Future Trends in Chinese Automotive Market

Talking about automotive in China is completely different from other countries, in most of the world you imagine automotive as a fierce market with no margins based only on volumes and sales strategy to keep the current volume and survive at least. In China automotive market is an emerging market with big growth ratio every year. Last year chinese passenger cars and commercial vehicles market grow about 40% and currently China is the biggest market for automotive worldwide. Predicting trends for the future is not easy but there’re some trends that surely will go on strongly in the near future:

1. Growth: the growth rate will be quite surely always double digit. It’s easy to understand why. Only 1 over 7 Chinese has a car, so the internal market is huge and moreover China is growing double digit as country so more and more Chinese will afford to buy a car, especially in the rural province where the rate is much less than in big cities like Shanghai and Beijing, where on the opposite the market will slow down also because cars needs first roads and infrastructure and big cities are becoming already overloaded in these years.

2. Consolidation: there’re still more than 100 car manufacturers in China and a lot of local small suppliers. Like in Europe and US it is expected a consolidation in the market. Probably automaker with volumes around 10.000-100.000 cars/year will disappear but it’s a slow moving consolidation, since Chinese internal market needs low prices for cars and so a lot of small automakers with only internal production of the whole car with a few technologies can give low prices, even though this means also low quality because the assembly lines of these automakers are still completely manual. Labour cost increase and general welfare will lead to an higher end demand and to the dissolving of most of these small automakers. As well as the same will happen for the small low quality suppliers.

3. EV: EV stands for electric vehicles. Since China has a lot of problems connected with pollution, EV is surely a trend that will grow. Remember that the biggest electric batteries suppliers worldwide are located in China and most of EV vehicles are being developed in China starting from these suppliers. Remember that the biggest electric batteries supplier, BYD is also a car manufacturer and someone like a certain Warren Buffet is a shareholder of the company.

4. Quality: the quality level of Chinese cars is becoming higher every year, especially foreign automakers wants really that the same standard of quality in Europe and US is applied also in China. Moreover the Chinese consumer is becoming every year more and more aware of quality standard and in the future will also be able to pay for that. As well as suppliers from all over the world and also local are trying hardly to have same technologies and quality as in Europe and US as a consequence of the customer requirement improvement.

5. Export: Surely there’s a big internal market, but the aim of most local automakers is to become a worldwide automaker. Geely is trying to do that through Volvo Cars, others are trying to start up facilities in other markets like Middle East or Africa or Eastern Europe. It’s a preparation for the arrival also in US and Europe, but first quality issue must be understood and digested by the local automakers. EU and US are always nearer also because of the flourishing of foreign suppliers in China, that are helping the market to become aware of technologies that before are not available.

6. Luxury Brand: the luxury EU and US car makers like Ferrari, Porsche, Bentley, Rolls Royce will flourish and China will become their first market. For some of them, it is already. It’s easier to find very rich people in a country with 1.4 billion inhabitants and that is growing double digit every year. Moreover Chinese see cars still as a status symbol.

7. Financing: surely financing companies for car loans will have a good time in the next years, given that more and more Chinese wants a car and the car is seen as a status symbol, but currently the ways of financing the purchase of cars in China are poor compared with other markets.