According to news on January 26, in the past few years, China’s auto industry has made great progress, and domestic cars are becoming more and more competitive in the international market. Analysts expectChina has surpassed Germany to become the world’s second largest exporter of passenger cars after Japanand is expected to become the world’s largest car exporter.
Andreas Tatt, manager of a greeting card company in Canterbury, England, is very interested in buying an electric car. But after considering the Tesla Model 3 and the Porsche Taycan, he settled on a lesser-known vehicle, the all-electric gold Polestar 2 made by Volvo and its parent company Geely.
Tate, who waited four months to receive the car, said: “The Polestar 2 attracted a lot of attention, partly because of the color, partly because people didn’t know what it was like. There may be a quality problem.” But after a test drive, any doubts about quality problems disappeared.
China has become the world’s second-largest exporter of passenger vehicles, a milestone that could reshape the global auto industry as Chinese auto brands lure more and more foreign customers like Tate. According to statistics from the China Passenger Car Association,Overseas shipments of Chinese-made cars have tripled since 2020, reaching more than 2.5 million last year.
This is not much different from Germany, where the number of car exports has continued to decline in recent years.China’s exports still lag behind Japan’s but are ahead of the US and South Korea, suggesting thatFormidable rivals to established auto giants are emerging.
Chinese car brands are now market leaders in the Middle East and Latin America. In Europe, most of the Chinese-made cars sold are Tesla Inc’s electric models, as well as former Chinese-owned European brands such as Volvo, MG and Dacia. BMW’s best-selling electric car in the world, the iX3, is only produced in China and exported to Europe.
A host of local brands such as BYD and NIO are also on the rise, with ambitions to dominate the NEV sector. Backed by Warren Buffett’s Berkshire Hathaway, BYD has already attracted EV buyers in developed countries such as Australia.
But according to Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, this is just the beginning. He said,China aims to sell 8 million passenger cars overseas by 2030which is more than double Japan’s current shipments.
The trend underscores how China is no longer the “world’s factory” for low-cost consumer electronics, home appliances and Christmas toys. By shifting to more complex and sophisticated products in highly competitive and highly regulated markets, Chinese companies are moving up the value chain in manufacturing, a key driver of economic growth. In fact, the Economic Complexity Index compiled by Harvard University’s Growth Lab ranks China 17th in the world, up from 24th a decade ago. The index primarily analyzes the range of products exported by a country.
Ola Kallenius, chief executive of Mercedes-Benz Group, said at the Paris Motor Show in October last year: “We must pay attention to China’s auto industry. The most interesting period in the auto industry since Carl Benz introduced the first gasoline-powered car in 2009, but it is also the most uncertain.”
However, the U.S. appears to have failed to notice the surge in Chinese auto exports, in part because the trend has occurred during the pandemic and because Chinese automakers have largely focused on developing markets in Europe, Asia and Latin America.GM did sell about 40,000 Chinese-made Buick Envision compact SUVs in the U.S. in 2021but many factors are reducing the attractiveness of the US market to Chinese car companies.
Entering the European market has always been the goal of Chinese companies. As early as the early 2000s, Chinese companies began exhibiting products at auto shows in continental Europe. Thanks to increased automation and resulting standardization, Goldman Sachs analysts say,Chinese auto brands have the world’s most robotic factories. As vehicle quality improved over the past decade, Chinese cars began passing European safety tests. China’s tight controls on air pollution have also helped most of its cars meet European emissions standards.
On December 19, 2022, Carlos Tavares, CEO of Stellantis NV, said in an interview at a powertrain plant in Tremely, northern France: “In order to fight against Chinese brands, we must achieve Similar cost structure. Alternatively, Europe will have to decide to close its market to Chinese competitors at least to some extent. If Europe does not want to put itself in this position, we need to double down on what we do.”
According to data released by Eurostat, 2021 will be a watershed year for China’s auto exports.Exports to the EU jumped 156% to 435,000 vehicles. But Agatha Kratz, consulting director at Rhodium Group, said the rapid rise in China’s EV shipments could spark a backlash in the EU. “Part of it is Chinese companies are getting better, but part of it is the excess capacity in China. That will be a pain point,” she said.
The high-priced Polestar 2-star bought by British owner Tate is an exception, because China has previously tended to export relatively cheap cars. According to data provided by UN Comtrade, in 2021, the average price of exported passenger cars produced in China will be about 13,700 US dollars, about one-third of that of German cars, and about 30% cheaper than cars made in Japan. That means Chinese cars are most likely to pose a threat to cheaper Japanese and Korean models, rather than German brands.
China doesn’t seem too concerned about competition in the auto industry, at least for now. “Facts have proved that the strength of a country’s auto industry will eventually be tested by the international market,” the official said, adding that the government would encourage Chinese automakers to acquire foreign companies.
Having proved itself a credible manufacturing hub, China is leading the charge to the next frontier — electric vehicles. China’s homegrown automakers have found EV platforms relatively easy to master compared with complex internal combustion engines.
Alexander Klose, executive vice president of overseas business at pure-play Chinese EV maker Aiways, said,Switching to batteries means motors are no longer a huge advantage. Technically, this creates a level playing field. Aiways has sold thousands of cars in Europe.
A global effort to cut carbon emissions and save the planet has prompted the Chinese government to subsidize electric car makers and buyers, while a strong local supply chain makes electric cars cheaper to build in China than anywhere else.Tesla’s Shanghai factory produced nearly 711,000 vehicles last year, accounting for 52% of the company’s global output. These measures have also spawned dozens of local manufacturers like Aiways, BYD, Weilai, Xiaopeng, etc. are all car companies with great potential.
BYD also produces its own batteries and chips,The company is now China’s largest producer of electric vehicles. BYD has ambitions to become the “Toyota of electric vehicles” for cheap buyers around the world, and is betting its own batteries and chips will help it achieve that goal.
Alan Visser, global head of Geely’s electric car brand Lynk & Co, said, “We are not hiding the fact that we are a Chinese car company, and European consumers are slowly getting used to the high quality of Chinese products. The company said its rental service has more than 180,000 registered users in Europe. Geely also said that its total export volume in 2022 will be 190,000 vehicles,Target is to reach 600,000 vehicles per year by 2025.
From exporting just a few thousand cars in the mid-1980s, China’s automakers have come a long way. Rapid growth in domestic demand made China the world’s largest auto market in 2009. In 2018, domestic sales fell for the first time in nearly 30 years, while domestically produced cars are becoming increasingly competitive in the international market.
Stephen Dyer, a Shanghai-based managing director at consultancy AlixPartners and a former Ford Motor Co executive, said Chinese automakers had already seen the trend. They believe: “This period of rapid expansion is coming to an end, so it is starting to set its sights on the international market.”
China’s supply chains are also growing rapidly. Domestic companies can now produce almost all parts, including those that until about a decade ago relied on imports, such as high-strength steel and fiberglass reinforcement. Affected by this, China will achieve a trade surplus in complete vehicles and complete vehicle parts for the first time in 2021. However, these assembly lines still rely on advanced machinery from Japan and Germany.
Dell said: “China’s auto industry seems to have undergone a phased change, and the long-term trend is that the sales of Chinese auto brands around the world continue to increase.”
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