2022 Chinese Auto Market general trends

Chinese Auto Market general trends

In 2022, the Chinese Auto Market recorded another year of positive growth after 3 consecutive years of decline since 2017. Although growth in 2022 was limited, it’s still a remarkable achievement considering the microchip crisis, COVID crisis and higher battery costs in the year. However, the Chinese Auto Market is hugely complicated with more than 100 brands, so not every OEM was growing in 2022 and the competition was so fierce that some players even had to leave the market.

In this article, we will analysis the Chinese Auto Market based on the data released by China Passenger Car Association (CPCA) and Association of Automobile Manufacturers (CAAM) in the last 2 weeks and try to explain some general trends in 2022. Through this article we will also categorise the OEMs in the Chinese Auto market and point out some obvious winners & losers in 2022.

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New car sales (in 10K units) and growth (in %), source: CAAM

First of all, when we look at the data from CAAM, China produced 27.02 million vehicles (including passenger and commercial vehicles) and sold 26.86 million vehicles in 2022, up 3.4% and 2.1% respectively. The growth today is nowhere near the double digital growth in the early 21st century, and does show that today the Chinese Auto Market is saturated. Even though the growth is limited it’s important to note that last year showed a positive growth trend since the decline in 2017, when the market peaked around 28.9 million vehicles. From a global perspective, China continues to be the largest Auto market in the world and will most likely keep that position going forward.

On the New Energy Vehicle side, China has produced 7.06 million vehicles and sold 6.89 million vehicles, up 96.9% and 93.4% respectively. Meaning every 4th vehicle sold now in China is a New Energy Vehicle. If we break down the 7.06 million vehicles produced, 5.47 million are Battery Electric Vehicles, while 1.59 million are Plug in Hybrids and a mere 4 thousand fuel cell vehicles. The growth trend in the chart below shows the exponential growth in the past 10 years in the New Energy Vehicle market.

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New Energy Vehicle sales (in 10K units) and growth (in %), source: CAAM

On the export side, China has exported 3.11 million vehicles in 2022, up 54.4%, helped by the lack of vehicle supply in the global market. This also means China has surpassed Germany to become the second largest exporter after Japan. And if the growth trend continues in 2023, China will also likely surpass Japan to become the largest auto exporter in the world. As the Chinese Auto market is saturated, the overseas market will become more and more important for Chinese OEMs going forward.

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China export volume (in 10K units) and growth (in %), source: CAAM

When we look at the brands according to its origins, Chinese brands have increased their market share and is now very close to 50% market share. Followed by German brands with 19.5% and Japanese brands with 17.8% market share. The rest of the market is shared by American brands at 9.4%, Korean brands at 1.7% and Non-German European brands at 1.6%.

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Percentage of market share according to brand origins: China, Germany, Japan, USA, Korea, Europe (excl. Germany). Source: CAAM

Before, we talk about the specific brands, we need to explain a little bit about the Chinese Auto Market and the 3 types of manufacturers in China today. Historically, China requires foreign OEMs to set up joint ventures if they wish to produce locally, and the foreign ownership is capped at 50%. Of course, if you don’t set up manufacturing in China, foreign OEMs can still import into the market, but this faces import tax and transportation cost, which makes the price much less competitive. Which is the case for some luxury brands like Maserati or high-end models of the premium brands like the BMW 7 series in China.

Hence in the Chinese market, the first type of manufacturers are the joint ventures since the 1980s, such as FAW Volkswagen, SAIC Volkswagen, SAIC General Motors, GAC Toyota and so on. In the past decade these OEMs and its products were very successful in the Chinese market, especially in the premium segment, but has lost some market share in recent years.

Recently the 50% foreign ownership cap has been abandoned and as a result Tesla became the first foreign OEM to own 100% of Tesla China. Also in Feb 2022, BMW became the first foreign OEM to increase their share of the joint venture with Brilliance Auto to 75%, a move more foreign OEMs also hope for.

