Automotive Industry in China - A Brief Overview

Automotive Industry in China - A Brief Overview

Pierluigi Visotti, Director – Program Management & Business Development, Bitron, 0

Having completed his MS in Mechanical Engineering from Politecnico di Torino and Global Executive MBA from China Europe International Business School, Pierluigi has over 12 years of experience in the automotive and mobility industries. Prior to joining Bitron in 2019, he has had successful stints with Marelli and Maserati across key organizational functions.

In a recent interaction with Bimlesh Prasad, Correspondent at CEO Insights Asia, Pierluigi shared his insights on various aspects pertaining to the current automotive market in China. Below are the excerpts from the exclusive interview –

What are some of the key factors driving high demand for automobiles in China?
China is the largest vehicle market in the world due to its enormous population and the rapid rise in middle-class earnings over the past few decades. Today, this middle class population has significant disposable incomes and is much inclined towards latest technologies, the perfect target for automobile companies. Secondly, the relaxation of regulatory policies over foreign investments has enabled many foreign automobile brands – especially Tesla – to establish manufacturing plants in China. As a result, customers are able to purchase foreign brand vehicles at a relatively cheaper cost, and this has been another factor for driving the demand for automobiles in China.

What role do the government and policymakers play in the development of automotive industry in the country?
Of late, China has been extremely ambitious in becoming the global technology leader across all industries and tech verticals. Due to the massive scope of growth opportunities it offers, the automotive industry is one of the prime areas in becoming a global tech superpower. Realizing this aspect, China has been thinking of the future, while making hefty investments in the EV space. This led to numerous companies foraying into the EV space with around 40 EV brands in China today. Additionally, the government too is supporting these new players to the fullest by not only easing regulatory frameworks, but also creating a conducive environment to freely innovate.

Throw some light on the impact new players will have on the market dynamics of the automobile industry.
The larger the number of players in a market, the tougher is the competition. To stay ahead in this competitive business scenario, companies are investing a lot of monies, developing new technologies that are less complicated and accessible, compared to internal combustion engine vehicles. Adding on, the government too is offering a lot of incentives to both local and foreign companies that are entering into the EV space in China. As a result, there has been a heightened competitiveness among all the players in the market, with each of them
trying keep their prices as minimum as possible to woo the customers. This has created a very positive atmosphere for all the stakeholders of the EV ecosystem.

How are automakers in China aligning their business strategies with the nation’s sustainability objectives?
China strongly believes that digitization and sustainable business practices are paramount towards the country becoming an economic superpower in the coming days. As a result, each of the new EV companies that are being incorporated in recent time in China is fully compliant with various sustainability regulations that are laid-down by the government. Thus, being Eco-friendly and reducing carbon emission to the maximum extent possible are among the core vision and mission statements of these organizations. However, majority of automobile companies that have been in business for a long time now are state-owned entities reinventing their business models and slowly shifting towards the EV technology. Also, these companies are investing a lot of money revamping their manufacturing units to support EV manufacturing and introducing new features in terms of entertainment, infotainment and connectivity to make their vehicle more digital-friendly.

China strongly believes that digitization and sustainable business practices are the paramount towards the country becoming an economic superpower in the coming days.

How has the local auto market maintained its resilience amidst economic shifts and how does it plan to navigate uncertainties ahead?
It is very easy for Chinese OEMs to achieve resilience during times of uncertainty as they have maintained a close connection with the government. This has enabled them to access a lot of insightful information and react accordingly whenever such needs arise. Since these OEMs have prior knowledge of what regulatory changes might occur, they are able to make investments accordingly with minimum risk and maximum outcomes. Another key advantage for companies in China is that the country alone is big enough for a business to thrive without even having to access the global markets, thus making them immune to any global crises.

How do you expect the automotive industry in China evolve in the days to come?
With EVs gaining widespread acceptance across the world, China is putting-in a lot of efforts to become a market leader in EV technology and is encouraging EV companies to leverage local technologies to the maximum extent. Currently, 40 percent of the total vehicles in China are EVs, making it the largest EV market in the world. These two factors are, according to me, the biggest growth drivers for the automobile demand in China today. Despite the ongoing global recession and geopolitical crisis, there has been a 12 percent increase in the automobile consumption compared to last year in China. However, the sale of internal combustion engine vehicles is seeing a significant dip in recent years with the customers becoming more inclined towards EVs, and this is expected to go even further down in the days to come.

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