China recently announced 20 measures to boost domestic consumption in automotive, housing and other sectors. While the country's homegrown new energy vehicle (NEV) companies are expected to see sales growth in the coming months, foreign-based carmakers are less likely to enjoy the benefits due to their limited EV market share.
According to Chinese media reports, the measures encourage people to replace their old cars with an NEV. The government will build high-quality charging infrastructure and support NEV adoption in rural areas.
Automotive suppliers said foreign car companies and their joint ventures in China are unlikely to enjoy the advantage brought by the policies. Besides Tesla, the companies are less competitive than local automakers like BYD, Geely, and SAIC in the NEV segment.
Many of the traditional US, European, and South Korean brands have withdrawn from the Chinese market in the past year because of sales plunges, according to suppliers. The European and Japanese automakers staying in the market struggle as local competitors boast their vehicles with advanced electronics.
Legacy foreign automakers have become aware that their EVs do not entirely fit Chinese consumers' needs. The companies have begun to catch up since the beginning of 2023. For example, Volkswagen has partnered with China-based Horizon Robotics and invested in the emerging EV company Xpeng. Audi has also deepened ties with SAIC.
Toyota recently renamed its largest R&D facility in China, Toyota Motor Engineering & Manufacturing, into Intelligent ElectroMobility R&D Center by TOYOTA. Engineers from FAW Toyota, GAC Toyota, and BYD Toyota will support the facility. Together with expertise from its tier-1 suppliers Denso and Aisin, the carmaker aims to accelerate the development of electric powertrains in China.
According to media reports, the government measures are expected to boost sales of Tesla and other China-based automakers in the following months but not so much for foreign brands. For instance, major German car companies, including Volkswagen, Audi, BMW, and Mercedes, make up only a single-digit percentage of China's EV market share while seeing strong gasoline car sales in the country.
Public data showed that BYD and FAW-Volkswagen Automobile were China's top two car sellers in the first half of 2023. Six of the 10 most popular vehicles were NEVs, including Tesla Model Y, four of BYD's vehicle models and the Wuling Hongguang Mini EV.