In 2022, the joint venture manufacturers had mixed results, wholesale figures of FAW Volkswagen reached 1.8 million, flat vs 2021; SAIC Volkswagen reached 1.32 million, up 6.3%; GAC Toyota reached 1 million, up 21.4%; While Dongfeng Nissan dropped to 0.92 million, down 14.8%; GAC Honda dropped to 0.74 million, down 5%.

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Top 15 OEMs by NCS in 2022: BYD, FAW VW, Geely, Changan, SAIC VW, SAIC GM, Cherry, SAIC GM Wuling, GAC Toyota, Dongfeng Nissan, Great Wall, FAW Toyota, SAIC, GAC Honda, Tesla. Source: CPCA.

The second type of manufacturers are the local OEMs represented by SAIC, BYD, Geely, Changan, Cherry, Great Wall and so on. Traditionally these brands have been competing mainly in the mass market, but they have also established premium brands in the recent years, such as Geely’s Lynk & Co, Great Wall’s WEY, and most recently BYD’s YangWang, all trying to gain market share in the premium segment. Another trend is most of these brands have been expanding their market share outside of China and has already gained a footprint in developing markets like Mexico, Chile, Russia and Saudi Arabia, while also entering developed markets like Europe recently. As an example, Cherry has exported 452 thousand vehicles in 2022, up 67.7%.

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Top 10 Chinese export OEMs (in 10K units): SAIC, Cherry, Tesla, Changan, Dongfeng, Geely, Great Wall, JAC,BAIC, Sinotruk. Source: CAAM
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Top 10 Chinese OEM export markets (in 10k units): Mexico, Suadi Arabia, Chile, Belgium, Australia, UK, Philippines, Russia, Malaysia, UAE. Source: CAAM

When we look at the major local manufacturers, most of them had a positive growth in 2022 except Great Wall Motors. Geely reached 1.43 million vehicle sales, up 7.9%; ChangAn reached 1.38 million, up 15.6%; Cherry reached 1.15 million, up 32.7%; Only Great Wall Motors dropped to 0.88 million, down 16%.

SAIC is in a unique position within the Chinese Auto Industry since it is the largest OEM in China, with both joint ventures with Volkswagen and General Motors while also producing under their own brands, including the famous MG marque. When counting both joint venture and own brands together, SAIC has sold more than 5.3 million vehicles worldwide in 2022, down 2.9%. Under its own brands, SAIC sold 2.78 million vehicles. Thanks to the MG marque, SAIC has exported more than 1 million vehicles, a huge increase of 45.9%. The MG4 (in China branded Mulan) has also been called the first Chinese vehicle developed for the global market and has received good reviews and order volume.

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When we look at all brands in 2022, BYD has to be the biggest winner, selling 1.86 million EVs, a staggering 155% increase, and since BYD stopped producing ICEs since April 2022, the EV sales has actually been up 207%, recapturing the World’s largest EV manufacturer title from Tesla, even though Tesla also increased sales by 46.8% to 0.71 million vehicles. BYD is also one of the very few Chinese manufacturers that has achieved its own 2022 target and beating it by 24%.

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Today BYD enjoys 28.6% of the Chinese EV market, followed by Telsa’s 10.9% market share. However, in the last few weeks we have seen Tesla starting a very aggressive price war trying to gain more market share in both the Chinese and Global market, as it claims their production capacity has not been fully utilized and maintained a higher profit margin than its competitors. In 2023, Telsa’s lower price strategy will for sure challenge BYD’s market share in China but to close a gap of 1.1 million vehicles in the Chinese market will still be a challenge. Now not only BYD will feel the pressure, but also the EV startups will face even more pressure.

Talking about the EV market we just can’t miss the EV startups, the last type of manufacturers in China. Since 2014 probably very few people know exactly how many EV startups have been founded in China, but that figure is for sure close to a hundred. And during the last 8 years many of them are no longer in the market.

