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Local brands seize opportunities, prompting the automotive industry to embrace change

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Local brands seize opportunities, prompting the automotive industry to embrace change

China’s Auto Market: The Rise of New Energy Vehicles and the Decline of Joint Ventures

The Chinese auto market has experienced a significant shift this year, with domestic automakers such as BYD and GAC Aion witnessing a surge in sales of new energy vehicles (NEVs). In contrast, joint venture brands have faced declining sales and in some cases, suspended production. This changing landscape has reshaped the dynamics of the industry, leading to new partnerships and opportunities for both domestic and foreign car brands.

Just recently, Japan’s Mitsubishi Motors made an announcement that it would cease local production of Mitsubishi-brand vehicles in China. Furthermore, the company plans to transfer its stake in a joint venture in China to its Chinese partner, Guangzhou Automobile Group Co Ltd. As part of this restructuring, GAC Aion, an NEV subsidiary of GAC Group based in Guangzhou, will take over GAC Mitsubishi’s production capacity. This move marks an important milestone for GAC Aion and the NEV sector as a whole, as it produced China’s 20 millionth NEV in Guangzhou earlier this year.

Meanwhile, as the NEV market in China continues its robust growth, foreign and domestic car brands are forging new partnerships. Volkswagen, for instance, recently reached an agreement to acquire a 4.99 percent stake in Chinese electric vehicle startup Xpeng. In addition to this investment, the two companies will collaborate in developing two electric vehicle models specifically for the Chinese market. This partnership is significant not only for Volkswagen and Xpeng but also for the entire intelligent EV manufacturing sector in China. It serves as a testament to China’s growing prowess in automotive production and its ability to attract leading global carmakers.

China’s auto industry has long been striving to enhance its innovation capabilities, encompassing areas ranging from entire vehicles to communication modules and power chips. Even world-leading auto parts supplier Valeo, headquartered in France, has recognized China’s potential and established its Valeo (Shenzhen) intelligent manufacturing center earlier this year. The center aims to achieve a high annual growth rate of over 20 percent for the next five years, leveraging Shenzhen’s robust new energy automobile industry foundation and the city’s advantages in intelligent car development.

In terms of financial performance, Chinese NEV giant BYD reported impressive numbers. Its net profit for the third quarter soared by 82.2 percent compared to the previous year, reaching 10.4 billion yuan ($1.4 billion). Similarly, its net profit for the first nine months of the year rose by 130 percent, amounting to 21.4 billion yuan. Moreover, the company’s revenue for the third quarter surged by 38.5 percent year-on-year, totaling 162 billion yuan. Overall, BYD’s revenue for the first nine months reached an impressive 422 billion yuan, marking a 58 percent increase compared to the same period last year.

Market analysts are optimistic about the future of China’s auto consumption potential and believe that foreign auto companies have ample room for development within the country. According to the China Passenger Car Association, China’s new energy passenger cars held a 63 percent share of the global market in 2022, showcasing the country’s dominance in this sector. Cui Dongshu, secretary-general of the CPCA, emphasizes that the rise of domestic Chinese car brands reflects the high-quality development of China’s automobile industry, particularly in the fiercely competitive NEV market.

In conclusion, China’s auto market has experienced a significant upheaval in recent times. The sales of new energy vehicles from domestic automakers continue to rise, while joint venture brands face challenges. In response to this changing landscape, new partnerships between foreign and domestic car brands have emerged, leading to further advancements in the intelligent EV manufacturing sector. With its innovative capabilities and resilient auto consumption potential, China remains a promising market for both domestic and international car companies.

Source: XINHUA – CHINA DAILY

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