Chinese Cars: An Explosive Past, a Bright Future
Say the words “Wuling Hongguang” to pretty much any American, and you’ll get nothing but a blank stare. Tell them it’s a car, and they might be surprised that they haven’t heard of it. Then tell them that the Hongguang sold more units than the Honda Accord in 2018, and watch the surprise turn to disbelief.
The Chinese car market is full of these so-called “unknowns”. Brands like Geely, BYD, and Dongfeng are virtually invisible in the western world. Yet, their sales are comparable to some of America’s best-loved auto manufacturers, including Ford and Chevrolet.
The Massive Chinese Market
So, how does an industry this big remain relatively hidden to the largest auto market in the world? Well, it doesn’t. The reality is that China has been the largest auto market in the world since 2009. China outpaces the US in car sales by roughly 10 million units per year, and nearly doubles the sales of the European Union. And China isn’t slowing down anytime soon. Estimates show the Chinese population increasing by up to 11% per year, which will provide a constant stream of new buyers for Chinese vehicles.
The increasing rate of car ownership is even more important than the recent population boom. Since 1990, car ownership in China has increased more than 56-fold. Despite this meteoric rise, only 25% of the population owns a vehicle. This leaves a massive, untapped market of potential consumers.
Thanks to China’s past policies on the auto industry, many of these future consumers are virtually guaranteed to buy “homegrown” vehicles. In the 1980s, China passed a series of measures to protect its fledgling auto industry. These measures included a law barring foreign companies from holding more than a 50% share of Chinese manufacturers, as well as tariffs of up to 250% on foreign imports. These measures were extremely effective: today, foreign cars hold less than a 5% share of the total market.
An Industrial Revolution for Chinese Manufacturers
China’s dominance at home has paved the way for innovation without fear of outside competition. As a result, the industry is catching up rapidly to its western counterparts. In the 1980s, most Chinese cars were carbon copies of their Japanese and Korean competitors. Since foreign factories were disallowed, it made sense to simply replicate the most popular model designs. However, in recent years Chinese manufacturing has taken on a distinct flavor of its own. Brands like Hongqi have incorporated luxury interiors, powerful home-built engines, and other technology to create uniquely Chinese designs. China is even dipping its toes into driverless technology, although progress has been slow.
Trends in the Chinese auto industry point to imminent global expansion. For one, Chinese auto production outpaced the US by 250%, while Chinese sales only outpaced the US by 170%. That indicates a surplus of Chinese inventory that is sure to continue in the future. Additionally, China’s 50% foreign ownership policy is being rolled back. With the Chinese auto industry reaching maturity, this indicates a readiness to bring Chinese cars to the rest of the world. In fact, that process has already begun. Geely launched its product line in Europe for the first time last year, and BYD is building electric buses for use in California.
While China may be making its first global forays in regard to its cars, it’s had its fingers in the global auto industry for a while. Chinese manufacturers are now responsible for many of the parts that go into foreign cars. From engine manufacturing to software and robotics development, Chinese companies have a hand in most components of a modern auto. Chinese manufacturers have also jumped head-first into the electric market; as one of the world’s leading suppliers of cobalt (a common element in most batteries), China is leading the way in car battery production.
-By Aaron O’Neill