How about joint venture brands that held a strong foothold in the Chinese market before 2010? How are they doing today? In 2023, the share of NEVs sold by these joint venture brands only amounted to 6.6%. This starkly accentuates the substantial market opportunity that they are missing out on, especially when compared to the NEV market, which has already captured a 35% share. Now, shifting our focus to China's overall passenger car production, we observe a notable increase. In 2023, China produced 25.8 million units, marking an 8.8% surge from the previous year's production of 23.72 million units. Individual brand performance varies. Toyota's sales in China (including Hong Kong and Macau) dipped by 1.7%, declining from 1.94 million in 2022 to 1.907 million in 2023, while BYD's sales in the same regions rose by nearly 50%, climbing from 1.863 million in 2022 to 2.706 million in 2023. The situation for other Japanese brands in China is more precarious. In 2018, Suzuki officially withdrew from the Chinese market by selling its stake in both Changan Suzuki and Changhe Suzuki for RMB 1. In October 2023, Mitsubishi also announced the cessation of its business operations in China. In terms of 2023 sales figures, Honda experienced a year-on-year decrease of 10%, recording 1.23 million units. Nissan's sales shrank by 16%, totaling 790,000 units. Mazda's sales dropped to 88,000 units, representing a 11% decline from 2022. According to statistics from the China Passenger Car Association (CPCA), the market share of Japanese brands in passenger cars suffered a downturn of seven percentage points, from 24% in 2020 to 17% in 2023.
U.S. brands continue to struggle in China. According to the latest statistics from the CPCA, their market share dropped 2.1 percentage points, from 9.4% in 2020 to 7.3% in 2023. Specifically, Ford sales plummeted from a peak of 1.048 million in 2016 to just 182,000 in 2023 (down 18.8% from 2022). GM, with a head start in China's NEV market (25% of 2023 sales), fared better with a sales decline of only 4.5% (2.1 million units in 2023). The German Volkswagen Group, after incorporating FAW-Volkswagen and SAIC Volkswagen, held a 14.2% share, representing a 0.6-percentage-point decrease from its 14.8% share in 2022. However, the harbinger of doom for Volkswagen is that the Volkswagen brand, which had historically been the sales ace in the Chinese market, lost its title to BYD in 2023. The gap between the two brands amounted to approximately 300,000 units.
Amid the surge of NEVs in the market, several joint ventures deserve our attention. Let's start with General Motors (GM). In 2023, GM sales of 2.1 million units represented only about half of the 4 million units it sold in 2017. However, the rate of decline in 2023 moderated, principally due to the rapid adoption of EVs in the Chinese market. Additionally, the low-priced SAIC-GM-Wuling brand consistently contributed half of the total sales volume. The Buick brand introduced the Electra E4 SUV and Electra E5 coupé last summer, along with the new Velite 6 EV (launched at the end of 2021) and Cadillac's Lyriq EV (launched last November). These fresh offerings are complemented by competitive pricing. For instance, the Velite 6 is priced at RMB 159,900. This strategic combination of new products and competitive pricing has effectively halted GM's sales decline in China. However, during the GM Company Q4 and calendar year 2023 earnings conference call at the close of January 2024, chair and CEO Mary Barra mentioned that the company was evaluating China, "We think there's a place to play. It is a tremendous growth opportunity." She further pointed out, "Nothing is off the table in ensuring that GM has a strong future to generate the right profitability and the right return for our investors." Later, at a conference held by Wolfe Research in Mid-February, "When you look at Chinese market, it's very different than it was five years ago," Barra said. "It's a market that we want to play in appropriately, and I think it's more at the premium and the high end." In other words, the Chinese market's overall contribution to GM will gradually evolve from sheer sales volume toward profitability. Ford China's president and CEO, Samuel Wu, echoed a similar sentiment. Ford, also an American brand, has a forward-looking strategy: prioritizing niche products that resonate with consumers and offer profit opportunities. Wu said, "In the future, Ford China will focus on crafting hardcore, high-performance, and luxury models exclusively for the Chinese market. We will create cars that are driven by passion, even if they don't necessarily achieve high sales volumes." In essence, Ford will prioritize niche products to establish market recognition and seize profit opportunities.
