Cutthroat Competition in China’s Car Market: Who Will Prevail?

Recent semi-annual reports from listed automakers highlight three main themes: price wars, overseas expansion, and intelligent driving [para. 1].

SAIC Motor Corp. faces stiff competition in the domestic market, particularly from new energy vehicle (NEV) maker BYD. In July 2024, BYD overtook SAIC Motor by selling 91,000 more vehicles. By August, this lead expanded to 113,000 units [para. 3]. The China Passenger Car Association (CPCA) noted that in July 2024, NEV sales surpassed gasoline vehicle sales, reaching a 51.1% retail penetration rate [para. 4].

SAIC Volkswagen and SAIC General Motors, both focused on gasoline vehicles, lag in adapting to market changes. SAIC Motor's total sales dropped 11.8% year-over-year in the first half of 2024, falling to 1.827 million units [para. 5]. In contrast, BYD sold 1.612 million vehicles, a 28.4% increase, with revenue up 15.76% year-over-year to ¥301.127 billion [para. 6].

Other joint venture-heavy companies, Dongfeng Motor Group Co. and Guangzhou Automobile Group Co., also performed poorly. Dongfeng's net profit fell by 46.1% year-over-year, while Guangzhou Auto's sales declined by 25.79% [para. 7]. The domestic automobile market faces a severe imbalance between supply and demand, with overcapacity in gasoline vehicle production and homogenization in the NEV sector [para. 12].

New energy manufacturers like BYD are strengthening their market dominance through aggressive pricing strategies. BYD's “King of Attrition” nickname reflects its frequent price cuts. Its average vehicle price dropped from 150,000 yuan in 2022 to around 130,000 yuan in 2024 [para. 10]. XPeng Motors chairman He Xiaopeng expects the "bloody competition" to last until at least 2026 or 2027 [para. 13].

Despite rising market penetration of NEVs, NEV startups struggle to maintain profitability. Nio, Xpeng Motors, and Li Auto all face challenges. Nio achieved high sales but also had the largest losses among its peers [para. 22]. Traditional luxury brands like BMW, Benz, and Audi also face challenges, unable to maintain market share despite hefty discounts [para. 27].

To combat weak domestic demand, Chinese automakers push for overseas expansion. BYD and Chery lead in exports. China exported 2.793 million vehicles in the first half of 2024, a 30.5% year-over-year increase [para. 28]. However, overseas markets are fraught with challenges. The European Union and Canada plan to impose significant tariffs on Chinese-made electric vehicles, pushing manufacturers to establish overseas factories [para. 30]. Despite this, BYD's revenue from overseas business grew by 39.65% year-over-year in the first half of 2024 [para. 28].

Autonomous driving remains a key focus. Tesla's Full Self-Driving (FSD) system aims to roll out in China and Europe by early 2025, pending regulatory approvals. This could mark a significant shift in the competitive landscape [para. 33]. Many companies, including XPeng and Li Auto, are investing heavily in end-to-end autonomous driving architectures [para. 36].

Meanwhile, Huawei’s intelligent driving system continues to advance, offering robust solutions aimed at safety and efficiency [para. 38]. Companies like BYD utilize dual-track strategies that include both independent R&D and collaborative approaches with firms like Huawei [para. 42].

In summary, Chinese automakers are adjusting to a rapidly changing environment characterized by intense competition, declining traditional vehicle sales, and significant advancements in NEV and intelligent driving technologies. Overseas expansion remains a critical strategy, albeit fraught with new regulatory challenges. The industry anticipates a transformative period ahead, driven by innovations in autonomous driving [para. 1][para. 12][33[para. 42]].