Apple, the world's second-largest company by market capitalization, recently announced its exit from the electric vehicle (EV) market. Apple announced 10 years ago that it entered the electric car market, but announced its withdrawal 10 years later, what kind of signal is this?
In fact, not only Apple, but also the U.S. auto industry is also adjusting the development strategy of the electric vehicle industry. On the one hand, it wants to launch a countervailing investigation on Chinese electric vehicles and restrict Chinese electric vehicles from entering the European market; On the other hand, some countries, such as France, also want to change their strategy and cooperate with the Chinese auto industry.
These are all strong signals that the global EV market has changed, a sea change. To use this metaphor, China's electric vehicle industry today is like the imperialist period that prevailed in the 19th century, blasting the markets of the United States and Europe. It's just that China's electric vehicle industry is to open up the US and European markets with a strong cost performance, rather than really relying on ship's strength.
The United States has adopted protectionism, and Europe is considering whether to adopt protectionism. China's electric vehicle industry has strong competitiveness, which is a strong weapon in the new century. However, there are some concerns about China's electric vehicle industry. Look at the news from the American continent. According to Reuters, Biden will relax his goal of "reducing tailpipe emissions by 2030 and increasing electric vehicle sales." Why did Biden say that?
It stands to reason that when the Democratic Party of the United States was in power, it always advocated new energy and new energy vehicles, so Biden passed the "Inflation Reduction Act" in August 2022, giving the American auto industry high subsidies and fully investing in the production and manufacturing of electric vehicles in the United States and North America.
There were once some supporters of the US Democratic Party who believed that if it were not for George W. Bush's election in 2000, the United States might have "achieved" the goal of new energy and new energy vehicles. Is that really the case? Now it is not the Democratic Party's Biden administration, but at this time he has abandoned the goals he originally set. The reason is that the U.S. auto industry has encountered obstacles, and the U.S. auto industry is losing money in the electric vehicle market, so it can't always lose money, right? According to Ford's 2023 financial report, the company reversed its 2022 losses and achieved a net profit of $4.3 billion.
That's a good result. However, Ford's R&D of pure electric vehicles accounts for 40% of its total capital expenditure, and the huge expenditure makes this business still in a loss-making state, and its loss is $4.7 billion, which is a huge loss. As a result, Ford has cut its plans for electric vehicle production in favor of profitability. Ford claims that the next generation of Ford's electric vehicles will only be launched if they are profitable. However, Ford has not given up on the EV market either, after all, this is the trend. However, on the premise of making a profit, Ford shifted its focus to gasoline-electric hybrid vehicles. In the U.S. market, gasoline-electric hybrid vehicles are still profitable.
In 2023, the U.S. sold 1.17 million gasoline-electric hybrid vehicles, a year-on-year increase of 52%. In addition to Ford, Toyota, Honda, and Hyundai-Kia in the U.S. market are also focusing on the production and sales of hybrid vehicles.
It is for this reason that Biden has to abandon the original electric vehicle sales target and vehicle exhaust emission target. Let's go back to Apple. Apple started developing electric vehicles ten years ago, why did it spend ten years of hard work in the field of autonomous driving and electric vehicles, spending $10 billion in sky-high research and development funds, and now giving up? In a word, Apple spent ten years of research and development, but it was unable to develop a competitive product that outperformed its competitors. To put it simply, Apple "can't do it". Since the death of Apple founder Steve Jobs in 2011, Cook, who took over as CEO, has struggled to develop new products. There is nothing new in the update of the iPhone, and the 5G chip has been developed for several years, but it has never been done well.
Don't forget, Apple disliked Qualcomm's 5G chips too expensive, so it decided to develop it itself. But from 2018 to the present, Apple has spent a total of one billion dollars on research and development, but the release of 5G chips has always been postponed again and again. If 5G chips can't do well, can they do well in electric vehicles and autonomous driving? In today's electric vehicle market, there is Tesla in the United States, and beyond Tesla is China's electric vehicle industry. It took Apple ten years of hard work to compete with Tesla, nor can it compete with Chinese electric vehicles.
This is a real problem. In addition, it is even more difficult for Apple to single-handedly take over electric vehicles + autonomous driving in the automotive field that has never been tried before. **In this regard, China's Huawei is relatively smart, and Huawei has also never done the automotive market, so Huawei has adopted a cooperative approach to give full play to its strengths in chip design, communication, software systems and artificial intelligence (AI), and cooperated with Thalys to launch the M9 SUV smart car. The M9 was launched on December 26 last year and sold more than 20,000 units in two days. The problem with apples is that they have to do everything by themselves.
This is the case with Apple computers in the 1980s, Apple took care of the computer hardware + operating system + all the specifications, and even the application software was mostly done by itself in the early days. But in the era of smart cars, it is different, because the use environment is different, Apple wants to include everything from the electric car itself, electric vehicle batteries, intelligent driving, car AI, etc., and the ambition is too great. Not to mention, in each of the above-mentioned fields, there are quite outstanding companies in each field, and they are global leaders. In terms of electric vehicle batteries, China's electric vehicle batteries are the first in the world, with a global market share of 62 in 20237%。To sum it up, the global electric vehicle industry today is: electric vehicles + batteries.
