Would you please park the car? Lately, we've been hearing a lot of this. You've got companies like Nio, companies like Li Shan, these Chinese EV makers that are frankly as good, if not better than Tesla right now. This I know people will say Americans won't buy Chinese. You know what you ask somebody, do you want to pay $9,000 for an SUV, or do you want to pay $19,000 or $20,000 for an SUV? No contest. And this is causing some concern to the likes of Elon Musk and Tesla and a number of other carmakers. China is the largest auto producer in the world. One in three cars is built there. In fact, it has become so productive its own market can't absorb the inventory. And so the age of the much-feared Chinese auto export has begun for Americans. It's hard to process that because we don't see Chinese cars on American roads.

Trust me. Go to Australia, to Mexico, to Brazil, to Israel, to South Africa. You're going to see Chinese cars all over the place. American trade groups and others worry that China will do with cars what it has done with countless other industries: eradicate competition with cheap labor and materials, and abundant government support. Chinese firms are already pushing out competitors at home. The Biden administration slapped a 100% tariff on Chinese EVs in an effort to stop the onslaught before it starts. Tesla got caught flat-footed in the China market because no one anticipated such a severe turn to clean energy vehicles, and we're seeing the effects of that. All the legacy automakers are scrambling. They're not just shopping them because they're cheap. They've super scaled the set of features that consumers are demanding. So how formidable are Chinese EVs? How do they stack up against the world's most popular model, the Tesla Model Y?

CNBC tried a few to find out. So, this is the Tesla Model Y. This is currently the best-selling car in the world. Woo! The acceleration on these things is incredible. Tesla is a really highly respected brand in China, but homegrown Chinese automakers are really catching up and, in some cases, surpassing. In fact, there are around 140 EV brands in the country, and at least in China, some of them are outselling Tesla. This is Eunice Yoon, CNBC's Beijing bureau chief. She set out to try some of the Chinese crossovers comparable to the Model Y, with a few technical exceptions, like Chinese-owned brands such as Volvo, Polestar, and Lotus. Chinese cars aren't available in the US yet. I was surprised myself driving these cars. First, let's address price. The BYD Tang, for example, made by Tesla's biggest Chinese rival BYD, is known for making cars very cheaply.

One of BYD's big selling points is that they're able to give you a car that is a seven-seater, a little bit of a shorter range than a Model Y, but at the same time it's $11,000 cheaper. How do they get the cost down that much? Well, then you get into that kind of secret Chinese superpower of state capitalism, where you have entrepreneurs driving costs down, innovating, designing better products while at the same time getting tremendous support from city, provincial, and national political leaders who want China to win. Between 2009 and 2023, the Chinese government handed out an estimated $231 billion in subsidies and tax breaks. BYD, which is not government-owned, received $3.7 billion in direct subsidies between 2018 and 2022, most of it in that last year. But one of BYD's biggest advantages is its ability to drive down costs through vertical

integration. BYD sold roughly 3 million cars in 2023, about half of them electric and half plug-in hybrid. This year they're forecasting 4 million. Contrast that with Tesla, which saw sales fall year over year in the first two quarters of 2024. BYD is also one of the largest battery makers. About 40% of China's cost advantage is attributable to its edge in batteries, which make up about 20 to 30% of a vehicle's total cost. BYD has done a phenomenal job of making in-house 75 to 80% of the parts that go into their cars, so they own the batteries and the battery supply chains. That's clear, and it contributes to lower cost and higher quality. And then apart from batteries, pretty much across every other category, BYD's costs are lower than its Chinese competitors, Tesla, and drastically lower than legacy competitors like Ford and GM. But all Chinese automakers benefit from low costs and a localized supply

chain. This can be seen in the G6 from Xpeng, a relatively small company that listed on the New York Stock Exchange in 2020. It hasn't done so well, although results were solid in the last two quarters of 2023. What's their pitch to the consumer? What made them different from the others? Price. So they have a lot of other features in there as well. So we were in the Xpeng G6. When you look at the specs and the dimensions, it's almost identical to the Model Y, but at 27K it's almost $9,000 cheaper. This is crucial. Chinese cars aren't just cheap, they offer value for money. What Henry Ford did to this industry is he took something that was a rich person's toy and made it so that anybody working in a factory could afford it. China is democratizing the smart EV, and smart is the key word here. This means connected to the internet and loaded with tech.

Chinese EVs tend to have a lot of bells and whistles. For example, I can ventilate my seat to deal with the summer heat. Oh yeah, I can feel it. I could change the settings so that this EV sounds as though it's running on gas. Oh. And I could tell the AI assistant to park the car without me. This is very handy. EV makers leverage these affordable tech features to target specific customers. This could be said of the Li Auto L6 shares of its Nasdaq listed manufacturer. $20 billion market cap have had a rocky time while the company carves out its brand identity. Li Auto does market itself as more of a family type of car maker. To pull that off, the company offers extras you won't find in a Tesla. Technically, this one wasn't an EV. It has a gas powered range extender on board. The extender appeals to road tripping families or the many drivers stuck for hours in the city's

notorious gridlock. Li Auto L6 is about the same price as a Model Y, but has a longer range at 893 miles. So we are driving during rush hour in Beijing traffic. But this five-seater is designed for families in a Chinese context, that means that a lot of extra creature comforts are common in the cabin family. In the front seats can watch TV or get a massage by their chairs. And if you want a cold drink, there's a fridge in the back. At the higher end. There are innovations that companies like Tesla have only talked about. Take Nio for example. It was a hyped IPO on the NYSE back in 2018, but shares are down 90% from a 2021 high due to sluggish sales growth and high cash burn. The company is relatively small, with a $9 billion market cap, and it only sells electric vehicles, about 160,000 of them in 2023.

