Takeaways

• The slowdown in EV sales growth, particularly in Europe and North America, has led several traditional automakers to reassess their strategies, including sales targets, product plans, and investments.

• In such a context, EU strategy seems less about innovation and more like diplomatic paralysis, where bold moves are obscured by tangled bureaucracy.

• Car manufacturers will have to collaborate even more with Chinese players in the value chain if they want to sustain their activities.

• In this note, we look at the key success factors of Chinese players with BYD as a benchmark.

• Vertical integration allows a company to control different parts of the supply chain, manufacturing, and distribution, potentially reducing costs, boosting sales, and maximising profits.

• However, vertical integration also has drawbacks, such as high capital demands and the risk of increased inefficiency if not managed properly: Northvolt is an example of a vertical integration strategy that failed for idiosyncratic and external reasons.

• Beyond Vertical Integration, technology diversification and exposure to incumbent players can be determinants of success or failure.

• We still believe that CATL and BYD seem to be, without a doubt, the concept and creation of a major long-term plan to dominate the electric vehicle industry.