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Friday, June 21, 2024

The deluge of China-made cars

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China’s emergence as a global powerhouse in the automotive industry has had a profound impact on the international market. This trend is particularly evident in the Philippines, where a growing number of Chinese-made car brands have entered the local auto industry. This article delves into the implications of China’s expanding presence in the Philippine market and examines the factors that contribute to its success.

Chinese Brands Make Their Mark:

The Philippine auto industry has experienced a significant influx of Chinese-made car brands in recent years. Brands such as GAC, Geely, Foton, Chery, Hongqi, Dongfeng, BAIC, Changan, JAC, Great Wall, MG, FAW, and others have made their presence felt during the Manila International Motor Show and continue to gain traction in the market. This influx shows no signs of slowing down, with more Chinese brands expected to enter the Philippine market in the near future.

China’s position as the world’s largest vehicle market, both in terms of annual sales and manufacturing output, has played a crucial role in its rise as an automotive powerhouse. In 2021, China sold a staggering 26 million vehicles, including 21.48 million passenger vehicles and 4.79 million commercial vehicles. With a population of over 1.4 billion and a growing middle class with higher disposable incomes, China’s demand for cars continues to rise. To support its automobile industry, China has made significant investments and developed low-cost vehicle models to increase sales, aiming to export these models to more mature markets.

Expansion Beyond Borders:

While China has yet to directly penetrate the United States market due to protectionist policies, Chinese automakers are actively exploring opportunities in other regions. Some Chinese-owned brands, such as Lotus, Volvo (including its Polestar spin-off), and Karma, are already operating in the US market. Conversely, American manufacturers like General Motors and Ford have established or planned production facilities in China to import vehicles back to the US. On a global scale, Chinese-made cars are finding success in Asia, Europe, and various other countries. In 2023, China became the top country for car exports, surpassing Japan. Chinese government-owned companies, along with emerging players like BYD and Nio, have propelled China to the forefront of the industry.

China’s success can be attributed to several factors, including the production of affordable models and a focus on electric vehicles (EVs). Chinese-made vehicles, both with internal combustion engines (ICE) and EVs, have gained market share in countries like Mexico and Europe. In Mexico, Chinese-built vehicles with ICEs increased their market share from 0% to 20% in the past six years. Chinese EVs also account for 8% of all-electric vehicle sales in Europe as of September 2023, a figure projected to rise to 15% by 2025. Chinese EVs are often priced around 20% lower than local models, posing a competitive challenge for established automakers.

China’s automotive market, with over 150 active brands, is now entering a phase of consolidation. Weaker brands lacking brand value, core technology, and development capital are expected to exit the market. This consolidation reflects the impact of structural changes and intensified competition in the industry.

The Local Perspective:

In the Philippines, Chinese car brands have gained significant traction, with BYD leading the charge in the country’s push for electrification. The Ayala Group of Companies, a prominent local business conglomerate, has embraced BYD, signaling the local industry’s commitment to electric vehicles. The success of Chinese-made cars in the Philippine market will ultimately depend on factors such as consumer preferences, pricing strategies, and the continued development of the local auto industry.

China’s rapid rise in the global automotive industry has made a significant impact on the Philippine market. The influx of Chinese-made car brands reflects China’s dominance as the world’s largest vehicle market and its aggressive strategies to expand its presence beyond its borders. As Chinese automakers continue to penetrate global markets, established players face disruptive challenges. In the Philippines, the success of Chinese-made cars will be determined by factors such as local consumer preferences and competitive pricing.

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