The rapid shift towards electric vehicles in China is having a significant impact on the sales performance of traditional car manufacturers. Volkswagen, one of the world's largest automakers, is currently on track for its worst local sales figures in years due to the country's transition to EVs. The German company has been slow to adapt to the changing market trends, with its focus on traditional combustion engine vehicles. In contrast, Chinese automakers have been quick to embrace the EV revolution, with government incentives and regulations driving the transition. As a result, Volkswagen is now facing stiff competition from local rivals who are offering more affordable and innovative electric vehicles. This shift in consumer demand highlights the importance of adapting to changing market trends in order to stay competitive in the rapidly evolving automotive industry.
Current Market Situation
The Chinese automotive industry is undergoing a rapid transformation, with a shift towards new energy vehicles (NEVs) that is leaving global car brands struggling to keep up. According to an analysis by CNBC of public data for the first three quarters of 2021, Chinese brands are taking the lead in the NEV market, leaving Volkswagen on track for its smallest year of China sales since 2012. The situation is similar for Nissan and Hyundai, which are both on track for their lowest sales since at least 2009.
China is the world's largest auto market, and NEVs have already accounted for more than one-third of new passenger cars sold in the country this year, according to the China Passenger Car Association. The market for battery and hybrid-powered cars is rapidly growing, with Tesla and homegrown brands such as BYD capturing a significant share.
While foreign brands such as Volkswagen and Toyota remain giants in China's car market, they are struggling to gain traction in the NEV space. BYD, a Shenzhen-based company, sold more than 1 million cars for the first time in 2022 and is on track for 2.5 million vehicle sales in China this year. Toyota, which has struggled in the market transition to electric cars, is set for its worst year of overall China sales since 2020 with about 1.8 million vehicle sales.
Growth of the Chinese Automotive Industry
The Chinese automotive industry is developing faster than the market's growth rate, with BYD set to capture a significant share of China's 8.5 million-large NEV market. Alvin Liu, an analyst at Canalys' Shanghai office responsible for global tracking and analysis of the NEV market, has noted the potential for original equipment manufacturers (OEMs) to compete via joint ventures with Chinese companies.
License plate restrictions in big cities such as Beijing incentivize locals to buy electric instead of traditional fuel-powered cars. A Bernstein survey of more than 1,500 consumers in China in August and September found that BYD was the top brand that Chinese buyers of electric vehicles would consider, followed by Tesla and Nio.
Competition in the NEV Market
Although China's NEV market is growing quickly, competition is fierce, even for domestic brands. BYD launched its most direct competitor to Tesla yet, the Denza N7, in July, while also expanding beyond mass-market cars into ultra-luxury with a 1 million yuan-plus (more than $138,000) price tag for a giant U8 SUV under its Yangwang brand.
Future Outlook
As competition intensifies in the NEV market, Chinese automakers are also expanding overseas. This year, China is on track to become the world's biggest exporter of cars, surpassing Japan and Germany, according to Moody's analysis in August. In a sign of how big a force Chinese automakers are becoming abroad, the European Union launched an anti-subsidy probe into Chinese electric vehicle companies in September.
Looking ahead, An Conghui, head of Geely's EV brand Zeekr, has warned that if this year was competitive, next year will be even more so. Geely has launched its luxury electric sports car, the 001 FR, with specs clearly meant to rival Tesla's Model S Plaid – but at a lower price. Zeekr set a monthly delivery record in October with just over 13,000 cars sold in China and has aggressive expansion plans to sell in Europe and the Middle East in the next two years.
Summary
The rapid shift towards NEVs in China is transforming the global automotive industry. As Chinese brands take the lead in this rapidly growing market, foreign brands must adapt or risk being left behind. With competition intensifying both at home and abroad, it remains to be seen which companies will emerge as winners in the race towards a greener future.
(This article is sourced from cnbc.com and curated Thetransporteronline24)
