According to a forecast by consultancy AlixPartners, Chinese automakers are expected to grab a majority share of domestic sales for the first time in recent history. The forecast suggests that Chinese brands will likely outsell foreign brands in China in 2023, driven by their growing dominance in electric vehicles (EVs). This would mark a significant shift in China’s car market, which has long been dominated by global brands like VW and Toyota operating in joint ventures with Chinese partners.
The rise of domestic electric carmakers such as BYD, Nio, and Xpeng Motors, coupled with competitive pricing and faster rollouts of new models, has changed the dynamic for made-in-China auto brands. Chinese automakers have successfully capitalized on the demand for EVs and have gained ground through features like advanced driver assistance systems, even on more affordable cars.
AlixPartners predicts that China’s overall auto sales will grow by 3 percent this year to reach 24.9 million vehicles, recovering to pre-COVID-19 levels. The consultancy also forecasts that in 2030, more than half of the vehicles sold in China will be EVs, with total sales reaching 30.6 million vehicles. China’s market for new energy vehicles (NEVs), including plug-in hybrids and pure electrics, has received substantial government subsidies amounting to approximately $57 billion from 2016 to 2022. In contrast, the U.S. government has provided $12 billion in subsidies over the same period.
Stephen Dyer, head of AlixPartners automotive consulting in Asia, asserts that Chinese automakers will pose a disruptive threat to established global automakers, much like Tesla has. He suggests that foreign brands should learn from new Chinese EV startups if they wish to survive in China or avoid facing the disruptive impact of these brands in their home markets.
Furthermore, Chinese-branded cars are expected to gain a significant presence in overseas markets. AlixPartners predicts that by 2030, annual sales of Chinese-branded cars in overseas markets will reach 9 million vehicles, accounting for 30 percent of the global share. Chinese brands are projected to hold a market share of 15 percent in Europe, 19 percent in South America, and 19 percent in South East Asia and South Asia.
However, the Chinese auto market also faces significant challenges, including overcapacity. Dyer foresees a wave of consolidation, estimating that by 2030, only 25 to 30 out of the current 167 NEV brands will survive. More than two-thirds of these brands did not record any sales last year. Dyer emphasizes that, even with best-in-class operations, automakers need to produce up to 400,000 units annually to break even.
In conclusion, Chinese automakers are set to take control of the majority share of China’s car market for the first time, driven by their dominance in the electric vehicle sector. Their competitive pricing, faster rollouts, and focus on advanced driver assistance systems have disrupted the market previously dominated by established global brands. To survive and compete, foreign automakers will need to learn from innovative Chinese EV startups. Chinese-branded cars are also expected to gain a significant presence in overseas markets, posing a further challenge to global automakers. However, consolidation and addressing overcapacity will be crucial for the long-term sustainability of the Chinese auto market.
