VW and Toyota Reigned for Years. Now It's China's Turn | Carscoops

      Chinese automakers are increasing their global production, encroaching on the market share of Toyota and Volkswagen as Tesla makes progress. Analysts assert that the industry landscape has already changed significantly.

      Localization efforts are expected to enhance global vehicle sales for Chinese car manufacturers, potentially leading to a steep decline in market share for VW and Toyota in crucial segments. Furthermore, analysts predict Tesla's market share will grow from 2% to 8% on a global scale.

      In the next few years, Chinese car manufacturers could do more than simply impact the global automotive industry. As they expand internationally and leverage their strengths in electrification and cost management, the transformation resembles a permanent shift rather than a temporary disruption. If this trend continues, these companies might command a third of the global market within five years.

      According to analysts at UBS, a Swiss investment bank, while China's domestic car market continues its upward trajectory, the importance of their foreign expansion is increasing. Their latest estimates indicate that international markets now make up about 20% of sales for Chinese automakers, and for some, this represents up to 50% of their profits.

      UBS’s projections have not changed since two years ago, despite the growth of Chinese production in Europe and some established automakers reducing their electric vehicle (EV) initiatives due to uncertain returns and declining demand. Paul Gong, UBS's lead analyst for Chinese EVs, noted that the slowdown in Europe regarding EV adoption and protectionist measures against Chinese EVs have been significant factors. He mentioned that while progress in 2024 was slower than anticipated, there are recent signs of improvement.

      The South China Morning Post reports that China’s strategic investments in electric vehicles, vertical integration, and aggressive supply chain developments are yielding positive results. These strategies have not only provided a cost advantage for Chinese brands but have also facilitated scalable production and rapid market responsiveness.

      According to Frank Diana, a managing partner at Tata Consultancy Services, China’s strength lies not only in scale but also in speed. He explained that China’s rigorous learning process positions it well for a dominant market share. However, other competitors are also expected to emerge in this space.

      UBS predicts that as Chinese brands rise, the market dominance of existing global leaders will be significantly challenged. Currently, Volkswagen and Toyota hold a combined 81% market share in key segments, but this figure could drop to 58% by 2030. Conversely, Tesla’s current global share of about 2% may increase to as high as 8% within the same timeframe.

      Chinese brands are also expanding internationally by localizing production. In Thailand, companies like SAIC Motor, Great Wall, BYD, GAC, Changan Automobile, and Chery have established assembly plants. Great Wall and BYD have set up manufacturing in Brazil, while BYD is developing a large facility in Hungary to enhance its presence in Europe.

      India is also positioning itself for potential growth in its car industry by 2030. Local brands such as Tata and Mahindra are gaining market share domestically while seeking opportunities abroad. However, they are competing fiercely against dominant player Maruti Suzuki and the Chinese-owned MG Motor, which has launched several new models for Indian consumers. Additionally, BYD has started to establish a foothold in the market, with Chery and Great Wall planning to enter as well.

      Analysts note that China's early investments have provided it with a lasting advantage. Its ability to adapt quickly, create tightly controlled supply chains, and manage costs effectively keeps its companies ahead of the competition. As one analyst remarked, the EV supply chain is largely dominated by Chinese firms, while India’s EV supply chain, particularly in electronics, relies heavily on imports from China.

      Looking ahead, Diana believes the market is on a path toward consolidation. China's early lead positions it well as the EV sector evolves into a more concentrated field of significant players. He envisions a future where consolidation occurs at the EV market level, eventually resulting in 10 to 15 major platform orchestrators comprising original equipment manufacturers and large technology companies.