Comments from Bill Russo, Founder & CEO of Automobility Ltd.

The China auto market is experiencing a secular shift to electrification, which we covered in our recent November update titled The Inexorable Rise of Electric Vehicles in China.

In this update we highlighted the fact that more than 4 of every 5 EVs sold in China in 2021 were locally branded. Only Tesla makes the top 10 among EV manufacturers. We believe that the foundation of Tesla’s initial success is rooted in its complicated relationship with the China government, who needed a market leader to build the EV supply chain and open the retail consumer market for electric vehicles. This was covered in the recent article in The Wall Street Journal titled Elon Musk Needs China. China Needs Him. The Relationship Is Complicated.

Tesla’s success stands in contrast to virtually all other traditional multi-national carmakers, who are late to the EV game in China, and are rapidly losing market share. This hard reality is particularly felt by Volkswagen Group, who through its portfolio of brands and joint ventures hold the largest share of the (internal combustion engine powered) automotive market in China:

With a clear understanding of the risk this places to their largest market, Volkswagen has introduced their ID.X lineup of vehicles to the China market, but has found that for the new era of electrification, they are no longer perceived as the market leader. Their initial success at introducing their electric vehicles in Europe is not being met with similar success in China:

Volkswagen’s struggles in this early stage of the secular shift to electrification have contributed to a leadership transition for the China market and are certainly a bellwether for all multinational carmakers who have relied on China for the past two decades for their growth and scale.