Marketing Scoops: The Self-Driving XPeng P7+ Does Great on Real Roads , Look Out, Tesla

Photograph courtesy of XPeng

Xpeng is seen by some as the Chinese answer to Tesla, not only because of its emphasis on tech, particularly self-driving, but also in terms of positioning. One of three Chinese EV start-ups listed in the US for a long time, it was best seen as an also-ran thanks to disappointing sales against better-known Nio and sales powerhouse Li Auto…….Continue reading….

By: Mark Andrews

Source: WIRED

Critics:

According to the China Passenger Car Association (CPCA), in the first half of 2020, the market share of local brands in the Chinese automotive market was slightly more than 30 percent, with German and Japanese brands then at around 30 percent and 25 percent respectively. Two years later, in October 2022, the share of local car brands in China reached 51.53 percent. It was the first time in history that the monthly share of local car brands in China exceeded 50 percent.

In contrast, the dominance of foreign brands are rapidly declining. The share of German brands fell to 19.25 percent, and Japanese brands fell to 18.94 percent in October 2022. Throughout 2023, the market share of local brands has remained at around 50 percent. These changes were attributed to the rapidly increasing popularity of new energy vehicles, and the failure of foreign brands to catch up with the shift.

In 2024, the market share of foreign car brands fell to a record low of 37 percent. According to a report by CPCA, the cumulative share of Chinese automobile brands in China’s local market reaches 61 percent for the full year 2024.Due to these market dynamics, some joint ventures that were already facing challenges during the era of traditional fuel-powered cars are further disadvantaged. In May 2023, Zhu Huarong, chairman of Changan Automobile, predicted that “in the next 2–3 years, it is conservatively estimated that 60%-70% of brands will face closure and transfer.

Between 2018 and 2023, eight joint venture manufacturers opted to withdrew the Chinese market. Other joint ventures with significantly decreased sales are scaling back their production capacity by closing and selling their underutilized manufacturing plants. The remaining production capacity has been acquired by their Chinese joint venture partners. In August 2023, BYD chairman and CEO Wang Chuanfu called on local Chinese car manufacturers to “unite” to take on foreign manufacturers, responding to the severe price war in the Chinese market throughout 2023. The call was welcomed by the CEOs of Nio and Li Auto.

Since the 2020s, Chinese technology corporations such as Huawei, Baidu, DJI have entered the automotive business. Huawei’s partnership with automobile manufacturers has taken the form of three business models, the standardized parts supply model, the “Huawei Inside” (HI) model, and the Harmony Intelligent Mobility Alliance (HIMA). Baidu and DJI have provided autonomous driving system and hardware to automotive manufacturers.

Qihoo 360 invested in the Chinese EV startup company Hozon Auto.Geely collaborates with Baidu to set up joint venture brands, and acquired Chinese smartphone company Meizu for its Polestar and Lynk & Co brands with its auto OS and AR system. Xiaomi is the first and the only Chinese tech company that is directly involved in automotive design, development and manufacturing, and operates its factory in Beijing.

Amidst the fierce domestic competition in China’s domestic market, Chinese automakers have established the building blocks for growing competitiveness in EV technology, software, digitalization, factor cost and supply chain areas. China’s domestic brands lead the market in the development and implementation of advanced assisted driving systems, capitalizing on their early-entry advantages in the electric and intelligent vehicle sector.

According to investment bank Goldman Sachs, newly opened Chinese car plants are the most robotized of such facilities worldwide. Authorized car dealerships are called 4S car shops. The 4S represents sales , spare parts, service and survey . In most cases, brand-name new cars can only be purchased from 4S shops. The profit of car dealerships in China is quite high compared to the rest of the world, in most cases 10%.

This is supposedly due to the ‘non-transparent invoice price’ as announced by manufacturers and to the premiums they charge for quick delivery. Due to the lack of knowledge for most customers, dealers can sell add-ons at much higher prices than the aftermarket. For new cars in high demand, a high premium is added for instant delivery or just placing an order. There is no regulation by either the government or associations, but some retailers are members of the China Automobile Dealers Association (CADA).

Direct sales are allowed in China, and have gained popularity in the 2020s, driven by new energy vehicle brands. Many electric car brands such as Nio, XPeng and Huawei’s HIMA rely heavily or solely on the direct sales model. Traditional automakers have also started adopting this sales model. This phenomenon has led to a reduction in the number of traditional dealerships. China encourages the development of clean and fuel-efficient vehicles in an effort to sustain the continued growth of the country’s automobile industry (see Fuel economy in automobiles).

By the end of 2007, China plans to reduce the average fuel consumption per 100 km for all types of vehicles by 10%. The proportion of vehicles burning alternate fuel will be increased to help optimize the country’s energy consumption. Priority has been given to facilitating the research and development of electric and hybrid vehicles as well as alternative fuel vehicles, especially CNG/LNG.

Unlike local Chinese manufacturers, joint venture manufacturers were reluctant to export their vehicles from China due to having to share 50% of the profit with its local partner, as opposed to keeping a full profit by exporting from fully-owned plants elsewhere. Notable exceptions in the early era included Honda, which formed China Honda Automobile in 2003 to produce vehicles for exports to Europe, and SAIC-VW that exported Volkswagen Polo to Australia in 2004.

As a result of excess production capacity, low cost of production, and the more accessible electric car supply chain, some joint ventures such as SAIC-GM, Changan Ford and Jiangling Motors (since 2018), Beijing Hyundai (since 2018), Yueda Kia (since 2018), Dongfeng Honda and GAC Honda (since 2023), and others started shipping vehicles from China to overseas markets.

According to a report from McKinsey, while Chinese car companies have performed well in overseas markets in recent years, their operating model remains based on “pure export,” making them less mature when compared to international car companies that have been deeply involved in overseas markets for many years. For example, only around 40% of Japanese vehicle manufacturers’ sales are produced in Japan, while 60% are produced and sold in overseas markets it operates in.

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