Among them, electric vehicle manufacturers in many countries buy electric vehicle batteries from China. And the trend of electric vehicles is: electric vehicles + smart driving or autonomous driving (AI). The trend of electric vehicles in China is: electric vehicles + intelligent driving or autonomous driving (AI) + Internet of Everything. The reason why China's electric vehicle trend has added an Internet of Everything is because there is a strong competitor - Huawei. The M9 is based on the HarmonyOS system, which has strong potential. In addition, China has also established a large AI model of artificial intelligence in autonomous driving, and it is a world leader.
In other words, in this field, the Chinese industry has stronger potential and more ambitious development ambitions. How can Apple compete? Not to mention Apple, even Tesla has to face competition from the Chinese industry. In 2023, BYD will sell a total of 3.02 million new energy vehicles, surpassing Tesla's 1.8 million.
China's model in the electric vehicle industry is difficult for all countries in the world to resist, and can only use the most protectionist way. The U.S. has imposed restrictions on electric vehicle batteries, components and materials in China. Europe also intends to follow suit, with the EU launching a countervailing investigation into Chinese electric vehicles. This is strange, the United States has engaged in a closure and blockade, and the European Union also wants to follow up, and the United States and Europe are afraid of China's electric vehicle industry? It's really feng shui in turn! The United States and Europe, that is, the Western countries in the eyes of the world, are afraid of China's electric vehicle industry! However, being afraid is not an option, you can't just shut yourself up for the rest of your life! If you want to do retreat and restriction, how many years can you do it? Since China has established a "whole industry chain" in the electric vehicle industry, it is difficult for electric vehicle manufacturers in the United States, Europe and Japan to compete with China. As a result, there are voices of cooperation between American and European automakers and Chinese companies.
The CEO of General Motors of the United States said: If we have a way to cooperate with other companies, especially in non-consumer-facing technologies (alluding to EV batteries and components), we will participate. And Ford said: We can start to compete in the battery market, maybe we should work with another automaker.
European automakers also want to cooperate with China's electric vehicle industry, but the way European manufacturers want to cooperate, like General Motors in the United States, is in China's most competitive electric vehicle battery. To be honest, China does have a strong competitiveness in the electric vehicle industry, and it is still a crushing competitiveness. But there are some concerns.
The first concern is that the US and European markets are closed to the Chinese industry. This is as mentioned earlier. The second concern is that EU countries may require Chinese battery manufacturers to set up factories in Europe. European car companies, including BMW, PSA, Renault, Daimler, Volkswagen, etc., have asked Chinese battery manufacturers to build factories in Europe. This is where we need to negotiate. In recent years, the United States and European countries have gradually lost the spirit of the free market and undermined the spirit of the contract, so it is necessary for China and the EU to negotiate and establish a good and guaranteed investment mechanism. Perhaps, this is the time for China and the EU to restart negotiations on an investment agreement. Of course, the content of the EU-China investment agreement was negotiated at the end of 2020, but the EU unilaterally shelved the review of the agreement the following year. It seems that the United States will not open up to China, and although General Motors and Ford have expressed their willingness to cooperate, it is difficult for the current atmosphere in US political circles to relax restrictions on China. But there is hope that Europe will negotiate a mutually beneficial situation. The point is that if China and the EU reach an agreement on the electric vehicle industry, the United States will be isolated.
On the one hand, it is difficult for the U.S. electric vehicle industry to compete with China, and it is also difficult to compete with European electric vehicle manufacturers under Sino-European cooperation, and American manufacturers will gradually lose their competitiveness. On the other hand, politically and economically, the United States will gradually loosen its grip on Europe. So, don't worry about the US blockade of China's electric vehicle industry, with a focus on Europe. The third concern is that although China's electric vehicle industry is strong, the industry's profits are low, and even they are selling at a loss. This is because there are many electric vehicle manufacturers in the Chinese market, and the competition is too fierce, so that price cuts stimulate sales and grab the market.
Chinese players can't always rely on price cuts to grab the market. It's not okay for low-end industries to do this, and for high-end industries to do the same. If the high-end industry does the same, how to increase profits, increase employee salaries, increase national income, and increase stock prices? In the high-end industry, you can't do the price of cabbage, you need to make a profit in a timely and moderate manner. On the other hand, although the US and European automakers are not as good as the Chinese in the electric vehicle industry, some US and European automakers are focusing on profits, and Toyota, Hyundai-Kia and Stellantis have hit new highs. This is something that needs to be done. Let's make a summary. Although the United States has engaged in subsidies and passed the "Inflation Reduction Act", it has not been able to compete with China in less than two years, which is quite ironic. The key opportunities are in European countries, and European countries do have the willingness to cooperate with Chinese companies, depending on how the two sides talk. It's a challenge, but it's also an opportunity. If the EU-China investment agreement can be retrieved from it, it will be beneficial to both China and the EU.
What if we can't talk about it for a while? On the one hand, as long as Europe can guarantee the investment of Chinese manufacturers in Europe, it is not undesirable. On the other hand, if it doesn't work, then compete! China has a whole industrial chain in the electric vehicle industry, and has great potential for future automotive artificial intelligence and car interconnection, so let's fight an industrial competition! Knock on the door of the American and European markets with competition!