Chinese manufacturers set to become a dominant industry force but not in the way many anticipated

The Facts

China isn’t just the largest car market on the planet; it is also the most prominent car producer, with over 20 million vehicles assembled in the past year. To show you just how massive the Chinese car industry is, we will compare it to the second market leader: the US car industry. In 2020, the USA produced just 8.8 million vehicles.

Apart from numerous local car companies like FAW Group, Dongfeng, Geely, Brilliance, Great Wall, or SAIC Motors, the biggest European and American car companies even have their assembly plants in China, where they produce models for local and Asian markets. The foreign investments in China’s car industry started in the 90s when Western car companies first saw the potential of this emerging market. Now, decades later, China is ready to change the car world by moving in three different directions.

1. Buying Well-Known Brands Rather Then Establishing New Ones

Chinese car industry strategists know that establishing a completely new car brand is a long and extremely expensive process. Pitching the idea of a new car brand to conservative European or American buyers is an uncertain venture which could result in failure. So the smart move is not to market Chinese cars over there, but acquire well-known brands and revive them with modern technology and style. At the moment, the best examples for this are Volvo, Lotus, or MG, all of which have been acquired by Chinese companies. This Chinese influence is not limited to just car factories, as the legendary tire manufacturer Pirelli was bought by China National Chemical Corporation in 2015.

Even though various Chinese brands are sold outside of China, they are still relatively uncommon on European and American roads. Only about 30,000 to 40,000 cars are exported to those markets annually. The prices are affordable and the models event represent tempting opportunities, but European and American buyers remain somewhat reluctant. Chinese car companies have become successful in exporting on emerging markets like Africa or South America. In these countries, the brand is less important as customers mostly decide on the price of the vehicle, which makes the Chinese companies very competitive and successful.

2. Production Capacities and New Technologies

As the car production per unit gets more and more expensive in Europe and America, Chinese companies manage to remain competitive. As a result, Chinese factories are not only producing cars for Chinese companies: Tons of cars sold in America or Europe are actually entirely made in China. Models like Buick Envision, BMW iX3, DS 9, Polestar 2, or Volvo S90 travel a long way before reaching customers overseas. In terms of quality, Chinese-made cars are equal to domestically-built models, so it is to be expected that more and more companies will decide to move their assembly lines to China in order to uphold the quality standards while also profiting from lower production costs.

Buying a car online remains a substantial threshold. Even for the most digital generations of them all: Generation Z. Studies have shown that even they prefer the live experience of a genuine showroom over a digital one when decision time is there.

3. Parts and Accessories Industry

It is less known, but the car parts industry was the first step in the motorization of Chinese society. Years before the actual cars became a fixed presence in the Chinese streets, numerous car parts were already produced by local factories and exported all over the world. This car parts industry has only gotten stronger, and today China is absolutely the biggest manufacturer for all automotive components, spare parts, and accessories of all kinds. In fact, there is no vehicle produced in the world without Chinese-made parts. Being dominant in this field makes China the first and sometimes only supplier in the maintenance industry, which is very important. Interestingly, Chinese companies also make spare parts for models that were never sold in China and quickly adapted to new materials, standards, and designs.