Chinese new energy vehicle brands are overtaking international rivals, according to a McKinsey report. In a survey of 2,449 respondents across 19 Chinese cities, seven out of the top 10 premium NEV brands were Chinese ones. The three remaining were German, ranking fourth, fifth and seventh. The findings are not surprising. Many Chinese NEV brands including Nio and Li Auto have made their challenge to established international premium carmakers clear. William Li, Founder and CEO of Nio, said the company’s goal is to change BBA – BMW, Mercedes-Benz and Audi – into NBA, with the letter N being Nio, in the Chinese premium vehicle market. Nio has achieved its goal in some wealthy cities, including Shanghai. Li expects Nio to account for 40% of the Chinese EV market segment with prices exceeding CNY300,000 this year. Li Auto expects its sales this year to reach 800,000 units, similar to those of the German trio’s sales in China. Li Auto sold 370,000 units in 2023, up 182.1% year-on-year.
Their meteoric rise seems unstoppable. The McKinsey report found that even owners of the German trio’s cars have put five Chinese marques into their top 10 premium NEV marque list – and the top three are Chinese. For those in the survey who purchased premium Chinese NEVs, the top reason was automated driving functions, followed by smart cabin features and attractive styling. “Chinese brands have garnered some brand awareness, but their brand loyalty is not yet very strong,” said Bill Peng, McKinsey Partner at the company's Hong Kong office. The consulting firm’s survey shows that 63% of Chinese premium NEV owners would consider traditional foreign brands if they came up with the same autonomous driving and smart cabin functions.
Such brands, especially the German ones, are working to catch up with startups, especially in the number of new models. Audi is scheduled to unveil its first China-made model on the dedicated PPE platform co-developed with Porsche this year. BMW and Mercedes-Benz, both of which have several NEV models in the market, are revving up efforts in local autonomous driving research and development (R&D). For those who chose NEVs from such brands, the top reasons were their reliable quality, good styling and the potential bankruptcy of startups, most of which are still losing money. One silver lining for established marques was that when survey respondents were asked to compile their list of top 10 premium vehicle brands, regardless of their powertrain, none was Chinese. “That means, Chinese marques have to do a better job in consumer relations and branding operations,” said Peng. “They need to improve their loyalty and keep the technologically leading position. Otherwise, the consumers will leave you.” International brands have to double their efforts as well. Chinese car buyers are no longer willing to pay extra for a vehicle because it bears a foreign marque.
In 2023, NEV sales totaled 9.5 million units in China, accounting for 31.6% of total vehicle sales in the country. Statistics from the China Electric Vehicle Charging Infrastructure Promotion Alliance show that there were 9.02 million charging pillars in the country by the end of February, up 63.7% year-on-year. But most of them are in first and second-tier cities.
China’s vehicle sales are expected to rebound despite a decline in February due to the effect of the Spring Festival. The China Association of Automobile Manufacturers (CAAM) announced that China’s auto sales reached 1.58 million units in February, down 19.9% year-on-year and 35.1% month-on-month. Car sales rose 11.1% year-on-year to 4.03 million units during the first two months of this year and production increased by 8.1% to 3.92 million units, according to the CAAM. The NEV sector maintained momentum during the first two months with sales jumping 29.4% year-on-year to 1.21 million units. The sector accounted for 30% of total auto sales during the period.
Auto exports amounted to 822,000 units during January-February, an increase of 30.5% year-on-year. In particular, Chinese brands sold 2.07 million passenger vehicles in the first two months, a year-on-year growth of 26.7%. Their market share reached 59.9%, up 7.6 percentage points compared with same period last year. UBS China predicts that Chinese brands will seize a 63% market share in 2024. Among major foreign brands, only South Korean ones experienced double-digit growth in sales in China during the January-February period. The sales of German, Japanese and American brands showed varying degrees of decline. Nissan and Honda are considering cutting production in China by 20% to 30%.
Meanwhile, Mercedes-Benz CEO Ola Kaellenius said that the European Union’s protectionism against Chinese electric vehicles is “the wrong way”, as increased competition from China would help Europe’s carmakers produce better cars in the long run. Chinese companies looking to export to Europe was a “natural progression of competition and it needs to be met with better product, better technology, more agility”, said Kaellenius in an interview with the Financial Times. The European Commission is investigating whether Chinese carmakers are receiving subsidies from the Chinese government that enable them to lower prices on vehicles exported to Europe. “We as companies are not asking for protection and I believe the best Chinese companies are not asking for protection. They want to compete in the world like everybody else,” said Kaellenius. “If we believe protectionism is the thing that gives us long-term success, I believe history tells us that is not the case. Let competition play out,” he said. Volkswagen's CEO Oliver Blume also said strong competition sends consumers positive signals. “When you have strong competition, you have to improve yourself; you can’t rest on what you have achieved,” Blume told China Daily. “I am a supporter of worldwide trade, because that is a big advantage for all countries to bring wealth, to improve the economic situation of each country. That is, in the end, a benefit for all people,” he said. Mathias Miedreich, CEO of Umicore, one of the world’s biggest battery materials manufacturers, said sales of Chinese electric cars were surging because of better performance and affordability. “They are simply good cars and people buy them,” he said, as reported by the China Daily.
