2023-09-13 16:30:29
China Poised to Overtake Japan as World's Largest Car Exporter
China is on track to become the world's biggest car exporter, surpassing Japan this year. This significant milestone marks a shift in the dominance historically held by European, American, Japanese, and South Korean car groups.
The rise of China's auto industry has been driven by deep-rooted structural challenges, which have the potential to disrupt car markets worldwide. Industry executives misjudged three key trends: the decline of internal combustion engine sales, the surge in popularity of electric vehicles, and the reduced demand for privately owned cars as shared mobility gains traction among China's urban population.
Slack was down, with issues loading pages and sending messagesAccording to Bill Russo, former head of Chrysler in China and founder of advisory firm Automobility, this mismatch between production and demand has resulted in a "massive overcapacity" of around 25 million unused vehicles in Chinese factories.
However, years of supportive industrial policy and private sector investment have bolstered China's competitiveness in the industry. Domestic automakers like BYD, a prominent player in the electric vehicle market, now outsell foreign companies and are expanding their reach in overseas markets.
Moody's data indicates that China's annual vehicle exports, which already surpassed South Korea's in 2021 and Germany's in 2022, are predicted to exceed Japan's this year. Nonetheless, China's domestic sales recorded their peak in 2017, coinciding with a slowdown in the country's middle-class growth and broader economic challenges.
Steam Trap Market to hit USD 6.2 Bn by 2032, Says GlobalOvercapacity Challenges for Local and Foreign Automakers
The problem of overcapacity isn't limited to Chinese manufacturers like Chery, SAIC, BYD, Geely, and Changan. An increasing number of foreign automakers, including Tesla, Ford, Nissan, and Hyundai, are reorienting their Chinese factories toward export markets.
By the end of July this year, China had already exported 2.8 million vehicles, including 1.8 million gasoline-powered vehicles – a 74% increase from the previous year. This surge in exports is attributed to Chinese consumers opting for electric vehicles and second-hand cars.
Despite overcapacity and slowing sales growth, the anticipated consolidation within China's auto industry has yet to materialize. One senior executive from a western automaker noted that financial support from Chinese local governments and banks has propped up unprofitable companies, thereby delaying the expected consolidation.
Rail passengers set for disruption as engineering work between Chesterfield and Sheffield leads to delays and diversions – with no trains to some Derbyshire stationsLegacy automakers such as South Korea's Hyundai have faced challenges in China. Of their four factories in China, two are being used for exports, and the other two are up for sale. Hyundai's losses in China have intensified due to low utilization rates and a majority of the produced cars being gasoline-powered. The company's existing manufacturing plants in other countries further complicate its strategy for selling cars made in China.
Analysts expect China to maintain its top position in the global car export market for years to come. Consultancy firm AlixPartners forecasts that Chinese automakers' overseas sales will reach 9 million units by the end of the decade, pushing their global market share to 30% in 2030, up from 16% in 2022.
Geographically, Chinese auto exports have primarily targeted developing markets in Europe and Asia. Notably, Russia, despite facing sanctions, has become the top destination for Chinese car exports. Models like Geely's Coolray crossover, priced at around Rbs1.4 million ($14,000), have seen significant demand in the Russian market.
Medicated Feed Market Size, Key Players Analysis and Forecast To 2029 – Evonik, DowDuPont, DSM, AdisseoWith Chinese electric vehicles offering more competitive pricing compared to international counterparts, analysts anticipate an intensification of the export trend. Chinese EVs, notably Tesla's electric cars from its Shanghai facility, already hold a considerable market share in Europe.
BYD, a leading Chinese electric vehicle manufacturer and the world's largest battery maker, is spearheading China's EV exports to developed markets. The company expects to double its export sales to 400,000 units next year, citing a technological and cost advantage over foreign legacy automakers.
Challenges Ahead for Chinese Auto Exports
Despite the promising outlook for Chinese auto exports, challenges lie ahead. Companies exporting from China must navigate escalating geopolitical tensions, limited brand recognition, growing protectionism, and consumer nationalism.
SkyWater Technology to Participate in Jefferies Semiconductor, IT Hardware & Communications Technology SummitChristopher Richter, an autos analyst at CLSA, raises questions about the sustainability of massive imports from China and whether Chinese companies will face pressure to shift production overseas. The evolving dynamics within the global automotive landscape underscore the need for Chinese automakers to adapt to changing market conditions.
Additional reporting by Gloria Li in Hong Kong and Peter Campbell in Munich
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