The numbers reveal that BYD officially outperformed Tesla by selling 526,400 pure electric vehicles in Q4 2023, surpassing Tesla's 484,500 units. For the entire year of 2023, BYD eclipsed the Volkswagen Group, which had long held the top spot in the Chinese market, with a staggering 2.4 million units sold. After overtaking Germany in 2022, China was set to become the world's largest automobile exporter in 2023, exporting a total of 4.91 million vehicles. This impressive figure exceeded Japan's 4.42 million vehicles.
The common thread connecting these achievements is the prominence of electric vehicles (EVs). In March 2022, BYD made a strategic decision to cease production of traditional diesel and gasoline vehicles and focus exclusively on manufacturing and selling new energy vehicles (BEVs + PHEVs). Within just two years, BYD became the leading pure EV seller in China and globally, culminating in their exceptional performance in Q4 2023. Of the 4.91 million made-in-China vehicles exported, new energy vehicles (NEVs) accounted for over 1.2 million, with 90% being pure EVs. Judging from the above sales figures, there's no denying that EVs have played a pivotal role in China's ascendancy over Japan in this domain.
Naturally, some would attribute China's success in automobile exports to two other factors: economic sanctions against Russia by Western nations and the local production and sales strategy prevalent in Japan.
Following the outbreak of the Russo-Ukrainian War, the Western camp imposed several embargoes on Russia. This created an opportunity for Chinese carmakers to become oligopoly players gaining a larger market share, resulting in China's car exports to Russia surging from 160,000 units in 2022 to over 800,000 units. While this growth in volume is noteworthy, it's important to highlight that the proportion of NEVs in these exports has also seen a significant rise. Japanese carmakers, on the other hand, have embraced a production localization strategy. They prioritize production in their overseas factories across different regions, pronouncedly surpassing the number of vehicles manufactured within Japan for export purposes. Let's consider the Toyota Group, for instance: of the 11.51 million vehicles produced in 2023, only 4.3 million rolled off Japanese assembly lines. Hence, some find it unsurprising that Japan has lost out to China in automobile export volume.
I figure that these contrasting approaches will lead to a widening gap in the future competitiveness of Chinese and Japanese automobiles due to fundamental differences in product offerings. To understand this further, let's now examine some real-world examples from China's car export markets.
European Market: In 2023, the European market (including the U.K. and non-EU countries) witnessed robust growth, selling 12.85 million vehicles, an impressive 13.7% increase from 11.29 million in 2022. Specifically, EVs skyrocketed by 28.2%, from 1.57 million to nearly 2.02 million units. Toyota's four European plants produced a total of 797,000 vehicles in 2023, a marginal 0.7% rise from the 792,000 produced in 2022. Toyota's European sales volume grew from 1.032 million vehicles in 2022 to 1.126 million vehicles in 2023, representing a 9.1% increase. However, the market share dipped slightly from 7.1% in 2022 to 6.9% in 2023. On the other hand, China's NEVs, including MG, sold over 320,000 units in the European market in 2023—a monumental year-on-year increase of 79% (according to JATO statistics).
Thai Market: Toyota faced challenges. The production volume (including domestic and export sales) declined by 5.8%, from 659,000 units in 2022 to 621,000 units in 2023. Similarly, sales volume decreased by 7.9%, from 288,000 units in 2022 to 266,000 units in 2023. The overall market share of Japanese brands also shrank from 86% in 2022 to 78% in 2023. However, EV sales in Thailand saw a leap, increasing seven-fold from 9,729 units in 2022 to 76,314 units. Among these, Tesla contributed significantly with 8,206 units, while Chinese brands dominated the rest. The overall market share of Chinese brands soared from around 5% in 2022 to 11% in 2023.
Japanese Market: Toyota experienced substantial growth. Sales shot up by 20.9%, from 1.906 million units in 2022 to 2.305 million units in 2023. Meanwhile, overall EV sales grew by 50%, from 58,813 units to 88,535 units. BYD EVs, which entered the Japanese market in February 2022, contributed 1,446 units to this growth. Additionally, in January 2023, a total of 1,186 pure EVs were imported into Japan. Among these, 217 were sold by BYD, accounting for approximately 20% of the total sales. BYD also established its 20th sales office in Sapporo.
