[Beijing Diary] Looking Straight at 49% and 1%

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Although the Chinese economy has suffered over the past three years due to the spread of COVID-19, there is still one sector that has grown remarkably fast. That is the automobile market, which has put new energy vehicles at the forefront. While the pace may not have met expectations, it is undeniable that the growth was at a level that surprised the world.

The most noticeable trend is that Chinese companies rapidly dominated the domestic market over the past three years, starting from the low point just before the pandemic spread in 2019. According to the China Association of Automobile Manufacturers’ data on ‘China passenger car market share by country,’ the market share of Chinese brands, which was around 34.1% in 2019, jumped to 38.4% in 2020, 44.5% in 2021, and 49.9% in 2022. During the same period, German brands, which had performed relatively well in China, dropped from 24.2% (2019) to 19.5% (2022), Japanese brands fell from 22.7% to 17.8%, and American brands declined from 11.2% to 9.4%.

[Image source=Reuters Yonhap News]

What about Korean brands? Their market share, which seemed to bottom out at 4.7% in 2019?half of what it was five years earlier (9.0% in 2014)?plummeted further to 3.5% in 2020, 2.5% in 2021, and dropped to 1.6% last year. In Beijing, except for vehicles used by Korean expatriates or taxis (Beijing Hyundai), Korean brand cars are rarely seen.

When articles like this are written, the typical response is criticism urging not to cling to China but to explore other markets. The argument is that there is no need to obsess over or depend on China, and that success can be found elsewhere. Some harsh critics even say there is no need to write articles that boost the confidence of Chinese companies. However, putting emotions aside and looking at the reality, the situation is not that simple.

The Chinese automobile market now holds significance beyond just the ‘domestic’ market. China’s new energy vehicles, which have emphasized premiumization over mass-market appeal, are active globally based on their experience, confidence, and performance in the domestic market. Last year, China’s share of the global electric vehicle market exceeded 60%, according to both domestic and international research data, securing an overwhelming first place. The fact that the American automaker Ford partnered with Chinese electric vehicle battery maker CATL to build a battery factory in the U.S. also carries significant implications for the global automobile market. BYD, which surpassed Tesla to become the world’s top electric vehicle seller, is actively pursuing the construction of battery and complete vehicle factories both domestically and abroad, meticulously building a global supply chain response strategy.

The rapid growth of Chinese automobile companies is felt even more vividly through the ‘riding experience’ locally. People around who use various ride-hailing services such as Didi Chuxing and Meituan Dache, trying different electric vehicles almost daily, unanimously say, “Considering the price, the quality of China’s new energy vehicles is top-notch.” Some even say they would choose them without hesitation if sold in Korea.

This year marks the first year that central government subsidies for the Chinese automobile industry have been phased out. The central government subsidies that were provided to expand the adoption of new energy vehicles have been completely abolished starting this year, and the purchase tax reduction measure, which was implemented for seven months from June 1 last year, has also ended. While some predict that this will deflate the market bubble, the more convincing outlook is that the Chinese automobile industry will enter a phase of qualitative growth by distinguishing the wheat from the chaff. Rather than ignoring the rise of Chinese companies and industries, it is time to consider technological innovation and proactive market strategies in response and to support these efforts.