The skyrocketing growth of the Chinese BEV market will provoke the knockout competition of traditional carmakers around the world

By Jeff Lee / Mike Song 2022-12-19

Since the 1990s, major international carmakers entered China market to seize the huge business opportunities. After the past 20~30 years, the operation results among carmakers vary in great disparity, and even some carmakers decided to leave the market. Certainly, the competition in the Chinese car market is extremely stiff, especially there are hundreds of carmakers in the competition when entering the era of BEVs and everyone wants to gain a foothold; However, this is also the best arena to test whether international traditional carmakers can be smoothly transformed. Only facing the Chinese market challenges can traditional carmakers solve the problems as soon as possible, and then the experiences can be applied to other battlefields around the world.

Since the beginning of this year, the China market of electric cars (BEV+PHEV) kept growing at extraordinary rate on a monthly basis. It had reached more than 30% of penetration rate of the whole car market by September, and it might end up with 28% this year. In this market segment, it’s completely dominated by Chinese self-owned brands, and the market share of international joint-venture brands plus Tesla (sole proprietorship) is under 10% in total. In this situation, there are some international major carmakers began withdrawing from China market … GAC FCA, which is a joint-venture between the Stellantis Group and Guangzhou Automobile Group established for more than ten years, had filed for bankruptcy in the end of October. This is another international carmaker announced to withdraw from China market  after Changan Suzuki and Dongfeng Renault. Certainly, the withdrawal of the Stellantis Group is mainly due to the reasons of product competitiveness and sales of ICE cars in the past few years. However, I believed that the “the last straw that breaks the camel's back.” is absolutely what they saw about the status quo of BEVs market being overwhelmed by Chinese self-owned brands. So, is there going to be more serious backlash after traditional car makers withdrew from China market? My viewpoints are as follows…

  • China car market accounts for almost 1/3 of Global car market for now. If international major carmakers give up China market, it will be equal to giving up one-third business opportunities of sales, which will have direct and profound impacts for their global operational strategy deployment.
  • The global sales volume of BEVs will reach 10 million units this year, in which China accounts for at least half of them; Moreover, Chinese self-owned brands account for more than 90% of the BEV market of China. If international carmakers chose not to directly face Chinese self-owned brands to seek for countermeasures, then they will be forced to face them in the other markets around the world again within the upcoming 2 years. At that moment, international carmakers will be caught off guard that their performance will drop even faster.
  • China has vast manpower and material resources, and even sits on top of the development of automotive futuristic new technologies around the world. At this moment, while automotive giants like VAG and Toyota chose to keep working hard and increase investment for technology cooperation, other carmakers might lose the potential opportunity of long-term strategy if they decide whether to stay or leave China market only by calculating short-term operational profits and loss.
  • To view from the global operational strategy, there is a deep link between the car markets of China and Southeast Asia. The Southeast Asian car market is now at the timing of the transformation to the era of BEVs. If European and American carmakers can have steady development in the China market, then it will benefit them for the vast business opportunities of entering the Southeast Asian market in the future; Otherwise, it will be more difficult for them to catch the possibilities of business expansion (the ICE car models of European and American brands have hard time competing with Japanese and Korean brands in the Southeast Asian market currently).

Although there are so many reasons to stay in China market as mentioned above, I still assumed that the withdrawal of the Stellantis Group is just the beginning… there will be other international major carmakers to follow. However, to view from another aspect, any international carmaker that survives in the China market and holds a place by BEV product portfolio is proven being capable of passing the cruel market challenge, and will be capable of competing with Chinese self-owned brands worldwide in the future.