State of China’s Auto Market - October 2023

17 Oct State of China’s Auto Market – October 2023

Posted at 23:29h in Newsletter by editor 0 Comments

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

Year-over-Year Shipments from January to September: NEV +37.5% ICE -0.8%

Please Note:

NEV = New Energy Vehicles (including Battery, Plug-in Hybrid and Fuel Cell Electric Vehicles) ICE = Pure Internal Combustion Engine Vehicles

Made-in-China Exports Surpass the Full Year 2022

Finished vehicle exports from China stand at 3.39 million units through September, surpassing the full year of 2022, placing China as the leading automobile export nation. While global attention has been focused on the export of electric vehicles, it is notable that new energy vehicles represent just 24.4% of these exports, and traditional ICE cars dominate the export mix. Also, NEV Exports are dominated by Tesla, with over 32% of the total, and BYD is rising rapidly with nearly 19%.

Through August, top export destinations for China-made vehicles are Russia (17%), Mexico (8%) Belgium (5%) and Australia (5%).

It is also important to note that prioritization of exports is largely driven by declining Chinese domestic sales, especially for vehicles with conventional powertrains. When exports are extracted from the total vehicle sales, it is evident that new car sales in China have been in decline since 2017.

The “Peak Car” sales year was 2017 globally and in China, which has broad implications for the world’s automotive industry. China has been the engine for growth for the 21st century automotive industry. This sudden reversal, combined with the movement of Chinese companies toward selling into international markets, represents a major disruption to the traditional power centers of the global automotive industry.

Market Momentum is Concentrated on NEV Sales and Exports

On the back of a 37.5 percent rise in NEV sales and record exports, 21.1 million vehicles were shipped through the month of September, including 18.1 million passenger vehicles and 2.9 million commercial vehicles. This was an increase of 8.2% over the same period of 2022.

As shown earlier, 3.39 million of the 21.1 million shipments were exported from China, representing 16% of all cars produced. It is very clear that Chinese carmakers are using exports to relieve a significant capacity overhang, especially for the relatively weak ICE segment.

Record Exports and NEV Growth Provide Momentum

Passenger Vehicle and Commercial Vehicle shipments improved in September, with PV sales up 6.6% and CV sales up 33.2% from the prior year. A positive trend from the third quarter period indicates that a recovery of momentum is underway.

New Energy Vehicle shipments set an all-time monthly record of 904,000 units in September, growing 27.7% from last year.

The NEV market is also remains highly concentrated and is dominated by just a small number of players, with BYD eating 36.3% of the NEV pie.

Full year NEV share rose to 29.8%, with a total of 6.28 million NEVs shipped to through September, of which 4.47 million were BEV and 1.81 million were PHEV. NEV sales will surpass the full year 2022 total in October, and will approach 9 million units in 2023.

On a monthly basis, NEV represents 31.6% of all vehicles shipped, with BEV and PHEV recording all-time record sales in September.

September NEV Sales Leaderboard

The NEV sales leaderboard for September includes some up and down positional moves, but the same 4 companies are represented: BYD, Tesla, GAC, and Wuling. Tesla Model Y and BYD Qin traded places, as did BYD Yuan Plus and GAC Aion Y. 2 BYD Models (Dolphin and Han) jumped ahead of GAC Aion S. Wuling’s Binguo replaced Wuling’s Honguang Mini EV in the number 10 slot.

The September Top 10 NEV Group sales leaderboard has one new entrant, with Leap Motor leaping over NIO to move into the number 10 position. Positional moves include Tesla falling to 4th place with a weaker performance resulting from a changeover to the refreshed Model 3. Volkswagen NEV sales increased as a result of aggressive ID3 price reductions, overtaking Great Wall in September sales.

2023 Overall NEV Sales Leaderboard through 3rd Quarter

Year-to-Date NEV growth stands at 37.5%, and market share through September is 29.8%, and local brands continue to dominate.

The Top 10 NEV Sales Leaderboard for 2023 also has the exact same group companies and nameplates as shown last month.

•The Top 10 companies command 80.2% of the NEV market

•The Top 5 companies command 63.2% of the NEV market

•BYD commands 36.3% of the NEV market

Additional points to note:

•#1 BYD outsells #2 Tesla by over 1.45 million units, and #10 NIO by over 1.77 million units.

•Wuling, and VW have struggled to maintain momentum in a hyper-competitive market.

