In 2003 I worked for Automotive News in China. Late that year, my then-colleague Jim Treece flew over from Japan. We interviewed numerous foreign and Chinese OEMs, including J.M. Noh, president of Beijing Hyundai, a joint venture between Hyundai and BAIC. We talked to him at the site of the JV’s new plant, under construction near Capital Airport (the only airport in BJ at the time). Hyundai figured it would sell some 110,000 in China in 2004 and 500,000 annually by 2008
“We’re expanding everywhere,” Noh told us.
.Hyundai wasn’t alone in its confidence about the opportunity China represented for foreign automakers, who had invested some $12 billion in China since 1994. More than half of that was committed in the 18 months from the beginning of 2002 to June 2003.
There was some debate about whether or not foreign automakers were jumping the gun and would face overcapacity problems. But foreign auto executives pooh-poohed that thought. Ron Tyack, president of Changan Ford, told us the market would continue to grow and “prudent” companies would add capacity over time, not all at once. Phil Murtaugh, president of GM China, told us “I don’t see anyone investing in capacity they won’t be selling in a two-to-three-year time frame.”
It’s easy to see why foreign automakers were so high on China’s market back in the early 2000s. Sales in the first eleven months of 2003 rose 68% to 1.8 million units. I wrote about a price war and eroding margins and the foreign brands’ continuing enthusiasm for the market.
Paul Alcala, president of Beijing Jeep, mused that Chinese automakers could resort to exports if overcapacity became a problem. “Why would we not see, in the next five years, Chinese cars going everywhere in the world?” he told us. “By then, China’s going to be extremely competitive on prices. Perceived quality could be an issue, but real quality will not be an issue.”
So where are we now? Hyundai sold 380,000 units in China in 2008. By 2023, sales had shrunk to just over 245,000 units. General Motors’ market share in China has been steadily shrinking in recent months as have its sales. In the second quarter of this year, sales plunged 29% compared to the same quarter in 2023. GM’s own brands saw the steepest declines. SGMW sales fell by only 12%.
Meanwhile, Chinese brands took more than half the market in 2023. One — BYD — snared 35.5%.
But Alcala’s question was prescient. Exports have become an outlet for overcapacity, for Chinese automakers. China is now the top auto exporter in the world, overtaking Japan in 2023. And while not all of those exports are electric vehicles, a growing number are. Southeast Asia has turned out to be a ripe market for Chinese EVs as have some countries in Latin America. (I wrote a story for InsideEVs on that topic; I’ll create a hyperlink when it is published.)
Could foreign automakers have prevented China’s rise? Maybe. But that boat has sailed. Smart automakers are investing in Chinese automakers to gain access to their connected car technology and their manufacturing tricks. It is way too late for Volkswagen to save its once-dominant position in China but its partnership with Xpeng may help it turn out some neat EVs. (It will be interesting to see what VW learns/gets from its investment in Rivian, too.) The Stellantis/Leapmotor partnership may help Stellantis with its EV problem. Alas VW and Stellantis have problems that investments in Chinese automakers will do little to alleviate.
The question is, will Chinese automakers take over the world? I think not. They’ve already taken over the China market. And they are going to grab most of the EV market in many countries. Foreign automakers aren’t lost, though. If they get their sh** together and take a page from Chinese EV makers, they may make a mild comeback.
But 100% tariffs on Chinese EV imports and blocking any connected car technology with even remote ties to China isn’t going to help unless U.S. automakers really use the time it buys them to aggressively develop EVs that can compete with Chinese brands, and that will be tough. Maybe the Chinese companies – and here I’m talking suppliers, not just OEs– will help them. The way the connected vehicle rule is worded, that could be difficult. That’s a topic for another blog, however.