By hannover-web.com Over the past 75 years, since the founding of the People’s Republic of China, the automotive industry has transformed from humble beginnings into a powerhouse on the global stage. Initially, this evolution involved trading market access for technology, but now Chinese manufacturers are exporting their technologies around the world. This remarkable shift has driven rapid growth and fundamentally changed the competitive landscape.
The automotive market itself is highly dynamic, characterized by swift changes and a process reminiscent of natural selection. During this time, the balance of power between joint venture brands and domestic manufacturers has seen significant fluctuations. Today, China stands at the forefront of the electric vehicle (EV) sector, having secured the top spot for several consecutive years and emerging as a crucial player in the transformation of the global automotive industry.
When the new China began, the automotive sector was virtually non-existent. The establishment of the first automobile manufacturing plant in 1953, with assistance from the Soviet Union, marked the beginning. The launch of the first domestically produced vehicle, a Liberation truck, on July 13, 1956, was a major milestone, signaling the end of an era when China was unable to build cars.
In the ensuing years, domestically manufactured models like Dongfeng and Hongqi began rolling off assembly lines. However, significant challenges loomed due to a weak industrial base and an underdeveloped supply chain, resulting in inconsistent product quality and difficulties in mass production. The situation started to improve with China’s economic reforms in the late 1970s.
In 1978, the government launched initiatives to introduce car assembly lines in Shanghai and sought foreign partnerships to enhance production capabilities. That same year, then-General Motors Chairman James McDonald introduced the concept of joint ventures in China. After lengthy negotiations, Beijing Jeep was established in 1984, becoming the first Sino-American joint venture in the automotive space. It was during this period that a government official articulated the idea of trading market access for technology, highlighting the demand for improved products.
In 1994, China unveiled its first automotive industry policy, prioritizing passenger cars and encouraging consumption, thus allowing private ownership for the first time. This framework solidified the exchange of market space for technology advancements, leading to a wave of joint ventures. This influx of foreign investment brought renowned international component suppliers into the market, laying the groundwork for a comprehensive automotive supply chain.
As joint ventures proliferated, domestic companies like Geely, Chery, and Great Wall Motors began emerging in the early 21st century, making significant contributions to research and development. Following its accession to the WTO, Chinese brands faced real competition without tariff protections, yet these companies gradually forged their paths in the market.
Entering the 21st century, cars transitioned from luxury items to essential consumer goods, heralding a golden age for the automobile market characterized by explosive sales growth. Between 2001 and 2008, average annual output and sales increased by over a million units each year. By 2009, China overtook the U.S. to become the world’s largest new car market, a position it has maintained since, with production and sales exceeding 30 million units by 2023.
During the early stages, joint ventures were dominant in the market, but as domestic players gained strength, their market share steadily increased, albeit struggling to surpass the 40% threshold for years. A downturn began in 2018, leading to a rift among domestic manufacturers. Several brands that had flourished during previous boom periods, such as FAW Xiali and Zotye, found themselves marginalized in the fierce competition.
However, the electric vehicle boom has dramatically altered the competitive landscape. In 2022, domestic brands surpassed joint ventures in overall market share, now accounting for over 60%. Recent data indicates that domestic passenger vehicles held a substantial market share of 63.2% in the first eight months of this year.
The rise of electric vehicles has allowed domestic manufacturers to leapfrog their competitors, with EV sales soaring from fewer than 10,000 units in 2011 to over three million by 2021. As of 2023, sales figures are approaching 10 million units, solidifying China’s position as the world’s largest market for electric vehicles.
Additionally, the number of newcomers in the automotive sector has surged, particularly among EV startups, creating a buzzing environment. While many new entrants have struggled against high barriers to entry, companies like NIO, Xpeng, and Li Auto have successfully positioned themselves as leaders in the domestic market.
Currently, nearly all automakers are investing in the electric vehicle sector, with BYD emerging as a significant player. Brands like Changan, GAC, Chery, and Geely are also witnessing steady growth in EV sales, while joint ventures lag behind in electrification and continue to depend on gasoline vehicles, leading to a declining market share.
The rapid advancement of technology has been a key driver behind the quick expansion of China’s EV sector, particularly in battery technology. Companies like CATL have maintained their leadership in the global battery market since 2017, while BYD’s market share continues to ascend. China has built a competitive edge in the EV supply chain, becoming essential to foreign manufacturers. Once-dominant foreign brands are increasingly looking to Chinese firms for expertise, with collaborations between companies like Toyota and BYD, or Volkswagen and Xpeng, demonstrating a significant shift towards reliance on Chinese technological solutions. This marks the end of the “market for technology” model and heralds a new phase where Chinese manufacturers are leading the way in technology exports.