Before 2022, the Chinese EV startup scene was led by NIO, Xpeng and Li Auto. In the past years these 3 brands have grown aggressively in the Chinese market. NIO through its own service and battery swapping network has gained a significant share in the premium EV segment. Li Auto has gained a leading position in the premium Plug-In Hybrid market or what they call Range Extended Vehicle. Xpeng was selling quite well thanks to the value for money for their smart EVs. Even though all 3 manufacturers have grown in 2022, they have all missed their own sales targets significantly and are still heavily loss making.

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On the other hand side, new competitors continue to challenge them in the EV market. Hozon Auto(哪托) sold 152 thousand vehicles, up 118.3%, surpassing Li Auto’s 133 thousand, NIO’s 122 thousand and Xpeng’s 120 thousand in 2022. Behind NIO, Xpeng and Li Auto there are also many startups catching up, such as Leapmotor (零跑) and AITO(问界). Leapmotor increased its sales by 147% and reached 111 thousand, which is more or less on the same level as NIO, Xpeng and Li Auto. Supported by the Huawei Ecosystem, even though AITO only delivered their first car in March 2022, they have delivered more than 10 thousand cars in merely 87 days, an industry record. By the end of 2022, AITO has already sold 75 thousand cars with only 2 models, making them a very strong competitor going forward.

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Top 15 Chinese PC OEMs by NCS in 2022: BYD, Tesla, SAIC GM Wuling, Geely, Aion, Changan, SAIC, Cherry, Hozon, Li Auto, Great Wall, NIO, Xpeng, Leapmotor, FAW VW. Source: CPCA

So we just talked about the growth stories but who are the biggest losers in 2022? It has to be the brands / OEMs that left the Chinese market.

Acura being the premium brand of Honda only sold 5 thousand cars in 2021, and even at its peak in 2017, it was only selling 16 thousand vehicles a year, so it was not really a surprise when they announced to leave the Chinese market in April 2022.

However, when Stellantis announced that they will fill bankruptcy for the GAC-FCA joint venture, it was a different story, cause FCA and GAC created this joint venture and just started local production of Jeep in 2015 only. The joint venture had its prime just 2 years afterwards with 220 thousand sales in the Chinese market thanks to the strong growth trend in the SUV market. But soon after the peak in the first half of 2018, sales dropped by a staggering 90% to around 20 thousand vehicles in 2021, due to conflict between the joint venture parties, high oil consumption, quality issues being reported as well as the not so trendy design.

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Source: Stellantis official website

Another brand that left the market in 2022, is Borgward, probably not that well known nowadays, as a legacy German brand that went bankrupted in 1961 and owned by different Chinese stakeholders since 2014.

The last brand that left the market has never really entered the market. I have also mentioned about NIUTRON in my YouTube video “Shopping mall in Mega cities”: https://linktw.in/LUhwvF . NIUTRON is not a well-known brand even within the Chinese Auto Industry, but it is founded by the co-founder of NIU Technologies, the world-leader in two-wheeled electric vehicles. Due to the lack of passenger vehicle production licenses in China, NIUTRON partnered with Dorcen (大乘 in Chinese). But as soon as Dorcen again fall into financial turbulence, NIUTRON had to gave up the plan to deliver their cars.

So that was about 2022, but which brands might leave the Chinese market in 2023? While I was writing this article, Subaru announced that they will stop production in March and stop sales in June 2023. At the same time various rumours that Skoda, Kia, Infinity, Mitsubishi and Mazda might also leave the Chinese market in 2023, shows how competitive and saturated the Chinese Auto Market is today.

So to summarise the 2022 Chinese Auto Market, BYD has to be the biggest winner, followed by Tesla. Major joint venture manufacturers continue to face strong competition from local manufacturers as well as leading EV startups. Niche players in the market as well as smaller EV startups are facing extreme pressure to survive in the market.

Hope this article helps you to better understand the Chinese Auto Market and the general trends in 2022. Here at Glopen we inspire learning, exchange and business!

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