•Companies that are not in the Top 10 will struggle to gain a foothold in the China NEV market, as there is very little observable movement into this list over the course of several years.

The End of Foreign Brand Dominance in China

The collective failure of legacy automakers to embrace new energy vehicles is a repeat of a historical pattern. Legacy brands were too slow to react to the rise of Toyota, Nissan, and other East Asian car brands in the late 20th century. The same happened with Tesla after the turn of the century, and now history repeats itself with China’s emergence as an EV powerhouse.

Legacy auto companies tend not to take seriously an emerging threat , instead believing they must hold on to investments they have made in vehicle platforms and associated powertrain technology. This resistance to change is costing global automakers the China market – and as Chinese companies expand beyond China, it may ultimately cost them their global business.

The impact of the weaker performance of foreign brands in China ia clearly shown in the following chart, where leading Chinese brands have climbed to higher overall volume positions as a direct result of their embrace of new energy vehicles.

Foreign brands are clearly paying the price for failing to embrace new energy vehicles, as is evident from the table below (where companies in grey are on the top 10 NEV leaderboard). Volkswagen is the only legacy foreign automaker that places on the top 10 NEV leaderboard, and they have struggled mightily to get 2.7% NEV share in a Chinese market that they have historically dominated.

Through the 3rd quarter of 2023, local brands have 55% share of passenger vehicles sales in China. 2023 will be first full year that Chinese brands will outsell foreign brands in China. Given the shifts we have seen in market preference, this is likely to remain true for the foreseeable future.

Several questions to consider:

•Will trade barriers impact foreign brands in the China market?

•Will tariff protections help to improve the competitiveness of global brands ? How will this impact the cost of EVs to the consumers internationally?

•The leaders in the China market have remained the leaders for several years. Is consolidation unavoidable and can foreign companies leverage this to get back in the game?

•Without the scale of the China market and its supply chain, how can foreign companies deliver affordable solutions – for both traditional and new energy vehicles?

A FEW MORE THINGS

For a deeper analysis of the topic of Made-in-Chna Vehicles Going Global, please have a listen to this excerpt from last Month’s AmCham Shanghai Automotive Committee webinar:

Made in China Vehicles are Going Global [VIDEO]

We are very proud to share the news that our book “Selling to China” has risen to the #1 ranking in the International Business section of the Amazon bookstore! The book can be ordered on Amazon or directly from the publisher by scanning the QR code, or following this link: https://bit.ly/3NYkbxw

“Selling to China” is #1 in International Business

You can follow us for regular updates on these online channels by scanning the QR codes:

If your organization would like a custom briefing on the State of China’s Auto Market, please reach out to us at [email protected]

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In his role as AmCham Shanghai’s Automotive Committee chairman, Bill Russo will chair AmCham Shanghai’s annual 2023 Automotive Conference on Wednesday, October 18 from 8:30 to 15:30 at Hualuxe Shanghai Twelve at Hengshan.

You will hear from industry executives (Ford, Autoliv, Magna, Aptiv) and leading analysts and experts (McKinsey, S&P Global Mobility, Albright Stonebridge, ASL, Hogan Lovells and Automobility).

This is an in-person event.

If you wish to join, please register here by scanning the QR code:

2023 AmCham Shanghai Automotive Conference

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About Bill Russo

Bill Russo is the Founder and CEO of Automobility Limited, and is currently serving as the Chairman of the Automotive Committee at the American Chamber of Commerce in Shanghai. His over 40 years of experience includes 15 years as an automotive executive with Chrysler, including 19 years of experience in China and Asia. He has also worked nearly 12 years in the electronics and information technology industries with IBM and Harman. He has worked as an advisor and consultant for numerous multinational and local Chinese firms in the formulation and implementation of their global market and product strategies.

Bill is a contributing author to the book Selling to China: Stories of Success, Failure, and Constant Change (2023), where he describes how China has become the most commercially innovative place to do business in the world’s auto industry – and why those hoping to compete globally must continue to be in the market.

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About Automobility

Automobility Limited is global Strategy & Investment Advisory firm based in Shanghai that is focused on helping its clients to Build and Profit from the Future of Mobility. We help our clients address and solve their toughest business and management issues that arise in midst of fast changing, complicated and ambiguous operating environment. We commit to helping our clients to not only “design” the solutions but also raise or deploy capital and assist in implementation, often together with our clients.