Chinese EVs take on global tourism

Few companies are making more global headlines than BYD. Founded as a rechargeable battery maker in Shenzhen in 1995, BYD (or Build Your Dreams) claims to be “the world’s leading manufacturer of New Energy Vehicles (NEVs)”. In March, its seven millionth NEV (known as EVs worldwide) was unveiled at its plant in Jinan, less than three years since producing the one millionth model.

In June, BYD opened a new factory in Thailand, with others planned or under construction in Türkiye, Brazil, Mexico and Hungary. The brand’s globalization strategy was also supported by being a prominent sponsor of Euro 2024 in Germany.

A BYD electric vehicle on display - the BYD Han EV. Image: Wikimedia Commons

Then, at the end of July, BYD announced a global partnership with Uber to enable app users in Europe and Latin America – and later the Middle East, Canada, Australia and New Zealand – to book an EV ride. “This collaboration marks a new era in the electrification of urban mobility, and we look forward to seeing our cutting-edge EVs become a common sight on the streets of cities worldwide,” said Stella Li, BYD’s Executive Vice President.

Chinese EV Globalisation

While BYD ranked fifth in terms of China’s largest automobile exporters in the first half of 2024, it leads for NEVs in a country that is starting to dominate the sector globally. The capacity of Chinese EV makers to produce a broadening range of high-specification cars at a low cost is disrupting the automobile industry and geopolitics.

US and European politicians accuse China’s government of subsidizing its EV makers to build competitive advantage. The imposition of tariffs on Chinese EV imports is, depending on your point of view, designed to protect local carmakers or force Chinese EV brands to invest into local markets, where operating conditions are tougher. Or a combination of both.

“Chinese new-energy vehicle manufacturers are more eager to build factories in Europe than before, as they remain optimistic about their long-term prospects in the region despite current headwinds, noted Chinese business news site Caixin citing an industry survey.

China's EV companies are expanding quickly.

Price and Affordability

At the heart of the matter is affordability. Chinese EVs are much cheaper than US or European models. This is important for three reasons. Firstly, for driving sales in a highly competitive market like China. Secondly, meeting Chinese consumer’s taste for discounted products driven by e-commerce price wars. And thirdly, it opens up new markets, especially high-growth regions like South East Asia, where consumers are also value-conscious. BYD showrooms are now a feature of shopping malls in most major ASEAN cities.

Tesla CEO Elon Musk’s comment that “If there are no trade barriers established, [Chinese EV makers] will pretty much demolish most other car companies in the world" is no empty threat. Tesla is among a list of US manufacturers seeking to launch cheaper models.

Tu Le, Founder of Sino Auto Insights, believes they may be too late. “Tesla is holding onto dear life as it tries to launch an affordable EV that it knows won’t likely be able to compete with the XPengs, NIOs, Avatr’s, Zeekr’s, Li Autos and certainly not the BYDs of the world.”

Red-Hot Car Rental Sector

As the world debates Chinese EVs within a framework of subsidies, tariffs and sales volumes, a sector often overlooked is tourism. More specifically, China’s car rental sector.

Self-drive travel is among China’s hottest tourism trends. This may be expected in a nation with 486 million registered drivers, but China embraced car rental for leisure relatively late.

Its appeal skyrocketed during the three-year isolation from international travel. Renting a car with family or friends provided self-contained safety from the risk of catching Covid on flights or trains. It also gave travellers freedom to plan personalised trips to explore their vast country and to head home for Chinese New Year reunions.

The appeal of self-drive has carried over since China reopened in January 2023. In 2024, car hire apps and OTAs said their inventories were fully booked ahead of Spring Festival and the May Golden Week holidays. Travel industry research firm Phocuswright forecasts that by 2027, China’s car rental sector revenue will be 265% greater than in 2019.

In China, rental cars have become more appealing since Covid, especially when it comes to getting away for holidays.

The business model of Zuzuche helps to explain why. Pre-pandemic, it was China’s leading mobile car rental platform for outbound travellers, claiming a 70% market share. Its top destinations for Chinese car renters were North America, Europe, Australia and New Zealand. The Covid border closure enforced a turnaround. Although self-drive travel was expanding in China, Zuzuche had not entered the domestic market. In Spring 2020, fearing a long period without international travel, Founder and CEO Ben Li adapted its global platform for Chinese drivers. Within four months, it offered 3,000 car rental suppliers nationwide.

Since reopening, domestic demand in China “continues to grow fast especially during public holidays,” Li says, while the recovery of overseas bookings has been impressive. “In 2023, our outbound car rental volume reached 96% of the 2019 level,” he notes, although the overall recovery rate varies by destination. While US demand remains down due to a lack of flight connectivity from China, “the rebound in Thailand, Malaysia, UAE, Saudi Arabia, Western European countries, Australia and New Zealand is much stronger”.

Upscaling EVs in Tourism

To tap the return of Chinese tourists, Zuzuche has partnered “with destinations like Australia, New Zealand, US and some European countries to promote self-driving tours for this year’s summer school holidays” says Li. “These destinations recognise the high-value potential of the car rental segment of the Chinese market.”

For now, EV booking is polarised. “Young Chinese people are very comfortable booking an EV in China as they are familiar driving different models of these cars. Overseas, our average customer is a little older and they are more cautious about the cars they rent. When they are overseas, there is also less supply of EV models that Chinese drivers know”.

As the expansion of Chinese self-drive tourism tracks the rapid growth of the nation’s EV capacities, the market is forecast to continue evolving. Plentiful EV capacity is filtering into the car rental and ride-share sectors. The BYD-Uber partnership is likely to set a new trend.

- Asia Media Centre