SHANGHAI – Until last year, foreign automakers held more market share than their domestic Chinese rivals.
But this year that changed. and noticeably.
Global brands, most of which rely heavily on petrol vehicles, will find it even harder to navigate the market next year as demand increasingly shifts to electric vehicles.
Internal combustion engine sales in China have been declining for years. A plethora of tax incentives were implemented this year, but failed to boost demand over the long term.
On June 1, Beijing halved the purchase tax to 5% for gasoline vehicles with an engine size of up to 2.0 liters and a price of 300,000 yuan ($43,041) or less.
The move is meant to spur a market that slumped in April-May when Shanghai, China’s largest city and center of auto production, was put under lockdown to curb the raging coronavirus outbreak. did.
Tax cuts provided some temporary relief to foreign automakers.
Global brands now account for more than half of China’s gasoline car production.
The most recent incentive, in particular, has increased the displacement cap eligible for tax incentives to 2 liters. His two tax cuts in 2009 and 2015 capped him at 1.6 liters.
Chinese brands mainly sell compact and subcompact cars, and the market for gasoline vehicles with engine sizes above 1.5 liters is mainly the domain of global brands.
After the tax cut, the market for gasoline vehicles recovered from June to September.
However, the recovery did not last long. Demand for gas-powered light duty trucks fell in October and remained sluggish in November.
In the first 11 months, industry-wide retail sales of gasoline vehicles fell by 14% to 13.3 million units, according to the China Automobile Dealers Association.
Demand for EVs advanced throughout the year, in stark contrast to the short-lived recovery in internal combustion engine sales.
As of November, retail sales of all-electric and plug-in hybrid vehicles, with 70% sold by Chinese brands, doubled from the previous year to 2.5 million units.
Bolstered by strong EV sales, domestic automakers are rapidly gaining market share from global rivals.
In September, for the first time in history, we surpassed global brands in the retail market.
The combined market share of the two companies reached 53.4% last month, up 7.1 percentage points from the previous year, according to CADA’s tally.
Coronavirus infections have surged across China after Beijing scrapped its zero Covid policy earlier this month.
The pandemic could lead to market contraction in 2023, but the ongoing structural changes are widely expected to continue.
The China Passenger Vehicle Association, a Shanghai-based trade group, forecasts that EV sales will surge 30% to 8.4 million next year, while demand for gasoline vehicles will fall 10% to 15.1 million. It says.
A subsequent shakeout is already underway. Stellantis stopped producing Jeep models in China this year. last week, car weeksister publication of car news chinareported that Skoda may withdraw from China, allowing a joint venture between the Volkswagen Group and SAIC Motor to concentrate on producing VW brand vehicles.
Given the serious challenges facing us, more global brands will be forced to scale back their operations in China next year.
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