Chinese automakers must continue to innovate and adapt to the market changes to survive in the highly competitive industry.
Make-or-break moment
New energy vehicle (NEV) adoption has substantially increased in China. However, the surge of new models has initiated an intense price war in the local market.
Chinese automakers’ ambition to expand overseas has also been challenging due to major regulatory scrutiny. Other markets, including US and Europe, are becoming more and more concerned about the downpour of Chinese EVs in their domestic markets. Some countries also require local production, including India.
All that said, the Chinese automakers are now witnessing a survival of the fittest in their already cutthroat home turf.
“The speed of elimination will only pick up.”
Feng Xingya, GAC President told reporters on the sidelines of the Beijing Auto Show in late April 2024 (translated by CNBC from Mandarin to English)
GAC’s EV push
Considering the above-mentioned status quo, GAC launched price cuts a week before the May 1 Labor Day holiday in China.
GAC President Feng noted that the brand’s Q1 2024 sales decline was primarily due to the intensifying price war in the Chinese market. As a result, its operating revenue dropped year-on-year for the first time since 2020.
Moreover, the GAC President shared that the company is expanding its partnership with various tech companies like Huawei while also working on internal R&D. For context, GAC is a joint venture of Japanese automakers Honda and Toyota in China. It offers an electric car unit, Aion.
“In the short term, if your product isn’t good, then consumers won’t buy it. You need to use the best tech and the best products to satisfy consumer needs. In the long term, you must have a core competitive edge.”
Feng Xingya, GAC President
Chinese automakers are also attempting to expand their business in the global market amid waning domestic sales as of March compared to December, according to CPCA data.
According to GAC Internationa General Manager Wei Haigang, the company set a target last year of selling 1 million new energy vehicles overseas. However, it has only exported approximately 50,000 units in 2023.
However, the company executive explained that the goal is to increase the 2023 figure to at least 100,000 units this year and 500,000 units by 2030. Its expansion push starts in the Middle East and Mexico.
“We are now going all out to speed up our overseas expansion.”
GAC Internationa General Manager Wei Haigang (translated by CNBC from Mandarin to English)
China’s surging exports since last year prompted the European Union and the US to launch investigations into Chinese-made EVs.
GAC also aims to localize production to support its expansion efforts. General Manager Wei said that the company launched a Malaysian factory in April. It further plans to open a new factory in Thailand in June. It also eyes Egypt, Brazil and Turkey for local production.
The Chinese automaker plans to launch eight subsidiaries in 2024 alone, including in Amsterdam. However, it has no plans to penetrate the US market yet.
Continuous innovations
The 2024 Beijing Auto Show demonstrated the continuous innovations of both Chinese and foreign automakers in terms of electric vehicle technology, including driver-assist software.
Chinese customers tend to prefer electric vehicles with high-tech features unlike American buyers, AlixPartners’ Greater China business co-leader Stephen Dyer said, citing the consulting firm’s survey.
However, Dyer also asserted that Chinese electric vehicle startups are “so aggressive” to sell a car with new tech even if the software still has issues.
“They know they can use over-the-air updates to rapidly fix bugs or add features as needed.”
Stephen Dyer, AlixPartners’ Greater China business co-leader
It is just among the benefits of technologies like OTA software update. It allows automakers to quickly fix software issues as soon as they discover them
All that said, Chinese automakers must immediately adapt to avoid losing out on the electric vehicle boom amid the challenging market situations overseas and at home.
