In the mid-2010s, it was a “golden age” for Western automakers in China, the world’s largest automotive market. But now, that era is gone forever.
According to the US Wall Street Journal, reported on June 30 local time, as Chinese consumers' purchasing power continues to rise, Western brands such as Buick and Volkswagen were once popular in the Chinese market. However, ten years later, the market landscape has reversed—Chinese domestic brands have rapidly emerged, while the market share of Western automakers in China has continued to decline.
According to data from the American consulting firm AlixPartners, Volkswagen, the largest Western automobile manufacturer in the Chinese market, will have a market share of 9.7% in China by 2025, down from 14.7% in 2015. The profit from its Chinese business has also shrunk significantly, from around $5 billion at its peak to an estimated $228 million to $684 million this year. Due to losing competitiveness in the Chinese market, Volkswagen plans to cut tens of thousands of jobs worldwide.
Not only the general public, but the situation of American car brands in the Chinese market is also not optimistic. Data shows that the overall share of American brands in the Chinese automotive market has dropped from 12% in 2014 to 5% last year.
Chinese (orange), Europe (light blue), other Asian countries (dark blue), and the United States (dark green) – the market shares of car manufacturers in China. Chart by The Wall Street Journal.
According to an analysis by The Wall Street Journal, Chinese brands have seized about two-thirds of China’s new car sales due to their more comprehensive configurations, advanced intelligent technologies, and competitive prices. They have practically pushed foreign automakers out of the markets for electric vehicles and plug-in hybrid cars. Even Tesla, which once played a key role in the rapid development of China’s new energy vehicle industry, has seen its market share decline in recent years.
The newspaper pointed out that China's new energy vehicle industry benefited from government subsidies in its early stages, but it was the faster product development and market response capabilities that truly narrowed the gap with Western counterparts.
Stephen Dale, head of business for Ai Rui Platinum Automotive, stated that unlike Western automakers who prioritize a lengthy development cycle, Chinese automakers tend to focus on rapid product launches followed by software updates to continuously improve functionality. For instance, Xiaopeng Motors, Ideal Auto and BYD have a main model refresh every three years, while traditional Western brands like Ford typically see product update cycles every five years.
"Ironically, the factors that once helped these traditional automobile manufacturers achieve success have now become obstacles to their progress," said Dell frankly.
According to reports, although foreign brands still account for about half of the sales in China’s fuel vehicle market, this market is shrinking as Chinese consumers continue to shift towards new energy vehicles.
Meanwhile, Chinese brands continue to maintain their leading position and are starting to expand into overseas markets, using exports as a new growth point. AiResearch predicts that by 2030, the share of Chinese branded cars in the European market will increase from 10% last year to 16%.
Currently, high tariffs and so-called “national security” considerations continue to keep Chinese cars out of the US market. However, Dell believes that whether in Europe or other overseas markets, Western car manufacturers must realize that they have little room for retreat if they want to compete with Chinese automakers.
This is completely feasible, but by no means easy—true determination required to make a real change. Dell said.
