Risks and Resilience in Global Trade

4.  Recent trends in concentration of exports of electric vehicles and electric vehicle parts

Against the background of the debate about global trade in electric vehicles (EVs), including recent announcements of further tariff increases by the United States, European Union and Canada on EVs imported from China, analysis of global trade in electric vehicles and EV parts1 reveals a significant increase in market concentration. Trade in EV batteries in particular has become increasingly concentrated, driven mainly by the emergence of China as a new and fast expanding producer.

Growth in imports of EVs from China has been uneven across regions and recent periods. EU imports of Chinese EVs skyrocketed in late 2022 and 2023, outpacing internal combustion engine (ICE) cars (Figure 4.1 Panel A). During the same period, imports of EVs from China into the United States increased only marginally and remained below ICE cars (Figure 4.1 Panel B). These developments likely reflect a host of factors, including China’s growing role in extraction of critical raw materials that are used to produce batteries and in the development of the associated technologies but also changes in consumer tastes and policies in China and its trading partners.2

The remainder of this chapter takes a closer look at the evolution of concentrations of world trade in passenger cars and car parts while distinguishing between the types of cars (ICE, hybrids and EVs) as well as the parts and components used in production of each of these car categories. The analysis shows that for ICE the global market concentrations are low to moderate and have been declining as more countries have come to account for a larger share of exports. However, it also shows that global exports of EVs and EV-related parts, in particular batteries, have become more concentrated, accounted for mainly by the emergence of China as a new and fast expanding exporter.

Figure 4.1. Exports of passenger vehicles from China to the European Union and the United States

Note: ICE stands for internal combustion engine cars. EV stands for Electric Vehicles. Electric Vehicles (EV) includes HS code 870380 and Hybrid category includes HS codes 870340, 870350, 870360, 870370. The Internal combustion engine (ICE) car category includes HS codes 870321, 870322, 870323, 870324, 870331, 870332, 870333.

Source: UN Comtrade (accessed 5 September 2024, last data point December 2023).

4.1. Global export concentration

Since 2000, there have been large shifts on the list of the major players of the passenger car market.3 Countries such as Germany, Japan, Canada, France, and Spain, once power houses for internal combustion engine (ICE) cars, have lost market share,4 and emerging car producing countries in Eastern Europe (Czech Republic, Slovakia, and Hungary) and Asia (China) now account for a larger share of global supply (Figure A B.4 Panel A). This reconfiguration has led to a decline in market concentration (Figure 4.2). In 2000, the top 10 car exporters accounted for 88% of total world exports while by 2023 this ratio dropped to 72%.

The market for ICE car parts (e.g. gear boxes, mufflers, engines) and parts common to all cars (e.g. chassis, bumpers, seatbelts, etc.) has consistently shown to have low concentration across exporters (Figure 4.2). Since 2000, the main (top 5) ICE parts producers, apart from Germany, have lost market share (Figure A B.4 Panel D). Canada, United Kingdom, and Austria are no longer in the top 10, replaced by new entrants such as China, Korea, and Poland. Mexico increased its rank from seventh to fifth place. By 2023, the top 10 exporters accounted for only half of total exports, a 12-percentage point drop from 2000. Similarly, the market for parts common to all vehicles saw top producers like Canada, United Kingdom, Spain, and Belgium fall out of the top 10, replaced by China, Poland, Korea, and the Czech Republic (Figure A B.4 Panel F).

Electric vehicles (EV) and hybrid cars have grown in popularity over the years. Since 2017 (the first year the EV and hybrid categories are distinguished in trade data5), the share of electric cars in total car exports, in value terms, have increased from 1% to 15% and the share of hybrids grew from 5% to 19% (Figure A B.5). Initially, international EV markets were highly concentrated, with the top 5 exporters accounting for 87% of EV cars and 75% of hybrid car exports in 2017. The United States, Germany, the Netherlands, Japan, and France were initially the top EV exporters (Figure A B.4 Panel B) while Japan, Germany, Korea, Belgium, and Türkiye led the field for hybrid car exports (Figure A B.4 Panel C). Over the last five years or so, the concentration of exports in both EV and hybrid markets has fallen to moderate levels, with the export concentration of hybrids falling more sharply and landing just short of the conventional low concentration threshold in 2023 (Figure 4.2). Germany, Slovakia, the United Kingdom, Spain, the Czech Republic, and China along with Hungary, Poland and Italy increased their share of hybrid car exports ranging from 1 (Italy) to 8 (Germany) percentage points between 2017 and 2023. The concentration of EV exports increased in 2022 and remains in the upper limit of a range which is normally considered as moderately concentrated (Figure 4.2), driven by a large shift away from the United States and the Netherlands, whose export market shares dropped from for 39% and 15% to 5% and less than 1% respectively and whose shares were replaced by exports from China (whose market share increased from 1% to 24%) and Germany.6

The concentration of exports of EV car parts as a whole, which cover battery packs and modules7, other EV battery parts, and electric motors, has increased sharply since 2011 (Figure 4.2), driven by China’s growth in the exports of EV components, in particular battery packs and modules. By 2023 China accounted for almost half (46%) of the exports of EV parts which is more than nine times larger than the other two top-3 exporters (Poland (8%) and Hungary (7%).

