China has rapidly evolved into a major force in the automotive industry, as proven by its ever-increasing exports. In 2022, China surpassed Germany to become the second largest exporter with 3.32 million vehicles. With a further increase so far in 2023, China has overtaken Japan, reaching the top spot in the first quarter of the year.
Chinese cars used to have a bad reputation for their build quality and safety credentials, but those days are long gone. Local automakers have improved so much that they can now compete head-to-head with well-established rivals, questioning their dominance in the global automotive landscape. A number of competitive advantages – including the lower cost – alongside China’s growing expertise in electric vehicles (it is the world’s largest market for EVs) are slowly changing the way people perceive Chinese models, leading to an unprecedented global expansion.
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As reported by S&P Global, China’s 3.32 million vehicle exports in 2022 represented a 57% growth compared to 2021. Between January and April 2023, China’s vehicle exports increased by 76% year-to-year to around 1.5 million, occupying the first place in the global charts.
While the demand for new vehicles in China is declining, the growth in export markets kept the local automotive industry quite busy. Note that, unlike overseas rivals, Chinese automakers weren’t hit by serious supply chain issues and semiconductor shortages, allowing them to flourish. SAIC Motor and Chery are heading the pack, with BYD and Geely showing great export potential.
Russia, Europe, And North America Are The Main Points Of Interest
China took advantage of the drastic changes in Russia’s automotive landscape following the war in Ukraine. Around 60 automakers used to be active in Russia before the sanctions, and now there are only 14 left. Unsurprisingly, setting aside the local Lada, GAZ, and UAZ, all of them come from China, taking the majority of the forecast 760,000 vehicle sales in 2023 (down from the pre-war levels of 1.5 million units). In 2022, Russia accounted for 5% of Chinese vehicle exports but this number is expected to grow further in the future. The takeover is so intense that even Russian brands are now selling rebadged Chinese vehicles.
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In Europe, China’s offensive is more gradual, as people need to be convinced about the quality of the products before leaving the safe waters of brand loyalty. Belgium is a strong market as it accounts for 6% of the Chinese vehicle exports, with another 4% ending up in the UK. A good business example is SAIC’s clever use of the MG brand which now sells more vehicles in Europe and the UK compared to China. Other automakers like BYD are planning to build factories in Europe, something that would help them avoid customs duties and improve their image in the Old Continent.
Mexico is China’s largest vehicle export market taking over 8% of the pie in 2022, mostly due to GM’s popular offerings which are built in Chinese factories. On the other hand, the US is not an easy target for China’s automotive industry due to the political tension between the countries and the 25% tariff imposed by the US government on Chinese-built models. Other tough cases include the markets of India and Turkey, where the local governments do not favor imported vehicles from China.
The future sounds promising for Chinese automakers who built their design, engineering, and manufacturing expertise by learning from their well-established Western competitors as part of joint ventures.
