Chinese automakers are starving. So far, they have leveraged the giant local market to drive their accelerated growth. With 25 to 28 million vehicles per year, China is not only the largest automotive market in the world, but also a major source of volume and growth. A 1% market share means 250,000 to 280,000 units per year, which is not bad compared to the figures recorded in Europe and the United States.
The first phase of the Made in China expansion is complete. Now is the time to chase global markets, far from internal borders. Chinese cars have become more attractive, efficient and meet higher quality and safety standards. Now they are ready to take on the world.
They have many things in their favour. They can count on the strong support of the Chinese government. At the same time, the large domestic market allows them to maintain sufficient production levels to reduce costs. Moreover, they are ahead of their Western rivals in electrification at all levels and in all segments.
Europe in sight
Of the 1.1 million cars produced in China last year and sold outside the country, 355,000 units were sold in Latin America, the biggest market beyond the Great Wall. Europe, in second place, accounted for 22% of overseas sales, followed by the Middle East, where 156,000 units were registered. Developing economies accounted for 58% of China’s auto exports in 2021.
However, China knows that its global dominance cannot be achieved without a better presence in developed markets, namely Europe, the United States, Japan and Korea. These last two countries have rather protected markets. The United States still has geopolitical and trade issues with China. Thus, Europe becomes the next target for Chinese cars.
Who will suffer?
The arrival of more and more Chinese car offers in Europe may please consumers, but it will become a problem for some local manufacturers. Automakers that offer fewer products and are still lagging behind in the electrification race are the most exposed to the arrival of the Chinese.
Fiat, for example, is quite vulnerable. It is heavily dependent on Italy (47% of car registrations took place in Italy between January and October 2022). It has a very small product line (only 4 models, excluding the two vans). It offers a single electric car, the 500e, and an SUV, the 500X.
Ford is another potential victim. The brand is moving out of the B segment, which is no longer as popular as before but which remains an important source of volume. The Focus will likely remain the only car available after the Mondeo is retired. The Puma and Kuga are popular SUVs, but neither is fully electrified.
There are also cases to consider among Japanese brands. Mitsubishi, for example, currently has two models available in Europe and neither is fully electric. The brand only sold 43,000 units in the first 10 months of this year. Even in the case of Honda, the offer is rather limited with only five models. And Honda’s only electric vehicle, the Honda e, is struggling to survive.
What do these brands have in common? They are all located in the consumer segment, one of the most competitive and least profitable in Europe. They are struggling to maintain their market share due to limited supply. Therefore, they should be among the first to feel the impact of the Chinese invasion.
The author of the article, Felipe Munoz, is an automotive industry specialist at JATO Dynamics.
Chinese automakers are starving. So far, they have leveraged the giant local market to drive their accelerated growth. With 25 to 28 million vehicles per year, China is not only the largest automotive market in the world, but also a major source of volume and growth. A 1% market share means 250,000 to 280,000 units per year, which is not bad compared to the figures recorded in Europe and the United States.
The first phase of the Made in China expansion is complete. Now is the time to chase global markets, far from internal borders. Chinese cars have become more attractive, efficient and meet higher quality and safety standards. Now they are ready to take on the world.
They have many things in their favour. They can count on the strong support of the Chinese government. At the same time, the large domestic market allows them to maintain sufficient production levels to reduce costs. Moreover, they are ahead of their Western rivals in electrification at all levels and in all segments.
Europe in sight
Of the 1.1 million cars produced in China last year and sold outside the country, 355,000 units were sold in Latin America, the biggest market beyond the Great Wall. Europe, in second place, accounted for 22% of overseas sales, followed by the Middle East, where 156,000 units were registered. Developing economies accounted for 58% of China’s auto exports in 2021.
However, China knows that its global dominance cannot be achieved without a better presence in developed markets, namely Europe, the United States, Japan and Korea. These last two countries have rather protected markets. The United States still has geopolitical and trade issues with China. Thus, Europe becomes the next target for Chinese cars.
Who will suffer?
The arrival of more and more Chinese car offers in Europe may please consumers, but it will become a problem for some local manufacturers. Automakers that offer fewer products and are still lagging behind in the electrification race are the most exposed to the arrival of the Chinese.
Fiat, for example, is quite vulnerable. It is heavily dependent on Italy (47% of car registrations took place in Italy between January and October 2022). It has a very small product line (only 4 models, excluding the two vans). It offers a single electric car, the 500e, and an SUV, the 500X.
Ford is another potential victim. The brand is moving out of the B segment, which is no longer as popular as before but which remains an important source of volume. The Focus will likely remain the only car available after the Mondeo is retired. The Puma and Kuga are popular SUVs, but neither is fully electrified.
There are also cases to consider among Japanese brands. Mitsubishi, for example, currently has two models available in Europe and neither is fully electric. The brand only sold 43,000 units in the first 10 months of this year. Even in the case of Honda, the offer is rather limited with only five models. And Honda’s only electric vehicle, the Honda e, is struggling to survive.
What do these brands have in common? They are all located in the consumer segment, one of the most competitive and least profitable in Europe. They are struggling to maintain their market share due to limited supply. Therefore, they should be among the first to feel the impact of the Chinese invasion.
The author of the article, Felipe Munoz, is an automotive industry specialist at JATO Dynamics.