Moreover, the market concentrations of the various EV parts are markedly different when the concentration of each part is considered separately (Figure 4.3). For example, the global supply of other battery parts, i.e. electric accumulator parts, have been moderate over the time frame. While the concentrations of the different types of electric motors, have fluctuated between the low to moderate range over the years and have converged to a low level of market concentration by 2023. On the other hand, the export market of EV battery packs and modules (HS850760 and henceforth referred to as EV batteries), which accounts for the largest share of the EV parts category (82% in 2023), has been highly concentrated over the years and the increase in concentration, particularly over the last three years, has been largely driven by China’s dominance in this industry (Figure 4.4).

A decade ago, Japan, Korea, and China dominated the EV battery industry (Figure 4.4). In total they accounted for 77.8 % of total EV battery exports with China accounting for only 39.4% of total exports and Japan and Korea accounting for roughly 20% each. Over the years new exporters entered the market. Most notably, battery producers in Poland and Hungary have slowly been increasing their market shares over the years. So much so that by 2023, they replace Japan and Korea as the number two and three exporters (respectively). However, despite new entrants, the market concentration of EV batteries climbed steeply starting from 2021 as China increased its market share from 42% in 2021 to 52.5% in 2023 while Poland and Hungary never accounted for more than 18% in total over those years, meaning that China’s share of EV battery exports has been over three times that of the number two exporter over the last few years. Not surprisingly, China has accounted for almost all of the recent increase in concentration of EV battery exports (92% in 2023).

Figure 4.2. Changes in concentration over time

Herfindahl-Hirschman Index (HHI) of world exports of car and car parts

Note: Concentration is computed for each category of cars and parts by first summing total exports for each region of the 114 regions that reported 2023 data across the HS6 codes that fall into each category and then computing the HHI index = $\sum _{r=1}^n{s}_r^2$ where s represents the share of world exports of region r and n=114. See Table A B.1 for the list of HS codes considered in each passenger car and car parts type. HS codes pertaining to EV cars and parts are not available for all years. In 2017, HS codes hybrid cars were reported separately and accounted for less than 5% of total passenger car exports. Combining ICE and hybrid cars to compute the HHI would not significant change the conclusions drawn from the chart. The Anti-trust division of the US Department of Justice considers markets with an HHI between 0.1000 – 0.1800 to be moderately concentrated and HHI in excess of 0.1800 to be highly concentrated (after converting the DOJ ranges to a 0-1 scale. See https://www.justice.gov/atr/herfindahl-hirschman-index). The shading in the chart corresponds to these zones.

Source: UN Comtrade supplemented with ITC data for regions reporting 2022 data but missing 2023 in UN Comtrade.

Figure 4.3. The export market for battery packs and modules is highly concentrated

Concentration of EV parts at the HS6 digit level

Note: HS850760: 'Battery packs and modules', HS850790: ‘Electric accumulators: parts’, HS850132: 'Electric motors (DC 750-75kW)', HS850133: 'Electric motors (DC 75kW-375kW)', HS850152: 'Electric motors (AC 750-75kW)', HS850153: 'Electric motors (AC +75kW)'.

Source: UN Comtrade. 2023 supplemented with ITC data for regions reporting 2022 data but missing 2023 in UN Comtrade.

Figure 4.4. Export market concentration of EV batteries has increasingly been driven by China

Squared export market share by the top exporting countries

Note: This chart plots the value of s² for each region’s (r) which is a squared export share component of the HHI computation: $\sum _{r=1}^n{s}_r^2$ where s represents the share of world exports of region r of product HS850760: 'Battery packs and modules' also referred to as EV batteries in the text. China’s share of the HHI metric is noted on the chart for each year. Countries in the chart were the top countries (5) in the concentration index in any year.

Source: UN Comtrade supplemented with ITC data for regions reporting 2022 data but missing 2023 in UN Comtrade.

4.2. Concentrations from the perspective of individual importers

From an individual importer perspective, the concentration and the reliance on China for EV batteries can be even higher. US battery imports have increased from USD 1.3 to 18.8 billion between 2012 and 2023. During this period concentration of foreign supply has been high (Figure 4.5) and at a higher level than that of world supply (Figure 4.4). Early on, the United States sourced its EV batteries mainly from Japan and China. In 2012 Japan accounted for about a third of total battery imports into the United States while China accounted for 41.2%. Korea became another import source of EV battery supply around 2017 eventually becoming the number two EV battery supplier to the United States. However, since 2020, not only has market concentration peaked even further but the reliance on China has become more pronounced. In 2023, 70.5% of EV imports into the United States came from China and only 8.11% from Korea. As a result, 97% of the market concentration in 2023 can be attributed to US reliance on EV batteries from China.