Nia has had its own way of dealing with charging challenges: battery swapping, something that Tesla had considered. Nio actually did it. If you want to swap your battery first, you find a station. You check what batteries they have, and then you place the order. There are 3,500 battery swapping stations around the country, most of which are Neos. So we're 92% charged. And that took a little less than ten minutes. Well, they say three minutes. My experience was about a little under ten. It's not difficult to find charging points here in Beijing. This map says eight out of the ten near me are available. China currently has 3 million public charging facilities. A lot of China auto industry analysts say the tech-forward features in and around these cars are really where Chinese automakers have a leg up on global competition. They are turning cars into connected devices that can work within the larger Internet of Things.

The AI assistant Nomi is a draw as well. While other car AI systems respond to direct voice commands such as turn off the air conditioner, people on social media say that Nomi sounds more like a person. Hey, Nomi, I feel so cold. Well, Han. Long. So, for example, instead of saying turn off the air conditioner, I would say, oh, I'm feeling really cold right now. And then it would say, oh, okay. And then it starts and it's like, how about I just turn down the air conditioner? You know, and then it would also make some jokes sometimes. So. So, you know, when it was signing off, it was like, bye. It's no longer how many units of hardware you sell. It's all the data and analytics and aggregation and monetization of services that happen after you sell the car. That's the new business model. If you look.

At a company like Apple, they sell us things that we didn't know we needed, and they charge a 35% premium for it. Does it really feel like you're in some sort of space age? Uh, you know, cabin or something? Were there any that really stood out in terms of, you know, being like especially tech-heavy? No. And I think actually, that's the point. All of these Chinese EV makers are trying to distinguish themselves somehow. So they keep putting in all these different technology features. Some of them were really, really fun. But then there were some that weren't as useful. And in fact, um, didn't really work very well. So we in two different cars, we tried the auto parking, and it was a little stressful. So please park the car. So that didn't quite work. We're about 7 or 8 inches from the car next to us.

We didn't hit it, so that's a good thing, but I think we're going to have to try parking again. When we speak to a lot of analysts, they say that Chinese drivers really like these technology features. But on the other hand, it's unclear how these tech features are going to resonate with drivers outside of China. But driving a tech-forward Chinese EV comes with its own costs. What struck me about all of these Chinese EVs is how they didn't focus as much on performance, and it kind of showed when I was in the Model Y. You could have pretty good control in the car, and that wasn't really the case on the whole for the cars that we were in that were from the Chinese EV makers. You didn't have that same level of precision when you were making a turn, for example. And in fact, that's a trend and something that is almost common knowledge among Chinese drivers.

They'll talk about, oh, there's the Tesla, there's the model Y, the model three, there, the performance cars. And one reason Chinese carmakers can keep prices low might be that they sometimes don't offer more bang for buck. They make compromises. You could really tell the difference from the ones that were pricier. They had nicer finishes. They had nicer interiors. They felt better. There weren't as many kind of junky or odd designs that were inside the car. For example, in one of the cars that I was in, the steering wheel was kind of off compared to where I'd be sitting. The windshield wipers were placed in an odd place for my hand, and even the premium vehicles show signs that these are new companies, new models, new designs, and automakers haven't worked out a lot of the kinks yet. There's one car that I was in that had really nice leather chairs, but the way that the chairs

moved it when you're driving. It's just squeaking the entire time. One of the other models that I was in, you know, it was so loud. Maybe these Chinese companies still don't have it down. So are foreign automakers doomed in China? Some industry watchers have said they suspect it will be hard for non-Chinese firms to compete when homegrown brands are tapping in so well to the Chinese preference for tech. And then there's the question of which of these companies and which business model can succeed. The highly integrated firm that can just beat on cost, or the highly connected smart EV maker that makes money off of services and subscriptions? BYD is already established that the proof of concept that they can execute on a business model and be competitive with anybody worldwide in terms of quality, design, and cost. This other notion of a greater ecosystem built around a digital system may very well be the future, may be the TikTok of cars, but I'm not ready to say absolutely they're going to run away with

everything because they have a better digital experience. Don't know yet. And can they duplicate in different languages and different cultures a comparably high level of enjoyment as they do at home for their own consumers? That's a big cultural step for them to take. And their own financial situation is by no means secure. Most of these companies aren't profitable. That's another characteristic of tech. Most of the tech companies, until they reach a critical mass or a certain inflection point from a sales cycle standpoint, they're not going to be profitable, and the price war is exacerbating that a bit. So will Chinese EV makers dominate the global industry? For Chinese EVs, the big challenge is going to be to convince people overseas who have brand loyalty to the GM's and the Toyotas and the VW, and to be able to convince them to switch not only to EVs, but to Chinese EVs that they've never heard of.

So that's, to me, where the performance issues and also these little odd design quirks really count because a car is different from a mobile phone, for example. A car is something that you put your family in. And then, of course, there's the price. You know, you have all these discussions about, oh, the government subsidies, and there's so much competition in the market. And I think all of that doesn't necessarily matter because, at the end of the day, it's going to be the consumers who decide who's really going to be ahead.

How BYD, Nio And Other Chinese EVs Compare To Tesla

Welcome to the official YouTube channel for CNBC. From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

For real-time news updates from around the world, visit: http://www.cnbc.com

For CNBC's primetime TV lineup, visit http://tv.cnbc.com

For CNBC's International YouTube channel, visit: http://www.youtube.com/cnbcinternational