A promising future for Chinese cars
35% cheaper to produce, twice as fast to develop, and ahead in technology. Chinese cars are on par with European competition. A study reveals how these new players could dominate the global market by 2030.
The Chinese triple advantage: cost, speed, and technology
A “Global Automotive Outlook” study by AlixPartners clearly shows that Chinese manufacturers have a colossal advantage in manufacturing costs, with savings of around 35% compared to their international competitors. Additionally, their development cycle, between 18 and 24 months, is twice as short as their rivals. This allows them to quickly respond to market changes and new technologies. Chinese cars also have an edge in infotainment, comfort, and equipment.
2030: the year of domination
By 2030, Chinese automotive brands could capture around a third of the global market, with estimated sales of nine million units outside of China. In Europe, their market share could double between 2024 and 2030 at the expense of European, Japanese, and Korean brands. This growth is explained by the aggressive strategy of Chinese manufacturers, who accept lower margins (7.1% against 15% for Europeans) to quickly gain international market share.
The challenge of the “software-defined vehicle”
The real challenge for tomorrow lies perhaps in the concept of “software-defined vehicles.” These cars, capable of updating and expanding their functionalities via software updates, could revolutionize the industry. And again, Chinese manufacturers seem to have an edge. This evolution could shift profitability towards software and technology companies, at the expense of traditional manufacturers and equipment suppliers.
Can Europe still react?
Faced with this offensive, Europe seems taken by surprise. European manufacturers must invest wisely in a context of uncertainty about the technologies that will prevail. Diversifying powertrains puts a heavy strain on their finances. Moreover, the expected growth of the European market (0.9% per year until 2030) is much lower than that of China (3.4%). This dynamic accentuates the advantage of Chinese manufacturers, who benefit from a booming domestic market.
Fabian Piontek, an automotive expert at AlixPartners, affirms that the traditional operational model of the automotive industry in Europe must change to stay competitive. The transition to the “software-defined vehicle” could be an opportunity for Europe to regain control, provided that it invests massively and quickly in these new technologies.
Should Chinese brands be blocked?
With increasing customs duties, the European Union has chosen to protect itself by taxing. Blocking Chinese brands might seem like a simple solution, but it would be counterproductive for several reasons. Firstly, it could trigger retaliatory measures from China, closing a crucial market for European manufacturers. Secondly, such a protectionist measure would go against the principles of the European Union’s free trade. Thirdly, depriving European consumers of these options could slow down innovation in the sector, to the detriment of vehicle quality and price.
Chinese manufacturers have already established partnerships and factories in Europe, making a total exclusion difficult without impact. Volkswagen partnered with Xpeng, while Stellantis formed a partnership with Leapmotor. Mercedes joined forces with Geely for the Smart brand, and Renault might also work with Geely to design its electric Twingo for less than 20,000 euros.
Strategic confusion in Europe
Recent decisions by European manufacturers show a certain strategic confusion. The suspension of the production of the electric Fiat 500, the halting of ACC battery factory projects, and Mercedes abandoning a promising electric platform are all signs of a lack of clear long-term vision. These turnarounds contrast with the coherent and aggressive strategy of Chinese manufacturers.
European manufacturers seem to be sailing blind, caught between the urgency of the electric transition and the fear of losing their traditional markets. This indecision could prove costly in the long run, leaving the field open for Chinese competitors to dominate the European market.
