Has the power of Chrysler (now Stellantis), the muscle of Ford, and the luxury of Cadillac really been overshadowed by Chinese upstarts? Well, definitely not, but there is no escaping the fact that the automobile sector has changed significantly since I was a kid, both in terms of manufacturers and technology. Today, Chinese automakers have become a formidable force, coming a long way to loosen the stranglehold that Western and Japanese automakers once had on the automotive sector. So, what has brought about this ground-breaking change? To put it simply, China’s automotive rise is being driven by innovation in electric vehicle (EV) eco system, government support, competitive pricing, the “Chinese speed” and aggressive global expansion strategies. Below is what Markets and Markets latest report on, Competitive Benchmarking of Chinese Automotive OEMs Global Strategy has uncovered.
Shifting into ‘Global’ Gear
It doesn’t take a genius to know that China’s automotive sector is gearing up for explosive growth in the coming decade. Production in 2023 crossed 30 million units and, if expectations are anything to go by, will top 38 million units by 2030/32. Likewise, by 2030, exports could cross 9 million units— China exports ICE vehicles to Russia, Brazil, Chile, Mexico, Egypt, and South Africa, and EVs to the UAE, Australia, Thailand, Malaysia, Indonesia, the UK, Germany, Norway, and several other European countries. China’s contribution to global passenger vehicle production, too, is set to increase by over 38%, helping cement its position as a global automotive giant while reshaping the market with production power and a rapidly expanding international footprint.
Last year, BYD, Geely, Chery, Changan, SAIC, and Great Wall Motors (GWM) ranked among the top 10 domestic passenger vehicle sellers in China. While some of these are well-known brands or manufacturers today—who hasn’t heard of BYD—others are on the brink of gaining global recognition. Industry projections suggest that by 2030, the Global Top 10 Automotive Brands by volume could feature many Chinese carmakers. Astounding, given the fact that they will be competing with VAG, Honda, and Ford, to name a few. But make no mistake, it will happen—Chery has already established itself as the largest vehicle exporter from China, while BYD, leading the global EV market with its cutting-edge technology and rapid production growth, is already the world’s largest EV manufacturer.
China’s ‘More Bang for Your Buck’ Strategy Disrupting the Auto Sector
There are no two ways about this. No one can offer more bang for your buck than Chinese carmakers today. Most Chinese cars offer at least the same or more features than their Western counterparts. At the IAA, Munich in 2023, Leapmotor (ever heard of them), a Chinese car manufacturer was suggesting they will offer 300 connected car features in their car in the near future. To top it all, Chinese cars are way cheaper than their Western counterparts. No, sir. You just can’t compete with Chinese prices and the value for money that their cars offer today. Who would want to pay optional for features the Chinese can give you included in your standard vehicle package ?
For perspective, Chinese electric cars are a staggering 25-45% cheaper than those manufactured by their rivals. How do they do this? The Chinese have figured out how to play the eco system game, manage the supply chain and take advantage of the low labor cost in the country to manage this. Production capacities, the availability of cheap raw materials, and advanced technologies—such as 8-in-1 ePowertrains, gigacasting, and advanced platformization strategies—all contribute to the final nail in Detroit’s proverbial coffin.
Despite this, Chinese carmakers are focused on reducing the production cost of passenger vehicles even further to increase adoption and maximize profit. This is especially true for EVs, where the government has moved from rebate-based incentives to increasing tax exemptions. A case in point is BYD—all current BYD models are produced on the latest BYD e-platform 3.0, but the company is developing a cheaper Version 4.0 BEV to lower manufacturing costs.
This trend can also be seen across all major manufacturers, where the focus is on improving existing technologies or developing new technologies to help reduce costs. A similar trend can also be seen in battery architecture, where the focus is on developing new architectures to minimize cost and mitigate range anxiety. Chinese are also in fore front of creating EV infrastructure and companies like Nio and CATL also offer battery swapping. CATL told me at the Hannover Commercial vehicle show that they can offer 2.8mn km warranty on their batteries for truck manufacturers if they will use their battery swapping network. With 2.8mn km warranty, the battery will over last the vehicle life and therefore is also an asset in its 2nd life in battery storage systems.
The Chinese are also leaders in Gigacasting, a new manufacturing technique for EVs that uses high pressure molds to create the body chassis architecture. With EVs the bill of material (BOM) of the chassis and Cell to chassis integration, can constitute about 60 to 80% of the vehicle cost, therefore providing huge cost advantage. Guess what – almost all gigacasting manufacturers are Chinese.
There is also something to be said about “Chinese speed”. The Japanese car companies reduced development cycles of new models to 48 months in the past. The Chinese are pushing the boundaries to 24 months and this includes new digital operating systems which in the West except Tesla no one has really figured out. Just have a look at the digital cock pits of car companies like Nio and you will know what I mean.
Wheels of Change: China Becomes World’s Largest EV Manufacturer
China accounts for more than half of all EV sales globally. Or over 60%, if you want to put a number to it. This is mainly due to its dominance in the mining of raw materials used in batteries, processing of these raw materials, and further manufacturing of battery cells. The numbers are jaw-dropping! Currently, over 60% of raw material processing for batteries and over 80% of all battery manufacturing in the world takes place in China. Though this can be mainly attributed to the presence of major battery manufacturers such as CATL, BYD (FinDreams Battery), Gotion, Sunwoda, and SVolt in the region, these are still unnaturally large percentages.
Besides these factors, China’s goal of achieving carbon neutrality by 2060 will also impact its automotive sector. While current regulations (CHINA 6b) focus on reducing the emissions of CO2, NOX, and particulate matter (PM), CHINA 7 regulations will drastically lower the permitted amounts of CO2, NOx, and PM, leading to a shift in focus from ICE to electric vehicles. CHINA 7 is set to be drafted and issued by the end of 2024 or early 2025 and brought into effect by 2030 and will play a significant role in China’s aim of achieving carbon peak by 2030, 50% electrification by 2035, and carbon neutrality by 2060.
China’s Self-driving Cars Accelerating into the Future
China has been busy securing its future in the automotive sector. As of 2023, over 17 national-level test demonstration zones had been established in China. More than 22,000 km of test roads, over 5,200 testing licenses, and more than 88 million km of total testing have taken place to further the development and launch of autonomous vehicles in China. Chinese carmakers like Nio, Xpeng, and Li Auto are keen to develop and test L3 and L4 vehicles that will be fully commercialized by 2030 and start working on developing L5 technology by the end of this decade.
Their pace of development has raised eyebrows—and worries—across the globe. The EU and the US have imposed duties of 38% and 100% on Chinese EV imports, respectively. Moreover, the US has proposed a ban on the hardware and software of Chinese connected-car technology. In response, China urged the US to respect market principles and provide a fair business environment for Chinese enterprises. In addition, it voiced concerns over the EU’s decision and warned of a withdrawal of Chinese investments from Europe. While this may hinder growth if implemented, its overall impact is expected to be limited and significant only with high volumes. And based on what we’re seeing, despite potential cost increases, Chinese EVs will continue to remain more affordable than those from other manufacturers.
Conclusion
To sum up, Chinese carmakers have become a force to reckon with in recent years. And I don’t see this changing anytime soon. Be it pricing, supply chain advantages, battery technology, or connected and autonomous compute platforms, you can expect to see more exciting cars manufactured by the Chinese plying on roads. And this isn’t a bad thing; I’ve been in and driven in few cars manufactured by the Chinese, and they are comparable and, in some cases, better than their Western or Japanese counterparts. But if you’re hoping to see 007 chasing bad guys in a BYD anytime soon, I suggest you hold on. Or maybe not…
