Chinese car makers take ground from foreign manufacturers in China

Chinese car makers gain ground in China

Foreign car makers losing ground in China is nothing new. In recent years, Chinese brands have moved into the spotlight, supported by the rapid growth of electric cars and consumers who are increasingly willing to choose domestic manufacturers.

The outcome of this shift is historic: in the first half of this year, foreign manufacturers' market share dropped to 28% (including joint ventures with Chinese partners). The scale of the transformation becomes clear when compared with 2020, when those brands held more than 60% of the Chinese car market, according to figures from the China Association of Automobile Manufacturers (CAAM).

German manufacturers have been among those most affected. For decades, China was the true El Dorado for brands including Volkswagen, Mercedes-Benz and BMW, accounting for roughly 40% of these manufacturers' global sales between 2019 and 2021.

The picture is now markedly different. In the first half of the year, Volkswagen's sales in China fell by 26%, while Mercedes-Benz, Audi and BMW recorded declines of 28%, 19% and 20% respectively, according to Yicai. The pressure extends beyond European brands: Toyota's sales fell 17%, Nissan's by 15% and Honda's by 35%.

The balance of power has shifted

The move towards electric cars has been one of the drivers behind this change, according to Wang Qian, deputy general manager of Chinese car manufacturer Dongfeng.

For decades, foreign manufacturers led the Chinese market because of their technological advantage, while local partners handled manufacturing and distribution. Electrification has changed that balance.

Rather than following European, American and Japanese manufacturers, Chinese brands have taken the technological lead in electric cars. They have benefited from a more established battery supply chain, competitive production costs and faster development cycles.

Manufacturers such as BYD, Geely, Li Auto, Xiaomi, Aito and Xpeng now compete not only on price, but also on technology, range, software and driver-assistance systems - areas in which foreign manufacturers were considered the benchmark only a few years ago.

A new strategy for the Chinese market

To regain competitiveness, foreign manufacturers are moving away from selling global models adapted for China and are investing in cars developed from the outset for that market.

Volkswagen is one such example with its ID. UNYX range, while Audi has even created a China-only brand - AUDI, without the iconic four rings - designed specifically to meet Chinese consumers' expectations.

Chinese manufacturers expand in Europe

This preference for Chinese cars is no longer confined to the domestic market. In Europe, for instance, Chinese manufacturers have been increasing their presence significantly.

In the first half of this year, Chinese manufacturers' share of the European market reached 10.9%, while the sales podium for plug-in hybrids is already held by Chinese manufacturers.