China set to overtake Japan as the world’s top auto exporter
Fortune, 10 January 2024
There’s a new king of the global auto market. The global shift to electric cars, signified by companies like Tesla and BYD, has helped China’s carmakers potentially reach two important milestones, unseating once-dominant players and unnerving legacy automakers in Europe, Japan and the U.S.
Chinese carmakers exported 3.83 million passenger cars in 2023, a 62% increase from the year before, the China Passenger Car Association (CPCA) estimated during a press conference on Tuesday. That would mark the first time its exports have surpassed those of Japan—Japanese carmakers exported 3.5 million cars between January and November, according to Reuters. The CPCA estimated that 5.26 million vehicles in total were exported from China, compared to 4.3 million from Japan.
Chinese brands also outsold foreign carmakers inside China, taking 52% of the domestic market, up 4.6 percentage points from the year before.
Foreign carmakers struggle
China’s success is being driven by a domestic shift towards EVs. Consumers, aided by government subsidies, flocked to buying affordable hybrids and battery-powered vehicles. Yet foreign carmakers, particularly from Japan, were slow to launch new electric car models in China.
These companies are now struggling to keep their presence in the Chinese market.
On Tuesday, Volkswagen reported a 1.6% increase in its China sales, with a 23% rise in EV sales specifically. Yet that growth lagged the rest of the China auto market, which grew by 5.6% and 36% in the broader market and for electric vehicles specifically, according to the Financial Times citing data from the CPCA.
Volkswagen was once the largest car brand in China, but lost the top spot last year to BYD, the Chinese EV giant backed by Warren Buffett’s Berkshire Hathaway. The German multinational pledged 5 billion euros ($5.5 billion) to shore up its strategy in China, and also invested $700 million for a 5% stake in Xpeng, a Chinese EV startup that makes Tesla-like premium models.
U.S.-based General Motors sold just 2.1 million cars in China last year, down from a peak of over 4 million cars sold in 2017, according to Bloomberg. By comparison, GM sold 3 million cars in the U.S. in 2017, and 2.6 million cars last year. It’s the first time GM has sold more cars in the U.S. than in China since 2009.
China presents other issues for GM. The U.S. manufacturer is trying to change its supply chains to ensure all its EVs sold in the U.S. still qualify for tax credits, following a rule change meant to exclude models that rely on China-sourced parts. Last week, GM promised to make up the difference for models losing the tax credit with a $7,500 incentive.
Japanese carmakers also reported declines in sales over 2023, like Mitsubishi’s 60% drop in revenue from China between April and September. The company announced in September that it would suspend its manufacturing operations in China.