New data shows that foreign car manufacturers are losing market share in China at a faster pace. Domestic brands have already captured the majority of the market.
According to a report by The Wall Street Journal, the China Passenger Car Association announced on Monday (July 8) that in the first six months of this year, foreign brands such as Tesla and Volkswagen accounted for 43% of the Chinese passenger car market, down from 50.5% in the same period last year.
Furthermore, based on the latest data from the Association, in the period from January to May, Tesla slipped to third place in the new energy vehicle category, trailing behind Chinese brands BYD and Geely.
China is the world’s largest automobile market, rapidly electrifying with the help of subsidies from the Chinese government. Local electric vehicle manufacturers have captured a significant portion of the market share.
In October last year, Mitsubishi Motors from Japan announced the cessation of car production in its Chinese joint venture, transferring its stakes to its local partner. As Mitsubishi exited the Chinese market, a price war in the Chinese automobile market was escalating.
In July 2022, Stellantis NV, based in the Netherlands, announced the closure of its only Jeep manufacturing plant in mainland China, citing increasing interference by local Chinese government officials in the country’s automotive market.
Several foreign car manufacturers are tightening their belts to adapt to declining sales. Tesla, in an internal memo to employees in April, stated that the company would be implementing a global workforce reduction of over 10%, impacting its employees in China as well.
Hyundai’s sales in China have been declining, with the company selling its factory in Chongqing to a local firm in January this year. In June, Nissan announced the cessation of production at its plant in Changzhou as part of efforts to streamline operations. Honda is also seeking to reduce the workforce at one of its joint ventures in China.
In recent years, as China’s economic growth engine – real estate – has cooled down, authorities have urgently shifted towards supporting manufacturing industries like electric vehicles to find an alternative engine and revitalize the economy. However, this shift has led to overcapacity and intense price wars, directly impacting corporate profits.
Toyota’s data released on June 27 showed a significant 21.7% drop in production in China to 111,014 vehicles in May. The company attributed this decline to the fierce price competition with local Chinese brands.
According to reports from NHK, Japan’s top five car manufacturers all witnessed lower sales in China in May compared to the same period last year. Toyota’s sales were 140,377 vehicles, down 13.6% year-on-year; Honda sold 66,202 vehicles, a decrease of 34.6%. Additionally, Nissan saw a 2.8% drop in sales in China, Mazda declined by 20%, and Subaru plummeted by 76.4%.