china's automotive industry

Roaming roads abroad: China’s automotive industry triumphs from local to global

China boasts the world’s largest and most rapidly growing automotive market, leading globally in terms of both car sales and production. China’s automotive industry has stepped up expansion in 2023, with a growing emphasis on overseas markets. Chinese car brands like BYD have successfully established themselves in overseas markets such as Asia-Pacific, Africa, the Middle East, Russia, and Latin America.

How do Chinese car brands reach the overseas market?

Exporting vehicles overseas

According to IBIS World’s analysis of 208 industries in China for 2023, the sector that experienced the most substantial export growth was the alternative-fuel car and automobile manufacturing industry, achieving a remarkable year-on-year increase of 48.3%. This was followed by solar panel manufacturing, battery manufacturing, and passenger car manufacturing.

China’s automotive manufacturers have diversified their product lines when exporting vehicles overseas. MG Motor, under the ownership of SAIC Motor Corporation, has notably enhanced its global footprint by introducing a range of vehicles, including electric cars and SUVs. Research conducted by Bloomberg reveals that SAIC has emerged as the largest Chinese vehicle exporter in 2022, thanks to its brands MG, Buick, and Roewe.

China overtook Japan and became #1 in global vehicle exports in 2023

From 2019 to 2021, Japan ranked first in terms of vehicle exports, followed by Germany and China. In 2022, China surpassed Germany as the world’s second-largest car exporter with approximately 3.1 million vehicles. China’s vehicle exports increased by over 81% year-on-year to 1.76 million vehicles in the first five months of 2023, occupying the first place in the global chart.

From January to May 2023, China exported approximately 287,000 finished vehicles to Russia, with Russia emerging as the foremost purchaser of Chinese automobiles. The imposition of Western sanctions severed Russia’s ties from the global supply chain for essential parts or components needed on the production line, resulting in a grinding halt to the Russian automotive market. The withdrawal of Western automakers from the Russian market has created an opportunity for China’s automotive industry to tap into Russia’s market and gain popularity among Russians.

china's automotive industry
Data Source: Bloomberg, designed by Daxue Consulting, Top international destinations for vehicles made in China from January to May 2023

China’s growing electric vehicle expertise sparks global expansion

The worldwide EVs’ sales doubled year over year in 2021 to 6.6 million. China is known as the biggest market for EVs in the world and this opens new opportunities to become a globally competitive player in electric mobility. BYD, NIO and Li Auto have been aggressively competing in the EV market to expand their presence overseas. “BYD has a very big market share in electric vehicle sales in the Philippines, which is more than 60% market share as of 2022,” said Mark Andrew Tieng, Electric Managing Director at BYD Philippines.

Chinese car manufacturers are demonstrating their growing expertise in the EVs by effectively leveraging innovative strategies. For example, BYD introduced its electric buses with different innovative charging solutions in overseas markets. BYD’s buses are designed with wireless charging, overhead charging, fast-charging capabilities, as well as AC and DC charging technologies.

byd cars
Source: byd.com, BYD buses with different charging solutions such as wireless charging, overhead charging, fast-charging capabilities, AC charging and DC charging

In addition, China has a strong domestic supply chain for EV components and batteries. China’s Contemporary Amperex Technology Co. Limited (CATL) has become the world’s largest manufacturer of lithium-ion batteries for electric vehicles in the first quarter of 2022. Chinese battery manufacturers have made substantial investments in research and development to enhance both battery technology and manufacturing capabilities. This concerted effort has enabled companies like CATL to mass-produce condensed batteries efficiently and cost effectively, which significantly contributes to China’s esteemed reputation in EV technology.

china's automotive industry
Data Source: statista.com, designed by Daxue Consulting, Global market share of lithium-ion battery makers as of Q1 2022

Global ambitions, local root: Chinese automotive companies’ localization strategy for overseas expansion

Chinese automotive companies also use localization strategy by setting up manufacturing facilities and regional factories in overseas markets. To address the growing demand for electric buses in the North American market, BYD established an electric bus manufacturing facility in California, USA to build electric buses and motor coaches. Great Wall Motors (GWM) are also adopting localization strategy to expand its presence in overseas markets by setting up production base in Rayong, Thailand. GWM’s Rayong Plant will be the key production base for right-hand drive (RHD) vehicles in Southeast Asia, and this strategic move forms a part of GWM’s efforts to enhance its brand visibility and popularity among consumers in Thailand.

China’s auto export: internal combustion engine vehicles (ICEVs) VS. electric vehicles (EVs) in global automotive markets

ICEVs have well-established distribution channels while market demand for EVs is still evolving. Geely is still focusing on the exportation of ICEVs such as the Coolray SUV to overseas markets. This strategy has propelled Geely into the Top 5 of SUV-B segment market sales in Russia, Saudi Arabia, Qatar, Kuwait, Philippines, and Mongolia. Geely is also leveraging the substantial preference for sedans, exemplified by models like the Emgrand. It has received positive reviews from customers abroad, particularly in the Saudi market, where many consumers have not yet fully embraced EVs. In contrast, BYD is concentrating more on EVs, evident from their decision to stop the production of gasoline-powered automobiles in 2022.