Observing the above three auto markets across various regions, we discover one consistent trend: EV sales outgrow the overall auto market regardless of market scale. The primary beneficiaries of this emerging trend are Chinese carmakers, who have invested heavily in EV production, whereas the Toyota Group and other Japanese carmakers face mounting competitive pressures.
The electric car industry has experienced a whirlwind of change. Local markets are adjusting their policies, with electric car subsidies gradually phasing out. In the European market, discussions are underway regarding restrictive measures for Chinese-made electric cars. Derisking, geopolitical considerations also necessitate recalibrating the electric car supply chain. Driven by net zero emissions mandates, however, traditional European and American car manufacturers are directing substantial research and development resources toward electric cars. The global push for net zero carbon emissions further intensifies this shift. Stricter fuel consumption laws worldwide compound the challenge for conventional fuel-powered vehicles, making sustained sales increasingly difficult.
In Taiwan, since the introduction of the second phase of fuel efficiency standards (Taiwan CAFE) in 2022, various car manufacturers had brought 45 EV models to the Taiwanese market by the end of 2023. This is a drastic increase from the 17 models available at the end of 2021. As a result, the market share of EVs rose from 1.6% in 2021 to 5.2% in 2023. This market trend is not unique to Taiwan. EV adoption is on the rise globally, even in the cold climates of the five Scandinavian countries. In 2023,
- Norway: EVs accounted for a whopping 82% of the sales market.
- Iceland: The market share of EVs reached 50%.
- Sweden: EVs constituted 39% of the auto market.
- Denmark and Finland: EVs achieved 36% and 33% market share, respectively.
Scandinavian consumers have found ingenious ways to enhance EV charging performance. For example, they park their EVs in warm rooms to prevent low battery temperatures that hinder charging. When not in use, the car is kept connected to the charger to maintain warmth. Moreover, electric car manufacturers like Tesla have introduced heat pumps to address heating challenges. These heat pumps capture warmth from the external air, thereby reducing battery power consumption. Compared to conventional EVs that rely on battery heating, those equipped with heat pump technology can save up to 60% of the electricity used for heating. Evidently, this approach also mitigates low-temperature performance issues associated with current lithium-ion batteries.
Now we can foresee market competition and price wars to boost production performance. Brands are poised for an even more intense price war in the vast Chinese market. Leaders like BYD, Tesla, and SAIC, along with second-tier brands such as Geely, Aion, and Changan New Energy, have recently slashed prices to secure a larger market share. This move has increased pressure on Japanese car manufacturers, whose market share in China already dropped from 24% in 2020 to 17% in 2023.
Regarding global expansion and challenges, to overcome resistance to importing Chinese vehicles, BYD plans to establish production plants in Hungary, Southeast Asia, Brazil, and Mexico. Similarly, SAIC is eyeing factories in Europe and Thailand, while Changan and Aion have announced plans for setting up plants in Thailand. Great Wall Motor already has production bases in both Brazil and Thailand. These strategic moves target developing markets in Southeast Asia and South America, which are crucial for Japanese car brands. It's safe to say that as the market ecology evolves, Japanese car manufacturers will face even tougher competition from Chinese EVs across regions all over the world in the coming years.
* This article reflects the author's personal opinion and does not represent the official position of this site.
About the author - Kenny Liu
Graduated from Dept. of Aeronautics and Astronautics, Cheng Kung University in 1988, started his auto industry career since July 1990 after two year military service. Starting as a service engineer and a temp technician, product marketing specialist in Peugeot/ Daihatsu, marketing and dealer channel specialist in VW LCV from March 1992, then field manager in GM Taiwan from Feb. 1994, sales and service / parts head in Ford Lio-Ho from Sep. 1998 till retirement in May 2019. Kenny then started to work for JLR Taiwan as sales/service head and consultant/ lecturer. After that, he was invited to work at a Suzuki dealer of Taipei as the general manager until April 2022.