China and the Auto Market Race
“China is determined to dominate the future of the auto market,” President Biden said in a February statement.
Once known as the “world’s factory” for low-cost consumer electronic devices, appliances, and Christmas toys, China’s current manufacturing efforts focus on more engineered products like passenger vehicles, which are highly competitive and subject to much more rigorous standards and testing.
According to the China Passenger Car Association, China exported 2.5 million vehicles in 2023, triple its exports since 2020. China is on pace to surpass Germany as the second-largest passenger car exporter by the end of this year.
Several factors are contributing to China’s growing market share with passenger car exports:
- Prices: At around $13,700, the average price of an exported China-made passenger vehicle was about one-third that of a German car in 2021 and about 30% less expensive than a Japanese-make, per UN Comtrade
- Car Quality: New vehicle quality in China improved in 2023 compared with last year as the number of design-related problems decreased, per J.D. Power
- EV Supply Chain: 90% of the EV battery supply chain relies on China, per Morgan Stanley. As a result, European brands like the Dacia Spring and BMW iX3 are produced exclusively in China.
- Automation: New auto plants in China have the highest level of robot usage in the world, per Bloomberg
China’s growing dominance in the auto market poses a threat to American automakers – even without selling directly to U.S. consumers. The danger extends beyond reducing American automaker export volumes – China is setting a new standard for pricing and production that will reduce margins and the feasibility of U.S. automotive business models.
In November, Elon Musk said, “There’s a lot of people who are out there who think that the top 10 car companies are going to be Tesla followed by nine Chinese car companies. I think they might not be wrong.”
