Jinhua: The Engine Behind China's Electric Vehicle Surge

Jinhua: The Engine Behind China's Electric Vehicle SurgeMarch 4th, Jinhua, Zhejiang province, a manufacturing powerhouse in eastern China, is emerging as a microcosm of the global electric vehicle (EV) revolution, fueled by its booming new energy vehicle (NEV) industry. Established in 2015, Jinhua's NEV City is more than just an ambitious plan; it's a reality

Jinhua: The Engine Behind China's Electric Vehicle Surge

March 4th, Jinhua, Zhejiang province, a manufacturing powerhouse in eastern China, is emerging as a microcosm of the global electric vehicle (EV) revolution, fueled by its booming new energy vehicle (NEV) industry. Established in 2015, Jinhua's NEV City is more than just an ambitious plan; it's a reality. Giant factories are nestled alongside upscale residential areas and an "automotive culture" theme park, providing workers with an attractive lifestyle as they contribute to the electric transformation of the global automotive market. Today, Jinhua's EV dream is becoming a reality. This coastal Zhejiang hub city of 7 million is locked in fierce competition with over a dozen other Chinese cities to become the "Detroit" of China's electric vehicle era.

China currently holds a 60% global market share in EV production and an astounding 80% share in EV batteries. Once intensely reliant on foreign technological cooperation, the Chinese automotive industry has transformed into a technology innovation leader, attracting collaboration from international brands. John Helveston, a China EV expert at George Washington University's engineering department, notes, "Chinese companies spent a decade on automation upgrades and supply chain optimization, driving down costs, and now they're at the forefront of technology."

By 2024, Chinese EV giants like BYD had surpassed Tesla in production volume. These competitors, boasting both price and technological advantages, pose a significant threat to traditional automakers in Europe and the US a concern that became a major focus for then-President Biden. He imposed a 100% tariff on Chinese EVs and restricted the entry of Chinese-made connected vehicles into the US market, resulting in a short-term absence of Chinese EVs in the American market. However, current President Trump, expressing disapproval of his predecessors focus on environmentally friendly vehicles, has rolled back Bidens support for the EV industry, while still promising to rescue the American auto sector. Analysts predict continued growth in the US EV market, but at a potentially slower pace, while China steadily pulls ahead. In 2024, China's sales of pure electric and hybrid vehicles neared 13 million units, accounting for 40% of total vehicle sales in China approximately four times the US volume. While transportation's carbon emissions still lag behind those from coal-fired power plants, environmentalists see this as a significant step towards decarbonization. For China as a whole, the success of its EV industry validates its industrial planning; for Jinhua, it represents a lucrative return on investment.

Jinhua, once a coastal export base with a population of 700,000, is now investing heavily alongside other Chinese cities to ensure domestic automakers have the resources to produce more affordable and higher-performing EVs. Massive market demand has reshaped the economic model for EVs in places like Jinhua. Over the past decade, state-owned enterprise (SOE) support, under the banner of accelerating innovation, has rescued many financially struggling EV companies. SOE-backed funds have invested across the automotive supply chain, ensuring the efficient operation of the supplier network, from raw materials to in-car entertainment systems. While many startups failed to find viable business models, the survivors have become the core strength of the industry cluster.

Jinhua-based Leap Motor (Zero Run), with sales reaching 280,000 units last year a doubling from the previous year surpassed international brands like Volkswagen to claim seventh place in China's NEV sector. This "dark horse" in the EV race is now actively expanding overseas. Zhu Jiangming, Leap Motor's founder and CEO, recently told local media, "Many people don't know us yet, but Leap Motor will eventually become a force to be reckoned with." This success has significantly revitalized Jinhua's NEV City. A newly renovated exhibition center showcases locally produced batteries, wheels, seat covers, gearboxes, and LED headlights, detailing expansion plans and claiming this will lead to greater prosperity for Jinhua.

Leap Motor's best-selling T03 micro-car and the higher-end C10 electric SUV are ubiquitous in Jinhua, from the steady stream of trucks leaving the factory to the daily commutes of local residents. Ye Can (phonetic), a nail salon owner in Jinhua, bought a T03 last year for 58,000 yuan (a relatively affordable price in China). She says she and her husband test-drove models like the SAIC-GM Wuling Hongguang Mini and compared gasoline-powered cars, ultimately choosing the Leap Motor EV for its cost-effectiveness, cute design, and convenient features. She particularly appreciates its four-seat configuration, acceleration, and app-controlled air conditioning. "Leap Motor is a local brand," says Ye Can. "As long as conditions allow, we will prioritize supporting the local auto industry."

