The Unavoidable Demise Of The Western Car Industry In China

The unavoidable demise of the western car industry in China is not on the forefront of managers’ minds, and neither on those of journalistic or financial followers of the industry. And that is strange. For many conglomerates in the industry, China is their biggest and most profitable market. Losing it will have huge consequences for those companies.

The first to enter China was Volkswagen Group in 1978, followed by nearly all other Western (and I include Japanese in this category) car companies. Their products were better, more expensive, and, consequentially, more prestigious than the products of local companies. They fueled the meteoric growth of the Chinese car market to the largest in the world. It became about as large as the USA and EU markets combined.

Besides liking a car with prestige, the Chinese are as chauvinistic as German, French, Italian, and US citizens, but not as chauvinistic as the Japanese. In all of these markets, the domestic brands dominate the market. The exception is the lower end of the car market in the USA, which the dwindling three from Detroit have ceded to the Japanese. Don’t ever think the Chinese were proud that their carmakers could not compete with the foreigners from oversea. But it was just a fact of life.

Now we have a new reality. The domestic new energy vehicle (the Chinese name for plug-in vehicle) makers are out-engineering those long-nosed people from far away. Not only are the volume brands of VW, Nissan, Ford, Toyota, and GM, etc. losing market share fast, but Mercedes, BMW, and other premium brands are also unable to compete with domestic brands on quality, design, and price. Even Tesla, for a few years the leading new energy vehicle brand in China, is loosing a price war with BYD. The latest report of our specialist José Pontes tells us the current state of the Chinese market.

How attractive will a cheaper but much better domestic product be in competition with inferior, expensive products from those invaders of the local economy? Yep, I am being sarcastic.

There will be some brand loyalty. Some customers need time to realize that Western models are not the best buy and plug-in electric vehicles are all the rage in China. Especially those with a big battery and a range extender — aka series hybrid vehicles. Western carmakers are still the experts in internal combustion technology. Perhaps they can retain some market share with great EREV designs.

Are EREVs the future, or just a intermediate, transitional technology until the charging/swapping infrastructure makes full electric vehicles the better choice? My guess is the latter.

While having wild theories about the Chinese market, I really don’t know anything about it, besides some basic facts. So, who can tell me what the Western market share will be when we enter the next decade? Still above 10%? (It was over 50% not that long ago.) Dropped down to 5%? Or will Western carmakers find a way to make the best BEV in the world and recover their previous market share?

I will read your comments with the utmost interest.