State of China’s Auto Market - August 2024 - Automobility
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24 Aug State of China’s Auto Market – August 2024

Posted at 21:04h in Newsletter by

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

2024 HALF YEAR HIGHLIGHTS

  • NEV passenger vehicle sales surpassed gasoline powered vehicles for the first time on a monthly basis in July.
  • Chinese brands now hold 63% share of the passenger vehicle market, an increase of 27% since 2020.
  • In addition to their NEV dominance, Chinese brands are also gaining strength in the larger-but-shrinking ICE lane.  Geely, Chery and SAIC have all recorded ICE market share gains.
  • General Motors has fallen off the top 10 list of companies selling gasoline powered vehicles, replaced on that list by SAIC.
  • BYD strengthened its domestic performance with 7 of the top 10 selling NEV nameplates in July, with their segment share increasing to 34.1% for the year.
  • 20% of vehicles manufactured in China are now exported, 78% of exports are gasoline powered.

A Decade Ahead of Schedule

The China auto market surpassed a major milestone in July 2024.
In October 2020, MIIT and SAE China published the China Energy-saving and New Energy Vehicle Technology Roadmap 2.0 with revised targets for New Energy Vehicle (NEV) penetration of automotive sales. This included a seemingly impossible target of reaching 50% penetration of sales by 2035, of which 95% of these vehicles would be battery electric vehicles (BEV). The remaining 50% was to be penetrated with conventional ICE hybrids.
NEV share of passenger vehicle sales hit 6% in for the full year 2020, and has been steadily climbing ever since. In July, NEV share of passenger vehicle sales surpassed the 50% mark, more than a decade ahead of the initial target. 
Since 2020, a steady stream of attractively priced and well-equipped NEVs have been launched in China, led initially by Tesla and quickly followed by a flood of local brands. Since then consumer preferences have rapidly tilted in favor of local brands, resulting in a 27% swing in passenger vehicle market share in favor of the local brands.
Multi-national automakers have watched in dismay as they have all lost relevance in the world’s largest automobile market. As an example, sales of General Motors in China have declined at a 23.3% compound annual rate since 2017.
Clearly, brand equity from the ICE age does not carry over to today’s younger and more tech-savvy Chinese consumers.

CNBC made an effort to explain why this shift is happening and I was very pleased to contribute to their piece on how the Chinese EV market differs from the approach taken in the rest of the world.

How BYD, Nio And Other Chinese EVs Compare To Tesla [CNBC VIDEO]

In a nutshell, it is our view that Chinese consumers of electric vehicles are technology shoppers – and seek vehicles with smart device features that speak to a more connected and app-oriented population of users.

Such cars are designed not simply to be driven, but to be experienced as smart devices. Every set of eyeballs matter – not just the driver’s.

While my comments were used in the piece, it still came off as a “let’s drive a few cars and talk about them in the way we evaluate traditional driving machines”.

You can do that…but it falls short to highlighting the bigger wave of disruption emanating from China: the advent of the Intelligent Connected Vehicle, which just happens to be powered by electricity (because 140 years is long enough to go with gasoline propulsion).

A Weak Opening to the Second Half of 2024

The second half of 2024 began with weak domestic sales performance in July. While shipments are up 4.4% through July, the main contributors are the 31.1% increase in NEV shipments and a 28.8% rise in exports versus the same period from last year. ICE shipments are down 6.5%. One out of every five cars produced in China this year was exported for sale in another country.

 

Monthly shipment volumes have been on a downward glide path for both passenger and commercial vehicles since Chinese New Year. This is particularly concerning as it seems that the price war which was re-ignited by BYD after the holiday has not expanded the market. Rather, it has accelerated the shift in consumer preference from ICE to NEV as value-oriented shoppers seek discounts in a weak economy.

 

As Made-in-China (MIC) ICE products lose their appeal among domestic consumers, these products are increasingly sold to overseas markets. One out of every five MIC cars are now sold outside of China, and over 78% of MIC exports are powered by gasoline.

 

MIC exports have become a solution to a growing problem of overcapacity in a China market that has not grown since 2017. This problem is most acutely felt in the rapidly shrinking ICE segment, which is why sales of vehicles of this type dominate the export numbers.

With monthly exports averaging around a half-million vehicles per month since March, we expect total MIC exports to approach 6 million units in 2024.

 

Continued Expansion of NEV Driven by Plug-in Hybrids
If a carmaker (or dependent supplier) bet on the continued dominance of ICE beyond 2020, they are now facing an existential crisis in China. Monthly NEV share of overall shipments surpassed 40% of all vehicles produced in China for a second consecutive month in July. 
Within this total, sales of plug-in vehicles set a new record in July while sales of BEV and ICE are trending down. Consumers in China are clearly gravitating to the flexibility and overall economic advantages that plug-in hybrids offer. Shipments of PHEVs are up ~87% versus the same period of last year.
While BEVs still outsell PHEV by a 56/44 split, there is an unmistakable upward trend in favor of PHEV (including extended range) vehicles, which are less crowded sub-segments. These powertrain configurations are typically used in family-oriented SUV body styles, popular for vacation travel where access to charging stations weighs heavily into purchase consideration. BYD dominates the parallel PHEV sub-segment with over 60% share. Li Auto and Huawei’s AITO are the clear leaders in the Extended Range (EREV) sub-segment.  Interestingly, Changan Auto participates as a top player in all 3 NEV categories.
NEV Sales Summary through July
Over 36% of vehicles manufactured in China this year were New Energy Vehicles, in spite of the heavy ICE export mix which dilutes this percentage. NEV share of domestic sales surpassed 40%. 5.93 million NEVs were produced through July, an increase of 10.3% over the same period of last year. 
The top 10 NEV leaderboard through July highlights the continued dominance of BYD, with ~34% share of China’s NEV market. Tesla remains as the only foreign branded carmaker among the NEV leaders, but they are only 1 of 2 companies (the other being Guangzhou Auto) that have not increased sales in 2024.
Significant year-over-year gains have accrued to legacy Chinese carmakers in this segment, with Geely (+107%) and Chang’an ( +80%) and Chery (+205%) expanging rapidly, proving that legacy carmakers can indeed become relevant NEV brands in China – provided they deliver a clear technology-oriented value proposition to the NEV customer.
BYD boasts 7 slots on the July top 10 NEV models leaderboard. Other than BYD, Tesla’s Model Y came in 3rd place, Li Auto’s L6 took 6th place, and AITO’s M9 placed 9th.

