Chinese EVs: Safety and Trust Challenges

1. Summary

• Safety and consumer trust issues in Chinese electric vehicles (EVs) are under scrutiny as several factors, including battery safety and performance in crash tests like those from Euro NCAP, pose ongoing challenges. Despite a positive trajectory in the global market, critical consumer confidence remains low due to historical and recent incidents. Companies like CATL have reported disparities in battery safety figures, highlighting concerns about battery reliability and fire risks. Meanwhile, certain Chinese EV models, such as Chery's Omoda 5, perform well in Euro NCAP safety assessments, showing some progress. Nonetheless, lingering doubts, often rooted in past poor crash test performances, continue to undermine consumer confidence.

2. Battery Safety of Chinese Electric Vehicles

• 2-1. Fire incidence rates reported by CATL

• The fire incidence rate for electric and hydrogen vehicles, including those manufactured in China, was reported by CATL's chairman as 0.96 incidents per 10,000 vehicles last year. Given that there are approximately 25 million electric vehicles in China, this totals around 2,400 reported fire incidents. This statement was made during the keynote speech at the 2024 World Battery Conference, lending credibility to the data.

• 2-2. Discrepancies in battery failure claims by CATL

• CATL's chairman has claimed that many batteries have a failure rate of 0.0001 (100,000 to 1) level. However, he has also noted that there is actually a significant risk with a failure rate of 0.1% (1 out of 1,000), raising questions about the safety of Chinese batteries amid frequent electric vehicle fires. This discrepancy poses serious implications for other Chinese manufacturers as well.

• 2-3. Impact of safety concerns on sales of vehicles using Chinese batteries

• Following a fire incident involving a Benz vehicle, it was observed that sales figures varied significantly. For instance, while Hyundai experienced a sales increase of 29.1%, sales of overseas manufacturers using Chinese batteries saw a decline. This trend suggests that safety concerns are directly influencing consumer purchasing decisions and overall market performance.

3. Euro NCAP Test Results for Chinese Electric Vehicles

• 3-1. Performance of Chery Omoda 5 in Euro NCAP tests

• The Chery Omoda 5 was first showcased at the 2021 Guangzhou Auto Show and began production in February 2022. It is equipped with a 197 horsepower inline 4-cylinder 1.6L gasoline engine and a 154 horsepower 1.5L gasoline turbo engine. Euro NCAP evaluates vehicles across four categories: adult passenger protection, child passenger protection, pedestrian protection, and safety assist. The Omoda 5 scored 87% in adult passenger protection, 23.7 points in child passenger protection, 68% in pedestrian protection, and 88% in safety assist. Notably, in the adult passenger protection category, it secured high ratings in various crash types, including 13/16 points for frontal impact and 14.6/16 points for side impact. In the rear impact assessment, it exhibited low passenger neck injury potential, achieving a score of 3.7/4.

• 3-2. Public perception of safety based on crash test outcomes

• Public confidence in the safety of Chinese electric vehicles remains low, largely due to prior poor performances in crash tests by some models. Notably, the longstanding concerns stem from the 2005 test by the German Automobile Club (ADAC) on a model by JLR Motors, which stated that there was 'no chance of survival' for the driver in case of an accident. This historical context continues to engender serious doubts among consumers regarding safety, directly impacting their trust in Chinese EVs.

• 3-3. Comparison of Euro NCAP results with consumer trust

• Despite some models, such as the Chery Omoda 5, achieving commendable ratings in Euro NCAP tests, the overall consumer trust in Chinese electric vehicles is significantly affected by safety perceptions. Reports highlighted that while these vehicles may perform well in tests, safety concerns derived from incidents, including battery fires, remain prevalent. Consumer distrust persists, partly due to the contrast between the test results and the negative safety incidents reported in the media, illustrating a gap in public perception versus actual performance.

4. Analysis of Consumer Trust in Chinese Electric Vehicles

• 4-1. Historical distrust stemming from past crash tests

• Consumer distrust in Chinese electric vehicles (EVs) is significantly influenced by past crash tests, particularly the negative evaluation by the German Automobile Club (ADAC) in 2005, which stated that a specific model had no survivability in the event of an accident. This historical incident has left a lasting negative perception among consumers regarding the safety of Chinese EVs, contributing to the current low levels of trust.

• 4-2. Current consumer perceptions of safety

• Presently, consumers hold serious distrust towards the safety of Chinese EVs. Many individuals associate safety directly with life-threatening concerns, which reinforces negative perceptions. Recent statements by the president of CATL regarding the fire risk associated with EV batteries have heightened these safety concerns among consumers, despite some models achieving favorable results in Euro NCAP tests.

