Today China is the largest production country in the world of automotive manufacturing, accounting for almost 30% of global Light Vehicle (LV) production in 2016. Although domestic sales account for by far the largest share of this volume, there are reasons to believe the tide is changing. With production capacity expected to increase and domestic sales growth set to slow, the country could try to export to other countries to a larger degree than seen before. Here are the main reasons for why it may happen this time:
High production capacity
Light vehicle production in China has increased significantly over the last ten years, from 8 million to more than 27 million. The growth has been so significant that today 10% of China’s tax revenues and 10% of all jobs are related to the auto industry. Consolidation looks to be down the road as manufacturers and government push for more exports, and the utilization rate of some plants are in the range of 60% to 80%.
Emerging markets ripe for Chinese produced cars
As the economies in Russia and South America are improving there are clear signs of a rebound in light vehicle markets after a couple of stagnant years. Relevant factors in these and other emerging markets like Africa and ASEAN countries is the expanding middle class and emerging desire for mobility. The aim here is to get any vehicle rather than a specific brand, which will allow the Chinese players to export vehicles with value-for-the-money.
China focused on electrified vehicles
As the focus on environment in the Chinese public is increasing and the government has high hopes for its program to encourage auto manufactures to produce electrified vehicles. By 2020, the Chinese government hopes to bring 5 million electrified vehicles including both plug-in hybrids and pure electric vehicles onto the nation’s roads, which would make China the largest production hub of vehicles powered by electricity. Volvo Cars and Tesla are among the automakers that could export vehicles out of China.
More OEMs see China as relevant export hub
Last year GM started to export light vehicles from China to the USA. According to automotive analysts at IHS, this export volume will reach 50,000 units per year from 2017 and increase to almost 150,000 units per year from 2020.
Ford is another American auto manufacturer sourcing some Chinese produced volume to the USA, while Volvo, with their Chinese owner Geely, began exporting cars from China to the USA in 2015. Volvo’s volume is expected to exceed 40,000 units per year from 2020.
New ambitious players like the new Geely brand Lynk and electric vehicle producer Faraday Future have exciting concepts that could also contribute to increased LV exports from China.
During the past few decades, global consumers have got used to seeing the “Made in China” tag on all kind of goods. Maybe the time when they can also buy a vehicle with that tag is drawing near.