 

Retail Sales of Top 10 NEV Models in July 2024
Chinese Brand Dominance

An interesting corollary to the rise of Chinese brand NEV dominance is that clear momentum is evident in the performance of Chinese brands in the ICE segment. This could be in part be attributable to a general increase in brand equity for Chinese brands among Chinese consumers. With more Chinese brands on the road, consumers are more willing to consider the purchase of a Chinese branded product independent of its propulsion system. The top 10 ICE list now includes 4 Chinese companies, with Chery moving into the 5th position, and SAIC jumping ahead of GM into the top 10 list.

Retail Sales of Top 10 ICE Companies in 2024 [January-July]
With SAIC’s promotion to the ICE top 10 list, four Chinese carmakers appear as leaders in both NEV and ICE segments, proving that legacy carmakers can successfully pivot and gain relevance in the NEV category. So far, only Chinese brands have been able to achieve this.
Chinese brands clearly dominate the NEV segment, and several are rising in the ICE segment. Viewed together, BYD passed VW Group since June and has widened its lead in July with 15% share of retail sales. 
Join us on Tuesday, August 20 at 9am China time for our monthly State of China Auto Market webinar, hosted by the American Chamber of Commerce in Shanghai. Use the QR code in the link to register.

Webinar | State of China Auto Market Monthly Briefing (August)

And circle Tuesday, September 10 on your calendars for our AmCham Shanghai Annual Automotive Conference. Our theme will be After the Storm: Competing in China’s New Automotive Landscape.
You may register via the above QR code or copy and paste the link to your broswer:

https://amcham-shanghai.glueup.cn/event/2024-amcham-shanghai-automotive-conference-%e4%b8%8a%e6%b5%b7%e7%be%8e%e5%9b%bd%e5%95%86%e4%bc%9a%e6%b1%bd%e8%bd%a6%e8%ae%ba%e5%9d%9b-44168/

Automobility to Sponsor Doon Insights’ Mobility Tech Workshops

On November 12th, the 10th annual Mobility Tech Workshop will delve into the latest trends and challenges in the mobility sector. The workshop will feature a lineup of 10+ promising startups and discussion panels on “The State of the Global Battery Supply Chain” and “From Private Placement to IPO: The New Path for Mobility Tech.” The program will also include 10+ “Something on My Mind” (SOMM) interactive mini sessions, led by industry leaders, investors, and technologists. This year’s event will take place at the scenic Cocoanut Grove in Santa Cruz, with an evening reception in Bonny Doon, allowing attendees to experience both the coastal and mountainous landscapes of California.

On November 13th, we are excited to introduce a new workshop, Manufacturing for Mobility in Mexico. This event will focus on Mexico’s emerging role as a near-shoring hub for EV production and the mobility supply chain. Industry experts and a delegation of policymakers, industrialists, and investors from Mexico will discuss the benefits of the USMCA, supportive Mexican government policies, and Mexico’s strategic importance in the global automotive and aerospace industries. This workshop will take place in Bonny Doon, CA.

Scan the below QR for details and register：

AUTOMOBILITY MEDIA

  • Tesla faces tough competition in China and slow EV adoption in the U.S., investment advisory firm says

Tesla CEO Elon Musk could be hoping to get support to “slow the advance of the competition he is facing in China,” said Bill Russo, founder and CEO of Automobility, a strategy and investment advisory firm.

Tesla faces tough competition in China [CNBC VIDEO]

  • Multinationals sound alarm over weak demand in China

Bill Russo, the former head of Chrysler in China and founder of Automobility, said foreign automakers, excluding Tesla, “collectively failed to pivot when confronted with changing Chinese consumer preferences” towards electric vehicles.

Please copy and paste the link to your browser: https://www.ft.com/content/8e2f415b-46bb-473f-9c26-474322e372f2

  • Tariff hike fears drive Chinese EV sales

“It’s a well-architected plan to encourage companies to shift their investments to the EU, instead of relying on exporting from China,” said Bill Russo, CEO of strategy and investment organization Automobility in Shanghai.
“The fact that some companies are taxed higher than others is a signal that they will make the penalty higher or lower based on the degree the company is committed to investing in the EU.”

Please copy and paste the link to your browser:

https://global.chinadaily.com.cn/a/202408/01/WS66aae534a3104e74fddb7eb7.html

You can follow us for regular updates on these online channels by scanning the QR codes:
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 21 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.

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.  

Contact us by email at [email protected]

PLEASE NOTE: The information and analysis shared in this newsletter, including the charts and style of materials presented, is the intellectual property of Automobility Ltd. While we share it as a way to serve our existing and new clients, it is not to be used without our express consent and then only with attribution. Any publication, reproduction or other use of this material without the express written consent of Automobility Ltd is prohibited.

 

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