• 4-3. Influence of safety perceptions on purchasing decisions

• The prevailing safety perceptions heavily influence purchasing decisions among consumers. Many potential buyers are hesitant to invest in Chinese EVs due to the uncertainty regarding their safety. Even though certain models have shown commendable results in crash tests, the overall recovery of consumer trust remains inadequate. Hence, improving the safety image of Chinese EVs is essential for boosting consumer confidence and increasing market sales.

5. Global Competitive Landscape of Chinese Electric Vehicles

• 5-1. BYD's market performance and expansion strategies

• BYD has shown a significant increase in market share, achieving over 1,000 unit exports monthly since the latter half of 2022. By the fourth quarter of 2022, BYD surpassed Tesla to become the world's number one in electric vehicle sales. Furthermore, in the Japanese market, BYD sold 1,511 units, greatly exceeding Hyundai's 492 units. This trend indicates BYD's competitive edge and efforts to mitigate existing biases towards Chinese electric vehicles.

• 5-2. Impact of trade barriers on Chinese EV market entry

• Trade barriers have played a crucial role in the international landscape for Chinese electric vehicles. Elon Musk, CEO of Tesla, stated that if trade tariff barriers were removed, Chinese companies would dominate most global automotive markets. This highlights the potential challenges Chinese EV manufacturers face in entering and competing in international markets.

• 5-3. Consumer preferences in international markets

• Consumer preferences for electric vehicles vary significantly across international markets. For instance, in North America, there is a strong demand for large electric motorcycles, while the European market has shown a preference for electric bicycles. As of 2023, Chinese electric two-wheeler exports to the U.S. reached 4,564,000 units, positioning it as the leading export destination. This discrepancy in consumer preferences is influencing the strategic maneuvers of Chinese EV companies in expanding their global presence.

6. Market Trends and Challenges for Chinese Electric Vehicles

• 6-1. Price competitiveness and market expansion strategies

• Chinese electric two-wheeler manufacturers initially relied on Original Equipment Manufacturer (OEM) methods for exporting complete units through overseas contract manufacturing. However, many Chinese companies have shifted their focus to strengthening research and development capabilities, building their own brands, establishing overseas factories, and innovating products. As a result, the export of Chinese electric two-wheelers has been rapidly increasing. For example, as of 2023, the export of electric two-wheelers to the United States reached 4,564,000 units, making it the top destination for Chinese electric two-wheelers.

• 6-2. Shift from OEM to direct production by Chinese manufacturers

• Chinese electric two-wheeler manufacturers are increasingly establishing foreign production facilities. Companies like Yadea and Aima have transitioned from OEM processes to setting up factories in countries like Vietnam and Indonesia. This shift is part of a broader strategy to enhance brand recognition and competitive strength in international markets.

• 6-3. Sales performance of electric two-wheelers in different regions

• The sales performance of Chinese electric two-wheelers varies by region. The European market shows a preference for electric bicycles, while the United States and North America favor larger electric motorcycles. The trend reflects ongoing diversification in consumer preferences and increased competitiveness of Chinese electric vehicles across global markets.

Conclusion

• The Chinese electric vehicle market is navigating significant challenges despite its technological progress and market expansion efforts led by companies like BYD. The acknowledgment by CATL of fire incidents has spotlighted critical safety concerns, impacting consumer trust alongside historical instances of poor crash performances. Essential to increasing market credibility is bridging the gap between impressive Euro NCAP test results of models like the Chery Omoda 5 and public perception. Substantial work remains in addressing the gap between actual performance and consumer perceptions through enhanced safety measures and awareness campaigns. Establishing robust quality and safety standards is crucial for Chinese EVs to secure a stronger foothold in global markets. Future developments should focus on resolving these trust issues to facilitate acceptance and growth in international arenas, alongside strategic moves like those BYD is implementing to strengthen competitiveness despite existing trade barriers. The practical application of these innovations lies in aggressive efforts to reframe the narrative of Chinese EV safety on the global stage.

Glossary

• CATL [Company]: Contemporary Amperex Technology Co., Limited (CATL) is China's largest battery manufacturer, recognized for its significant role in the electric vehicle battery market. Its acknowledgment of fire incidents has raised concerns regarding battery safety, making it a central figure in discussions about the reliability of Chinese electric vehicles.

• Euro NCAP [Organization]: The European New Car Assessment Programme (Euro NCAP) is an organization that evaluates the safety of vehicles sold in Europe. Its crash test results are crucial for assessing the safety performance of vehicles, including those from Chinese manufacturers, and play a significant role in shaping consumer perceptions.

• BYD [Company]: BYD Company Limited is a leading Chinese electric vehicle manufacturer known for its innovative technologies and competitive pricing. Its rapid growth in the global market showcases the potential of Chinese EVs, though maintaining consumer trust remains a challenge.

Source Documents

• 중국산 전기차의 안전성, 현실은?go-public-report-ko-efbebdb3-43c1-422d-9ea8-da7aa7cc0262-0-0