Figure 4.5. Concentration of Imports of EV batteries, United States

Note: This chart plots the value of s² for each region’s (r) which is a squared export share component of the HHI computation: $\sum _{r=1}^n{s}_r^2$ where s represents the share of world exports of region r of product HS850760: 'Battery packs and modules' also referred to as EV batteries in the text. China’s share of the HHI metric is noted on the chart for each year. Countries in the chart were the top countries (5) in the concentration index in any year.

Source: UN Comtrade supplemented with ITC data for regions reporting 2022 data but missing 2023 in UN Comtrade.

EU Members import batteries from a number of EU and non-EU countries, and until 2022 no one source accounted for more than 30% of total imports into the region. However, over the last two years the EV battery imports from China have more than tripled, increasing from USD 8.2 to 28.8 billion between 2021 and 2023. While imports also increased from many of the EU Members’ other partners, both within and outside the European Union, none at the same magnitude. Imports from Hungary, for example, during the same period, increased by USD 5.6 billion and from Poland by USD 2.4 billion. Even considering intra-EU trade, concentration is high and has been rising since 2018 (Figure 4.6 Panel A). Focusing on imports among non-EU Members only (Figure 4.6 Panel B), the concentration is even higher and has increased sharply over the years becoming somewhat highly concentrated, driven in large part by the growth of EV battery imports from China. The growth in concentration among extra-EU suppliers of EV batteries, particularly from China, underscores a critical trade dependency risk for the European Union, as it reveals the region’s increasing reliance on a single external partner.

In sum, China controls a substantial portion of the global supply chain for critical battery components such as critical raw materials and the manufacturing capacity for battery cells, modules and packs. Despite the presence of alternative suppliers of EV parts such as Poland, Hungary, Germany, Korea, and the United States, their combined export share in 2023 (32.0%) remain below that of China (46.4%). Moreover, China’s fast growth in electric vehicles exports has allowed it to increase its market share from just 1% in 2017 to 24% in 2023 placing China just below top exporter Germany (28%) but above Korea (10%) and Belgium (6.6%) in terms of market share. Accordingly, China’s growing dominance in the EV and EV battery market poses potential significant challenges for car producing and consuming economies, such as the United States and the European Union, in terms of trade dependency in an industry which is increasingly seen as critical to the green energy transition and is centre stage in innovation and technological developments.

Figure 4.6. Concentration of Imports of EV batteries, EU27

Note: This chart plots the value of s² for each region’s (r) which is a squared export share component of the HHI computation: $\sum _{r=1}^n{s}_r^2$ where s represents the share of world exports of region r of product HS850760: 'Battery packs and modules' also referred to as EV batteries in the text. China’s share of the HHI metric is noted on the chart for each year. Countries in the chart were the top countries (5) in the concentration index in any year. EU27 includes countries currently members of the European Union regardless of year. Striped areas in the chart represent EU partners.

Source: UN Comtrade supplemented with ITC data for regions reporting 2022 data but missing 2023 in UN Comtrade.

Notes

← 1.  Electric vehicle parts in this section cover only electric batteries and electric motors. It does not cover other parts specific to electric vehicles such as the charging port, electric power converter, and thermal cooling system among others.

← 2.  These figures predate recent announcements of further increases in import tariffs on EVs from China by the United States (from 25 to 100%; see https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/, accessed 20 August 2024 ), the European Union (recently adding countervailing duties up to 36%; see https://ec.europa.eu/commission/presscorner/detail/en/ip_24_4301, accessed 20 August 2024) and Canada (100% surtax, effective October 2024, in addition to the Most-Favoured Nation (MFN) import tariff of 6.1%; see https://www.canada.ca/en/department-finance/news/2024/08/canada-implementing-measures-to-protect-canadian-workers-and-key-economic-sectors-from-unfair-chinese-trade-practices.html, accessed 29 August 2024). In parallel, since 2018, China has increased its outward FDI to neighbouring countries, such as Mexico and Morocco, but also to the United States and the European Union, as Chinese producers has been shifting to local or regional production in response to more restrictive trade policies (Figure A B.3).

← 3.  In this section, references to “cars” as a finished and assembled product refers to passenger cars or motor vehicles that are principally designed to transport persons and not goods (HS 8703) and excludes vehicles covered under HS 8702 (vehicles used for public transport. Vehicles such as golf carts, snowmobiles and racing cars have also been excluded from the analysis. “Parts” are those products that could be used as intermediate inputs in the production of passenger cars but also other types of vehicles or other products. See Table A B.1 for the list of HS codes used in the analysis.

← 4.  Analysis in this section is based on the value of exports and imports.

← 5.  The world’s first mass produced hybrid vehicle was the Toyota Prius, first released in Japan in 1997 (The History of the Electric Car | Department of Energy).

← 6.  Examining only trade data does not capture car production moving from one country to another. Additionally, cars produced in a country are not necessary produced only by national car manufacturer as discussed in (Mayer, Vicard and Wibaux, 2024[20]) who calculated that foreign brands still represent a large share of car exports from China (63% in volume terms in 2022).

← 7.  An EV battery, also called a pack, is made up of several modules. Modules are composed of a series of connected battery cells (Mayer, Vicard and Wibaux, 2024[20]).