ICEVs will only require existing gas stations and fuel distribution infrastructures. In contrast, exporting EVs will necessitate a distinct infrastructure, such as charging stations or electric vehicle supply equipment (EVSE) networks. The lack of charging infrastructure in various nations, like India and Malaysia, poses a significant obstacle to the widespread adoption of EVs. The higher upfront cost of EVs, as compared to ICEVs, will make EVs less accessible to a majority of consumers, especially within price-sensitive markets such as India.

In Q1 2023, ICEVs accounted for 75% of Chinese exports, while the collective category of new electric vehicles(NEV), encompassing battery electric vehicles (BEVs), plug-in hybrids (PHEVs), and fuel cell vehicles (FCEVs), accounted for 24.1%. EVs’ exports have shown significant growth, reaching an impressive total of 248,000 year-to-date. Chinese automotive manufacturers are capitalizing on the opportunity to expand EVs into countries with higher EV adoption rates, such as Europe. For example, NIO is expanded into Norway which is a more matured EV market to facilitate the entry of Chinese EVs.

Chinese automobile brands excelling on the global stage

  • Changan Automobile in Arab SaudiAccording to Changan, its cumulative sales in the Saudi Arabia market had reached a record high, exceeding 23,000 units from January to October 2021. Changan is expanding into the overseas market by strategically laying out its intellectual property for new products and introducing innovative Chinese automotive concepts to the Saudi Arabian market. Changan became one of the most influential Chinese car brands in Saudi Arabia and the Gulf, fueling a considerable upsurge in the prevalence of Chinese-branded cars across the Middle East.
  • Geely Auto in EuropeAccording to Xinhuanet, Geely Auto Group had entered the European Union (EU) market by signing an agreement with Hungarian car importer Grand Automotive Central Europe (GACE) which distributed Geely’s Geometry C, a premium category electric car model, in Hungary, the Czech Republic and Slovakia via dealers in its network. Geely Auto’s collaboration with the well-established European automotive company Volvo Cars focuses on the development and adoption of next- generation technologies. As a result, Geely Auto has successfully secured new growth opportunities in Europe and accelerated its global expansion.

Opportunities or challenges for China’s automotive industry in the future?

Despite its strong position, China’s automotive industry may still face some challenges when expanding to overseas market.

The overseas EV market will become increasingly competitive, with both domestic and international automakers vying for market share as more global automakers start entering EV market. Tesla, BMW, Ford and numerous startups such as Rivian, Lucid Motors have unveiled their electric vehicles spanning diverse market segments. Ford and Volkswagen have extended their global alliance to facilitate Due to the advancement of technology, the automotive industry is poised to adopt new technologies like autonomous driving and advanced driver-assistance systems (ADAS). The incorporation of hydrogen vehicles poses challenges to the current automobile industry in China, particularly in the face of countries like Japan and South Korea, which still dominate the market for hydrogen vehicles. Nevertheless, the cost is the main reason why hydrogen vehicles have such a low share in China. This technology evolution is expected to reshape consumer preferences, leading to a significant shift away from ICEVs and EVs toward alternative vehicle options.

Based on the data released on S&P Global, political risk constitutes a significant concern for China’s automotive industry to expand its presence overseas. For instance, Turkey’s recent increase in import tariffs on Chinese EVs from 10% to 40% will result in higher price on the car imported from China. This tariff hike will inevitably lead to elevated prices for Chinese cars entering the Turkish market.

Navigating forward: Unlocking future opportunities —self-driving vehicles

Baidu Apollo has developed self-driving vehicles and officially launched a new self – driving service platform, “Carrot Run”. Baidu’s self-driving service has also started in various cities in China such as Beijing, Shanghai, Changsha, and Guangzhou. In addition, WeRide, a Chinese autonomous driving company, has also paved its way to expand into overseas markets by forming partnership with global original equipment manufacturers (OEMs) including Yutong Group, GAC Group and expanding its research and development and operation centers to Singapore, San Jose, and Abu Dhabi. This can be viewed as an opportunity for China to expand its automotive industry by potentially promoting autonomous driving cars to overseas markets in the future.

weride
Source: Gasgoo, Weride Robotaxi and Weride Robobus

Key takeaways for China’s automotive industry expanding abroad

  • Chinese car brands’ success in venturing into overseas markets can be attributed to the competitive first-mover advantage of China’s EVs.
  • China holds the position of a global leader in EV production with China automotive companies such as BYD, Wuling, Chery, Changan, and GAC exerting control over 81% of the domestic EV market.
  • The preference for EVs is growing in countries worldwide, with Europe in particular favoring the entry of Chinese car brands, leading to a significant expansion of China’s automotive exports.
  • China’s automotive companies have effectively gained access to invaluable expertise and expansive distribution networks by strategically collaborating with established global automakers.
  • However, due to the rapid changes of market conditions, China’s automotive industry need to place a growing emphasis on innovation to develop more greener and smarter automobiles.
  • To mitigate the effects of rising tariffs or barriers, Chinese car manufacturers might seek to diversify its export markets and engage in negotiation for trade agreements with other countries.

Author: See Ching Yee


Have you already heard about our 7 Continents initiative?