More than 130 brands are currently competing in China’s new-energy vehicle (NEV) market, says GlobalData Automotive Division China operations manager John Zeng.

Three brands, however, dominate the market, with Tesla, BYD and Seres having taken 42% of the NEV market in the first quarter of this year.

“That means that 130 brands are competing for 58% of the market – so the competition in China is fierce,” says Zeng.

“In the next five to ten years, half of these brands will disappear from the market in my opinion.”

Zeng says this means that dealers looking at distributing Chinese vehicles will have to “make a careful choice, as there are a lot of brands in China, but many of them will cease to exist”.

He adds that the leading Chinese car brands are currently at around 60% NEV production, while international brands are much lower within their plants in China.

“The ICE-only (internal combustion engine) market in China is shrinking rapidly,” says Zeng.

“We’ll probably see NEV sales in China pass 50% market share next year – the first major market to do to.”

What this means, however, is that ICE production is starting to face challenges in China, with overcapacity at many plants, especially at non-Chinese car brands.

Another challenge within the Chinese auto industry is that it is seeing a second wave of NEV manufacturing, with several newcomers joining the market.

Traditional automakers have seen their share of NEV sales drop from 92% in 2019, to 87% in 2020, says Zeng.

While IT companies such as Google could not make inroads into the mobility market in the US, for example, the same does not seem true for Chinese IT groups, such as phone maker Huawei.

Exports Set To Grow
Zeng believes that the competitiveness of China’s automobile manufacturing industry continues to improve, and that there is much scope to expand.

Both ICE and NEV vehicle exports from China have been increasing steadily since 2018.

This surge was aided by the scrapping of a regulation that forced international vehicle manufacturers to form a 50:50 joint venture with a Chinese partner. They are now able to own 100% of their operations.

As international vehicle makers were unwilling to share their global markets with Chinese car brands, it meant that they rarely set up their Chinese plants as export hubs, notes Zeng.

The change in regulations, however, challenged, and freed, Chinese car makers to tackle export markets head on.

Before 2022, exports from China were stuck at around one-million units a year.

But, in 2022, China exported 2.2-million passenger vehicles, growing to more than 4-million vehicles in 2023.

The top exporters are Chery, SAIC, Geely, BYD and GWM. Most cars go to Russia, Mexico and Brazil.

Zeng says there is much room for exports to grow, as China’s share of exports in terms of total vehicle production was at 14% last year, compared with 74% in Germany and 42% in Japan.

He does not believe that the significant tariffs set to be levied on Chinese electric vehicles going to the US and Europe will have a big impact on the Chinese auto industry.

“This will actually benefit the big Chinese brands as companies such as BYD and Chery have already moved to set up European plants by the end of 2025.

“This will actually aid them in that it will keep out the smaller Chinese competitors. Also, they should be able to afford the tariffs.”

* Zeng spoke at a National Automobile Dealers' Association event in Cape Town.