Foreign automakers have dominated the car market in China for many years, but the rise of homegrown electric vehicle (EV) makers, such as BYD and Xpeng, has resulted in significant challenges for traditional carmakers. Volkswagen, Ford, and General Motors have all seen a decrease in sales and market share as Chinese consumers increasingly prefer Chinese brands over foreign ones. In July, foreign manufacturers’ share of auto sales in China dropped to just 33% from 53% two years earlier, indicating a major shift in the market dynamic.
The decline in sales for global automakers is also impacting their profits in China. Income from Toyota’s joint ventures in China dropped by 73% in the second quarter, and GM reported consecutive quarterly losses in the country. Mary Barra, GM’s CEO, highlighted the challenging environment in China, stating that many companies are losing money due to intense pricing competition. The EV price war has forced local and foreign automakers to restructure their businesses, leading to shutdowns and layoffs as they struggle to cut costs and remain competitive in the market.
The sudden change in fortunes for global automakers follows two decades of growth in China’s car market. The arrival of Tesla in China in 2019 marked a turning point, as the China-made Model 3 transformed consumer perception of electric cars and made them more desirable. This shift in preference, coupled with government support for local EV manufacturers, has propelled Chinese brands to new heights. The International Energy Agency predicts that sales of electric vehicles in China will reach 10 million this year, accounting for nearly half of all car sales in the country.
Established automakers have been caught off guard by the rapid shift to EVs in China, exacerbated by the onset of the coronavirus pandemic. Foreign automakers struggled to keep up with Chinese manufacturers in terms of vehicle software, production speed, battery technology, and supply chain control critical for making EVs. As a result, Chinese EV makers like BYD have experienced record sales growth while foreign brands have lagged. With Chinese carmakers expanding globally and increasing their market share, European and North American automakers face a significant challenge in competing and retaining market share.
To adapt to the changing landscape, global automakers are forming strategic partnerships with Chinese EV makers to reverse declining sales and stay relevant in the market. Volkswagen and Stellantis have invested in Chinese EV companies to jointly develop vehicles and expand their presence in the EV market. Meanwhile, Chinese carmakers like BYD are expanding their global footprint by investing in plants in other countries and acquiring distributors in Europe. The growing influence of Chinese EV brands in international markets is reshaping the automotive industry, making China the new center of the automotive world.
As China’s EV market continues to grow and gain global momentum, the threat posed to European and North American auto industries has prompted a wave of tariff hikes on Chinese-made EVs. However, it remains uncertain whether these measures will be sufficient to curb the rise of Chinese EV makers in the global market. With Chinese carmakers projected to double their share of the global EV market by 2030, global automakers are facing a future where competition from Chinese brands will be a dominant factor in the industry. The shift towards electric vehicles and the rise of Chinese EV makers are reshaping the automotive industry, with Chinese companies emerging as major players on the global stage.
