European and American carmakers have a problem: what is happening in the largest car market

VW Group and other foreign carmakers have dominated the Chinese market since the 1990s, but are now lagging behind Chinese rivals in winning electric vehicle buyers.

If global carmakers believe they can expand their dominance in China in the electric age, they could be in shock.

General Motors and Volkswagen Group lag behind local players in China’s booming electric vehicle market, a country that is key to financing and developing their electric and autonomous ambitions.

In the first four months of 2022, the number of new-energy passenger vehicles – pure electric and plug-in hybrid vehicles – doubled to more than 1.49 million a year earlier, according to the China Automobile Manufacturers Association.

Cleaner technologies accounted for 23% of China’s passenger car market, where total vehicle sales fell 12%, reflecting a sharp drop in demand for petrol vehicles.

There are no foreign brands among the top 10 automakers in the new energy vehicle segment this year, with the notable exception of US electric pioneer Tesla in third place, according to the China Automobile Association.

Chinese brands

All others are Chinese brands, from BYD and Wuling to Chery and Xpeng. Chinese leader BYD has sold about 390,000 electric vehicles in the country this year, more than three times as much as global leader Tesla has sold there. The top traditional car manufacturer is VW’s business with FAW Group, the 15th largest electric vehicle sales.

Global brands have dominated China since the 1990s, typically gaining a collective share of 60-70% of passenger car sales in recent years. In the first four months of 2022, they caught 52 percent, with a monthly share in April of 43 percent.

Pointing to the scale of the challenge facing traditional carmakers, Nissan CEO Makoto Uchida told Reuters that some brands “could disappear in three to five years” in China.

“Local brands are getting stronger,” said Uchida, who was Nissan’s chief of staff for China, adding that the value of electric vehicles from Chinese manufacturers has improved rapidly, with progress being made in a matter of months.

“There will be many changes in China and we need to look closely at the situation,” he said, adding that carmakers need to be agile in designing, developing and launching new models.

“In those respects, if we were slow, we would be left behind.”

“High-tech natives”

Bill Russo, a former Chrysler CEO who now heads the Shanghai-based automotive company Automobility, said global brands need to change quickly as they control less than 20 percent of China’s only growing car market.

“Chinese brands are winning the race for EV,” Russo said, adding that the shift from consumers to cars that are essentially four-wheeled smartphones seemed irreversible and that traditional carmakers have trouble keeping up.

“I think it’s a secular shift to high-tech,” he said of consumer demand for a “user-centric digital service experience” with a focus on interface, connectivity and applications.

“Traditional companies are not high-tech natives.”

VW Group brands, including Volkswagen, Audi, Bentley, Lamborghini, Porsche and Skoda, have dominated the market for much of the past two decades, alongside General Motors brands such as Buick, Chevrolet and Cadillac.

The two global groups had car market shares of nearly 13% and 12% respectively in China last year, according to LMC Automotive. The GM giant in Detroit also has a 44% stake in the locally controlled company SAIC-GM-Wuling Auto and includes its sales in group numbers, although SGMW does not produce US brands, only Wuling and Baojun cars.

GM is now focusing on gaining younger buyers in the big cities, who have so far largely rejected their models.

GM told Reuters it plans to install capacity to produce 1 million electric vehicles a year by 2025 in China, adding that demand for the Buick Velite NEV and Chevrolet Menlo EV family “increased significantly” in 2021 and the first three months. of this year.

He said he is implementing smart technologies, including assistance for hands-free drivers on highways, “aviation-quality” cyber security and over-the-air software updates.

Volkswagen can’t compete either

VW, which spends about $ 55 billion globally on electric vehicles by 2026, launched the new generation of ID series in China earlier last year, but missed its goal of selling between 80,000 and 100,000 electric vehicles. last year. It aims to sell between 160,000 and 200,000 ID vehicles this year, although it sold only 33,300 by April.

A key concern for foreign brands, according to a close relative of GM, as well as a VW insider, is that their new electric vehicles are designed more for the US and European markets, with a greater focus on performance and durability.

The challenge for global brands is to find the formula to earn consumers in big cities with disposable income, such as Cheng from Beijing and Li Huayuan, a civil engineer from Shanghai.

Li only half-heartedly considered the Japanese and German brands when he bought his BYD electric sedan last year for 290,000 yuan, including insurance.

“It seems to me that only Tesla stands out when it comes to American brands,” he said of his BYD car parked in Sichuan City, Mianyang, where he is working on a project.

“The other brands don’t even seem competitive to me.”