be transformative for the Global South

As Chinese multinational firms expand their presence internationally, they can reshape global production networks towards the Global South and accelerate the transition to a green economy, helping build a more sustainable future for all

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The BYD EV Dolphin Mini is displayed as the Chinese electric-vehicle producer announces the launch of the low-cost model in Mexico City on February 28. As Chinese firms seek to expand their global reach and navigate a complicated geopolitical climate, middle-income countries such as Mexico and Morocco could benefit handsomely. Photo: Reuters

Winston Mok

Published: 4:30pm, 7 May 2024

China surpassed Japan as the world’s leading car exporter last year based on data from automobile manufacturer associations in the two countries. However, most of those exports were internal combustion engine cars while electric vehicles (EVs) represented only about 25 per cent of exports. In 2022, Japanese car manufacturers produced about 17 million cars overseas, more than four times the 3.8 million units exported.

Given the significant trade barriers Chinese EVs face in the United States and in Europe, these companies might have no choice but to follow Japan’s path of overseas expansion if they want to pursue Western markets. In their global expansion, Chinese green tech multinational corporations could make a greater impact than Toyota and Honda before them.

BYD is building factories in Thailand, Brazil, Mexico, Uzbekistan and Hungary. While not limited to EVs, Geely and SAIC are looking to expand their overseas plants.

While China represented about 60 per cent of global EV sales last year, Europe and the US combined made up 35 per cent of the worldwide market and are thus too important to be overlooked. To mitigate the risks of European trade barriers, Chinese car companies are setting up factories in Hungary, Spain and Italy.

In 2022 and 2023, China’s EV-related industries made about US$60 billion in outbound foreign direct investment. Three quarters of that amount went to Europe, the Middle East, North Africa and Asia. CATL and Svolt have built large factories overseas. While much of the recent investment was battery-related or upstream, firms are now shifting downstream to EV manufacturing.

While investments upstream and midstream have been driven by supply and other economic considerations, market access to overcome trade barriers has become a key factor behind downstream investments in EV production. Hence, many downstream investments will be in the European Union or countries with free-trade agreements with the US or the EU.