The German Volkswagen Group is taking a distinct approach to the Chinese market. Its core strategy is "in China, for China," emphasizing local autonomy. This includes establishing the Volkswagen China Technology Company Limited (VCTC). VCTC brings research and development closer to the Chinese market, enabling them to react swiftly to consumer needs. Moreover, by taking a significant stake and becoming the largest corporate shareholder in China's XPeng Motors, it's deepening its commitment to the Chinese market. While continuing to consolidate its champion sales volume of gasoline/diesel vehicles, VCTC is also venturing into the EV segment and committed to introducing competitive EVs. The Group's own brands, Volkswagen ID and Audi e-tron, play a pivotal role in this transition. VCTC is collaborating with XPeng to launch a B-segment EV, whereas Audi is partnering with SAIC to introduce another B-segment EV. In addition, the Group is building a CMP platform exclusively for the Chinese market, aimed at capturing the entry-level EV segment.
Masayuki Igarashi, Honda's Chief Officer, Regional Operations (China), revealed in an interview with the Nihon Keizai Shimbun at the end of January 2024 that in response to declining sales and overcapacity in China, Honda aims to compress fixed costs and speed up preparation for the transition to purely electric vehicles. The company plans to launch more than two electric models per year to expand its product pipeline. Acknowledging the profitability challenge with EVs compared to gasoline/diesel vehicles, Honda will focus on cost reduction through component integration. Meanwhile, in August 2023, Toyota made a strategic move by officially renaming Toyota Motor Engineering & Manufacturing (China) Co. Ltd. (TMEC) to Intelligent ElectroMobility R&D Center by TOYOTA (China) Co., Ltd. (IEM by TOYOTA). Collaborating with the Toyota Group's three Chinese joint ventures—FAW Toyota, GAC Toyota, and BYD Toyota EV Technology (BTET)—along with Denso and Aisin, IEM by TOYOTA aims to create an integrated R&D system focused on electrification and intelligence. Toyota's strategic focus involves three key areas: expanding local suppliers, optimizing component design, and reforming production technology and manufacturing processes. The ultimate objective of these concerted efforts is to markedly reduce manufacturing costs and boost profitability from EVs. Tatsuro Ueda, Toyota's CEO (China Region), outlined a significant shift in the company's approach to the Chinese market during an August 2023 interview. He underscored a commitment to "revolutionizing our work style and consciousness." This includes prioritizing local R&D spearheaded by IEM by TOYOTA. The goal is to rapidly develop and deliver competitive products that cater to Chinese customers. Mr. Ueda further highlighted the importance of knowledge sharing, stating that learnings from China's R&D will benefit not only the Chinese market but also Toyota's global operations. While recognizing the growing popularity of EVs in some regions, Mr. Ueda elucidated Toyota's continued commitment to hybrid technology. Toyota will continue to offer hybrid models to meet the ongoing demand for hybrids among Chinese consumers. Toyota also recognizes challenges in some Asian regions, where pure EV infrastructure is not yet fully developed, for large-scale sales of pure EVs. This aligns with Akio Toyoda's previous assertion that EVs will at most constitute 30% of the global market share. Time will tell how effective Toyota's approach will be.
Based on the discussions above, we can draw an important conclusion: traditional automobile brands must not only leverage their existing product characteristics and brand assets accumulated over the years but also adapt to policy changes and consumer trends in the Chinese market. It's crucial not to remain fixated on past success models, disregarding shifts in the market and consumer preferences. Even more critical for traditional automakers is understanding why new, independent Chinese brands, which have never entered joint ventures, have gained traction with consumers and survived in the market. Finally, achieving success in China—the world's largest yet fiercely competitive market—requires a strategic approach. Fully localizing the supply chain becomes crucial for cost reduction and brand differentiation, a potent combination for traditional auto giants to secure a solid foothold in China's dynamic auto ecosystem.
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.