China’s automobile exports rank first in the world. What impact will this have?

In the first quarter of 2023, China’s automotive exports surpassed Japan, securing the world’s top spot for the first time. This remarkable achievement marks a significant milestone for China’s automotive manufacturing industry and a giant leap towards expanding its influence on the global stage.

Annual sales of car brands

Looking back just three years ago, China’s automotive sector struggled under the dominance of joint venture brands, constrained by pricing limitations. Vehicles were often confined to the sub-200,000 RMB price range, striving to appeal to budget-conscious consumers. However, in a mere span of three years, China’s automotive industry landscape has undergone a remarkable transformation. Indigenous automotive brands have soared both in terms of quantity and value. BYD, for instance, surpassed Volkswagen to become China’s leading car brand by sales volume, while Li Auto made strides to rival established BBA (BMW, Benz, Audi) brands. Furthermore, new entrants like K-Cars secured a stable foothold in the 300,000 RMB and above market segment.

Monthly export trend of Chinese automobile brands

BYD’s launch of the premium YOUNG brand introduced vehicles that reached the million RMB price tier, while NIO entered the 500,000 RMB luxury car market. The resounding success of China’s automotive sector is evident and indisputable.

The heyday of joint venture brands is now a thing of the past. Even on the global stage, China’s automotive sector continues to achieve unprecedented successes, maintaining robust growth momentum.

In January 2023, China exported 301,000 vehicles, marking a 30.1% year-on-year increase. For the months of January and February combined, exports reached 680,000 vehicles, reflecting a 43.2% growth. In the first three months, vehicle exports totaled 1.07 million units, an impressive 54% surge. Notably, March saw an explosive increase of 94.47% with 387,000 vehicles exported.

China's top 10 auto exporters

With this ongoing growth trajectory, exceeding 4 million vehicle exports by the end of 2023 seems a highly achievable target.

Data released by the China Association of Automobile Manufacturers revealed the top ten countries for Chinese automotive exports in terms of value during the first quarter. The list included Russia, the United States, Mexico, the United Kingdom, Belgium, Japan, Australia, Germany, the United Arab Emirates, and South Korea.

Chinese car Russia ranking

The presence of China’s automotive brands in Russia speaks volumes; not only do they dominate in terms of volume but also in pricing. Brands like Chery, with its Star Jet model, are sold at a starting price of 3.0699 million rubles in Russia (equivalent to 267,000 RMB), compared to its domestic starting price of 193,900 RMB. Other notable brands include Great Wall and Geely, contributing to China’s comprehensive dominance of nearly 50% market share in Russia.

Interestingly, the second-place ranking of the United States in China’s export destinations raises questions. What models are predominantly exported to the US? A closer look reveals that it is not primarily indigenous brands being exported, but rather joint venture brands such as Changan-Ford Focus, SAIC-GM Buick Encore, SAIC-Cadillac CT6, GAC Honda Fit, and Geely-owned Volvo.

China's automobile export market share ranking

This choice reflects cost-effectiveness, where importing these vehicles from China yields savings of up to $500 million annually compared to importing from Mexico. China’s mature automotive industry allows for greater local production, with fully developed supply chains and lower manufacturing costs.

Unexpectedly, Mexico ranks third in terms of value despite taking the lead in terms of import volume. In 2022, Mexico imported 254,000 vehicles from China, constituting a quarter of its total imports. SAIC Motor, Changan, Beijing Auto, and Chery stand out as the key contributors, with SAIC’s MG lineup emerging as the star performer with a staggering 200% increase in sales and 48,000 units exported to Mexico.

China's national exports in 2022(1)

The export success to countries like the US, Japan, and South Korea can be attributed to Shanghai-manufactured Tesla models. These vehicles not only cater to the domestic Chinese market but also find their way to countries like Australia, New Zealand, Singapore, and Canada. In the race for the global premium electric vehicle market, China primarily relies on Tesla’s reputation, while SAIC Motor’s MG brand captures the mid-to-low-end electric vehicle segment.

By July 2022, SAIC Motor’s MG celebrated the milestone of exporting over a million vehicles overseas, a testament to its position as the first Chinese automaker to achieve such success. MG’s performance rivals brands like BMW’s Rolls-Royce and Mini, Geely’s Volvo and Lotus, as well as Tata Motors’ Jaguar and Land Rover, contributing significantly to SAIC’s swift expansion into Western markets.

MG production workshop

From the insights provided, it is clear that China’s automotive export strategy revolves around diversification, multiple brands, and varied approaches. Local production combined with rebranding for exports characterizes the lowest level of engagement. On the other hand, acquisitions of overseas brands pave the way for quick entry into Western markets, as exemplified by SAIC’s MG, Geely’s Volvo, Lotus, and others. Lastly, the steady growth of autonomous brands like Chery, patiently building their presence, represents the third approach.

Jaguar and Land Rover8

In summary, China’s automotive industry has established a diverse, multi-brand, and multi-matrix structure. While challenges remain in terms of international brand reputation, the achievements thus far are commendable. Despite the rapid rise of China and South Korea in the global automotive market, traditional players such as Japan and Germany are also witnessing an impact on their market shares. The rise of China and South Korea’s automotive industries has left a lasting impression, changing the dynamics of the global automotive landscape.

Automotive workshop

The days of Volkswagen and Toyota’s unchallenged million-unit sales may be numbered.

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