Once, international automakers like GM, Volkswagen, and Honda dominated the Chinese market, leaving domestic competitors struggling to match their design, quality, and internal combustion engine technology. Chinese consumers overwhelmingly preferred foreign brands. Joint ventures were prevalent, with foreign companies providing technical support to local manufacturing partners. However, the electrification era has completely rewritten the rules of the game. Chinese automakers no longer rely on overseas technology; instead, international brands are vying for partnerships with Chinese companies to gain access to EV technological advantages. European automakers are rapidly leveraging China's EV technological prowess, while American automakers are proceeding cautiously with expansion in China. Stephen Ezell, vice president of the Information Technology & Innovation Foundation in Washington, says: "When China was trying to catch up in the internal combustion engine era, they got technology through joint ventures. Now it's Europe trading market access for Chinese EV technology."

This deeply intertwined supply chain creates a more complex landscape for the US and Europe as they attempt to nurture their domestic EV industriesa reliance on Chinese supply chains and partners that cannot be easily bypassed. Last year, the EU approved tariffs of up to 35% on Chinese-made EVsa decision opposed by Germany, where major automakers Volkswagen, BMW, and Mercedes-Benz sell about one-third of their total vehicles. According to analysis by New York-based research firm Rhodium Group, even with the added costs, Chinese brands can still command significantly higher prices in Europe than in China for the same model, potentially yielding substantial profit margins per vehicle. Data from Brussels-based NGO Transport & Environment shows that the market share of Chinese brands in EU EV sales rose from less than 1% in 2019 to 8% in 2023.

Chinese production bases offer automakers convenience, low costs, and economies of scale. Many of these bases boast low operational costs, abundant suppliers, and the ability to quickly upgrade models to maintain competitiveness. Tu Le, managing director of SinoAutoInsights, an industry information company, says, "American automakers couldn't build affordable EVs without the Chinese supply chain." He adds that China has at least five production bases with a scale equivalent to the US Midwest "auto corridor" stretching from Detroit to the Gulf of Mexico. While US automakers are striving for independent competition, they must contend with the close collaboration between major European automakers and Chinese companies and local cities. For example, Volkswagen last year announced a $2.7 billion investment in a joint innovation and production center with Chinese EV maker XPeng to develop, manufacture, and sell vehicles. The center is located in Hefei, China's EV capital.

The Hefei model is widely emulated across China. Reports indicate that as many as 50 delegations from across the country visit Hefei each month to learn from its success. This success, it's reported, is due to $23 billion in government-guided fund investments in emerging industries over the past decade. In 2020, Hefei invested $787 million to acquire a 17% stake in NIO, a move that paid off handsomely. NIO agreed to relocate its headquarters to Hefei and establish an industrial park there, attracting other automakers. Today, Hefei has successfully attracted six electric vehicle manufacturers, including BYD, JAC Motors, and Changan Automobile. However, growing concerns exist, both domestically and internationally, that the "Hefei model" isn't universally applicable and could lead to oversupply. Ilaria Mazzocco, a China industrial policy expert at the Center for Strategic and International Studies, notes, "Every local government wants to replicate the Hefei model." Hefei is increasing its investments to maintain its lead against emerging competitors. Late last year, a Hefei city-led investment vehicle announced a further $471 million investment in NIO, which ranked 12th in sales last year.

Despite the risks, Jinhua is betting big on Leap Motor, aiming to replicate Hefei's success. After a shaky start in 2019, Leap Motor is now focused on speed, technological innovation, and self-sufficiency, producing around 60% of its key components in-house. "Cars are shifting from mechanical products to electronic products, like smartphones," said Cao Li, executive director of Leap Motor, in an interview. "Mastering the independent R&D capability of core components allows us to quickly adapt to market competition and user needs." Leap Motor's reputation for innovation helped it secure a $1.6 billion investment in October 2023 from Stellantis, the Dutch-based automotive giant that