Yes, after I publish this, we’re going to get people jumping into the comments and complaining about us praising or promoting Chinese automakers and the Chinese government. But this is just about reality. The world is changing, fast, and in the auto world, things look set for some massive transitions. I’m going to split this into four sections below to make my case. After that, feel free to tell me if I’m wrong about where the auto industry is headed. 1. The future is electric, and Chinese automakers are far ahead of the rest. It’s easy to say the present is already electric, but until we go beyond 50% EV share, I’ll hold off on that claim. Electric vehicles will probably account for about 30% of new vehicle sales this year. But the technology learning curves and cost curves that have gotten us here are going to keep going, so EVs are just going to get more and more competitive and more and more popular. Chinese automakers are dominating innovation and sales in this arena right now, and I don’t see that changing. Chinese EV producers are often two or three stages ahead of legacy automakers from the US, Europe, and Japan on EV tech. So, as the EV industry grows, it seems obvious these companies will win more and more of the overall auto market. 2. Legacy automakers are mostly struggling financially, but especially with any efforts to electrify. European, US, and Japanese legacy automakers have been struggling to not lose money and shrink in recent years, and nearly every automaker is net-negative financially when it comes to electric vehicles. There’s no real indication that any of them are approaching profitability with an EV-focused approach, and none of them actually seem to be trying (except perhaps the Cadillac brand under the broader GM umbrella). If these automakers continue to struggle to make money, and even more so on EVs, they are likely to keep lagging at best or go under financially at worst while profitable EV-focused companies from China keep growing and selling their vehicles to more and more of the world. 3. Chinese automakers are starting to build and buy factories in Europe, South America, and elsewhere. BYD is building factories in Europe, South America, and the Middle East. XPENG is reportedly in talks with Volkswagen Group about buying a factory from them in Europe. Geely is already quietly in the door through its ownership of Volvo Cars, Polestar, Lotus, smart, and LEVC (London Electric Vehicle Company). 4. China was the savior market for Western brands, and they are quickly losing share there. Due in large part to the Chinese EV industry leaving them in the dust, Western car brands are rapidly losing their cache in China and losing market share there. They’ve gone from about 60% of the Chinese auto market in 2020 to about 31% last year! Given that China is the largest auto market in the world, accounting for about a third of sales, winning in China is important to winning globally. Considering their leadership in EV technology and EV sales, considering the financial struggles legacy automakers are having (and especially when it comes to EVs), considering the fact that Chinese EV makers are expanding their manufacturing footprint geographically as well as their EV sales, and considering how quickly legacy automakers are losing sales and market share in China, it looks to me like Chinese automakers are set to take over the world (the automotive world, of course). Perhaps some countries will do whatever necessary to support their domestic auto companies, but there are many countries without domestic auto companies! Those countries have relied on vehicles from Europe, Japan, and the US — but it seems inevitable they are going to get their cars more and more from China. Have a different opinion on all of this? Feel free to share.
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