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The Future of Global Auto Brands in China: A Looming Crisis

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Chapter 1: The Rise of Local Electric Vehicle Manufacturers

Recent insights from Nissan's CEO, Makoto Uchida, suggest that in the next three to five years, we might witness the decline of European, American, and Japanese automotive brands in China. This shift is largely driven by consumers favoring local manufacturers that offer more advanced and environmentally friendly electric vehicles.

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Section 1.1: The Decline of Traditional Brands

In light of my previous article on the Osborne Effect, which discussed the rapid decline in car sales unrelated to the semiconductor shortage, I recently reviewed a Reuters article titled "Global Automakers Face Electric Shock in China." This piece highlights the latest sales data from the Chinese market.

The evidence is compelling: as the Chinese electric vehicle market flourishes, consumers are increasingly opting for local brands like BYD, NIO, and XPENG over their global counterparts. Notably, these consumers typically prioritize electric vehicles and are inclined to consider American and European brands only when seeking gasoline-powered options.

Subsection 1.1.1: The Impact of Rising Fuel Prices

Advanced technology in local electric vehicles

This trend has been amplified this year, not just in China but globally, as rising gasoline and diesel prices make electric vehicles comparatively more appealing. A stark contrast is evident when comparing vehicle sales in the US, Europe, and China during the early months of 2022 to those of the previous year.

According to the China Association of Automobile Manufacturers, electric vehicle sales surged to 1.49 million units from January to April 2022, marking a 100% increase from the prior year. While the growth isn't as pronounced in the US and Europe, similar patterns are emerging.

Section 1.2: The Demand for Smart Technology

Consumers are not merely seeking electrification; they desire smart cars that can replace their outdated "analog" vehicles. If such options are unavailable or unaffordable, buyers may postpone their purchases, choosing not to revert to gasoline or older technologies.

This is how legacy brands are perceived: while they are recognized for their quality and comfort, they lag in technological advancements compared to newer entrants in the market.

Chapter 2: The Unique Position of Tesla

The first video, Major Auto Brands “Could Disappear” From China, discusses the potential disappearance of global brands in the face of strong local competition.

Tesla remains the sole global brand making significant strides, as all other manufacturers struggle to shake off their outdated image. Despite substantial investments to maintain their foothold in the Chinese market, where Volkswagen and GM still hold the top two spots in total sales, they falter in the electric vehicle segment, with Volkswagen ranking 15th.

The landscape is shifting rapidly. GM’s sales have plummeted from 2 million vehicles in 2017 to approximately 1.3 million in 2021—a staggering decline of over 35% in just four years as Chinese consumers increasingly favor domestic brands.

The second video, Chinese Brands Will Dominate Global Car Market by 2030 say Experts, highlights predictions about the future of the automotive industry dominated by local manufacturers.

Only Tesla effectively competes with emerging Chinese auto brands, having initiated the technological shift years ago and serving as a benchmark for these new players. With its primary factory in Shanghai, Tesla has become a major exporting hub to other Asian countries, Australia, and Europe, while its first European factory ramps up production to meet soaring demand.

Tesla's technological advancements in electric vehicles

Current trends affirm that electric vehicle sales are on an upward trajectory, and smart cars are poised to become commonplace in the near future. We are at a pivotal moment where new vehicle sales are beginning to rapidly increase.

Any automaker that fails to adapt to this evolving demand risks seeing a decline in sales and may lose its position in the market within a few years.

If you found this article insightful, you might also be interested in:

  • Car Sales Are Dropping Fast — And Not Because of the Semiconductor Shortage

Supply chain challenges have affected automakers, but the significant impact of the Osborne Effect poses a much greater threat to the industry.

Additionally, if you're interested in exploring more high-quality articles from me and other writers, consider joining the platform using my referral link here.

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