There has been a lot of talk about the potential of Chinese cars in the West. Competitive pricing and quality improvement are their best weapons to win a decent market share outside of China. Many argue that this is a threat to traditional builders in Europe and the United States. But is this massive Chinese wave really happening?
Before answering this question, it is important to agree on the definition of a Chinese car. The Asian giant is fast becoming a strong exporter of cars thanks to its huge production capacity, relatively low wages, and the fact that it has learned much from Western manufacturers for at least 20 years. Today, China's auto industry can easily become the world's number one exporter, ahead of Japan.
However, most of the exported cars are produced by manufacturers headquartered in the west. Tesla, BMW, Volvo, Smart, Polestar, Dacia, Buick, Chevrolet, Lincoln, and Lotus are among the brands building cars in China and exporting them to markets such as Europe and the United States. Even if these are cars made in China, I personally don't consider them Chinese cars.
On the other hand, there are cars produced by manufacturers based in China. They are mainly intended for domestic demand, given that we are talking about a market of around 25 to 28 million units per year. Other units are exported as Chinese cars, starting from design through development and final production. These are brands such as Changan, BYD, MG, Chery, Haval, NIO, Xpeng, JAC, Hongqi, Dongfeng, Wuling, and many more.
Almost Niche Brands In Europe
Today's reality shows this group of "pure" Chinese brands is far from being a major player in the European market, not to mention being completely absent in the United States. According to the latest data from JATO, Chinese brands account for just 2 percent of total new passenger car registrations in Europe, through April 2023.
That equates to 85,900 units registered between January and April. Percentage-wise, it's an impressive 102-percent growth from the same period in 2022. But despite the increase in supply and relatively competitive prices, European consumers are still reluctant towards these new brands.
Mg Is An Exception
An interesting fact of the results in Europe for the first four months of this year is the strong weight of MG. The information reveals that this brand accounted for a little over two-thirds of the volume of Chinese auto brands, or 59,200 units. MG is rapidly climbing the ranks, especially in the electric vehicle segment, thanks to very competitive products such as the latest MG 4, which entered the European top 10 for electric vehicles in April.
MG bases its rapid growth not only on captivating cars, but also on playing the western card through a brand still recognized as British. The current iteration of MG designs and manufactures all of its cars in China, but positions itself as a UK-made car brand. This is probably why it has managed to find a better footing in markets such as Europe than its Chinese counterparts.
The question that remains is how long it will take for Chinese brands to resolve the reputational issues they have overseas. Pricing can be a good way to attract customers. But that alone won't be enough to change the negative perception of Chinese cars many people have around the world.
The author of the article, Felipe Munoz, is anAutomotive Industry Specialist at JATO Dynamics.