AUTONEWS

Foreign brands' market share in China falls below 25% for the first time; VW drops 26%, Honda 35%.

In 2020, they controlled over 60% of the market. The boom in Chinese electric vehicles has destroyed a business model that lasted for decades and seemed unshakable.

The market share of foreign automakers in China fell below 25% this year for the first time, driven by the rapid growth of Chinese brands—particularly in the electric vehicle segment—according to data cited by local media on Tuesday.

According to an estimate recently presented by Wang Qian, deputy general manager of the Chinese automaker Dongfeng, at an industry forum, this figure includes joint ventures—such as the one Dongfeng maintains with Japan’s Nissan. He described the situation as "unimaginable just three years ago."

He stated that the growth of China's electric vehicle market has put an end to the industry's traditional model, in which foreign manufacturers provided the technology while Chinese partners handled distribution and cost advantages in exchange for access to a massive market.

Data from the China Association of Automobile Manufacturers (CAAM) shows that foreign automakers and their joint ventures with local partners controlled over 60% of the Chinese market in 2020.

This share fell to 28% in the first half of this year, a figure slightly higher than the estimate presented by Wang.

According to the news portal Yicai, all major foreign brands recorded significant sales declines in China between January and June.

Volkswagen saw sales drop by 26%, while Japanese automakers Toyota, Nissan, and Honda recorded declines of 17%, 15%, and 35%, respectively.

The luxury segment was also affected, with Mercedes-Benz sales falling 28% year-on-year in the first half, while Audi and BMW recorded drops of 19% and 20%, respectively.

Faced with this scenario, foreign manufacturers are accelerating the localization of their operations in China, granting local teams greater autonomy in decision-making and technological development in an effort to regain competitiveness and respond more quickly to market changes.

According to Wang, the Dongfeng Nissan joint venture managed to increase sales by 192% year-on-year after raising the proportion of electric vehicles in its total sales from 7% to 30% this year, following the launch of three new electric models.

Foreign automakers losing ground in China is nothing new. In recent years, Chinese brands have gained prominence, fueled by the rapid development of electric vehicles and consumers who are increasingly receptive to domestic manufacturers.

The result of this shift is historic: in the first half of this year, the market share of foreign automakers dropped to 28% (including joint ventures with Chinese partners). To put the scale of this transformation into perspective, these brands controlled more than 60% of the Chinese auto market in 2020, according to CAAM data.

German automakers are among the hardest hit. For decades, China was a veritable El Dorado for brands like Volkswagen, Mercedes-Benz, and BMW, accounting for around 40% of these manufacturers' global sales between 2019 and 2021.

Today, the landscape is vastly different. In the first half of the year, Volkswagen's sales in China fell by 26%, while Mercedes-Benz, Audi, and BMW recorded drops of 28%, 19%, and 20%, respectively, according to the website Yicai. However, the pressure is not limited to European brands: Toyota saw sales retreat by 17%, Nissan by 15%, and Honda by 35%.

The transition to electric vehicles was one of the catalysts for this shift, according to Wang Qian, deputy general manager of the Chinese automaker Dongfeng.

For decades, foreign manufacturers dominated the Chinese market thanks to their technological advantage, while local partners handled production and distribution. Electrification has altered that balance.

Instead of following European, North American, and Japanese manufacturers, Chinese brands have taken the technological lead in electric vehicles, benefiting from a more consolidated battery supply chain, competitive production costs, and faster development cycles.

Manufacturers such as BYD, Geely, Li Auto, Xiaomi, Aito, and Xpeng are now competing in the market not only on price but also on technology, range, software, and driver-assistance systems—areas where foreign manufacturers were, until a few years ago, considered the benchmark.

A new strategy...To regain competitiveness, foreign automakers are moving away from the practice of selling global models adapted for China and are instead focusing on cars developed from scratch specifically for that market.

Volkswagen is one such example with its ID. UNYX line, while Audi has even created a brand exclusive to China—AUDI (without the iconic four rings)—designed specifically to meet the demands of Chinese consumers.

This preference for Chinese cars is no longer limited to the domestic market. In Europe, for instance, Chinese manufacturers have significantly increased their presence. In the first half of this year, Chinese manufacturers' share of the European market reached 10.9%, and Chinese manufacturers now dominate the top three spots in plug-in hybrid sales.