China’s determination Automobile sector It also relies on technological innovation and government support. Chinese brands are not subject to constant demand thanks to the participation of the state in their capital. This situation, together with the development of batteries and the electric car, has allowed the country to create an industry that is now measured against European and North American companies. As Josep María Recasens, Renault Group’s strategic director and head of Renault in Spain, points out, „it’s all about the technology” and they’re ahead of us. Its R&D centers are nothing to envy in Europe. They master software and all development. „They’re a whole generation ahead of us,” Renault chairman Luca Di Meo said recently. A small example is BYD, a Chinese manufacturer that makes one out of every two iPads sold in the world and provides the technology for one out of every five smartphones. Like I said, technology. Shenzhen is the city of the future and home to major Chinese technology companies.
In addition to dominating the value chain and being a leader in electrification, the Chinese automobile industry has a major advantage. Except for cases like BYD, most companies „They are state-owned… so there is no need to meet the need to make money. They already have a good tie.”, comments a key manager of a French manufacturer. In this scenario, the need for European brands to always win at any cost is clear. That’s where the Chinese have a lot of advantages. As long as they don’t lose a lot of money, they will continue to be supported, however implicitly, by their own government. They will come to stay.
Zhang Guiping, CEO of Chery International, commented to Brenza Iberica a few days ago:We want to make ourselves known to the public in Europe and present our products so that they can check their quality.. We know that Spain is a very competitive, demanding and very interesting market for us. Understanding the demand mindset in Europe is important, and we believe Spain is a good starting point. We don’t jump into the pool and then come back because that would be a bummer for the buyers. „It’s a minimum requirement.”
European manufacturers, led by French industry, managed to get the European Commission to launch an investigation into whether Chinese brands are receiving aid from their country’s government and thereby breaching fair competition laws. This was a reaction that did not have much effect, because Europe also tried to subsidize local industry through rescue programs (known as PERTE). Among other activities. „We love competition, but we want everyone to play by the same rules,” says Luca Di Meo, president of Renault and the European Manufacturers Association (ACEA).
Meanwhile, China is waiting to see them coming. Chairman of Chery International, Zhang Guiping, said in Wuhu a few days ago that it is normal for Europe to want to protect its local industry, but it will not affect them: „We’ve been exporting since 2001 and we’ve seen all kinds of tariffs and regulations…we’re still doing the same thing.”. So the investigation seems to be going nowhere, because higher fees won’t stop them from growing. The ability to create a block is on your side.
Get out of your market
The expansion of the automobile in China is going on very fast. With government support and growing middle classes, the Asian giant’s auto industry has gone from producing nearly two million vehicles in 1999 to delivering a total of 27 million by 2022.. It registered its record with 28 million vehicles in 2016. As for cars, China produced just 600,000 in 1999, but last year it already produced nearly 24 million units.
The domestic market has grown rapidly, from nearly six million in 2005 to a record 29 million in 2017., but it started showing some signs of stagnation just before the coronavirus pandemic. The proliferation of electric cars, benefited by the government and the delay of combustion cars left 26 million on the market. This makes brands want to step out of their comfort zone and introduce themselves to other markets, Europe being one of their next targets.
New Chinese manufacturers report million-dollar sales. Therefore, BYD is targeting a turnover of 90,000 million euros and sales of three million cars, which is 56% more than a year ago.. These figures confirm the need for them to leave their home market and seek new frontiers. And Chinese brands have been expanding over the years. They not only export fully finished vehicles but also choose a formula that is economically most beneficial for them. Chery is the leading car exporter in China and its figures point to 900,000 cars in 2023…almost the entire Spanish market. As we pointed out, in addition to filling boats with cars, the assembly formula is also desirable. CKDs (short for complete knockdown) are manufacturing plants, often owned by a European or American manufacturer, where cars arrive in containers as parts. These are manufactured in China and shipped from one point in the logistics chain to another for assembly in another country. To do this, they introduce several local suppliers for some pieces, thus paying lower fees, and they can choose to be considered brands with production in each end country.
A clear bet
It is this CKD method that Chery, for example, has been using for years to cater to overseas markets. Currently, Chery has 12 CKD centers outside China, which will favor market penetration with lower production costs.. Cherry centers around the world are located in Brazil (2), Venezuela (2), Egypt (2), Syria (2), Russia, Malaysia, Iraq and Indonesia (1), which will soon be joined by another in Turkey. In addition to the European one, everything indicates that it will be located in Barcelona. The visit to the facilities of the former Nissan plant in the free trade zone will occur in the second phase after the implementation in Spain and the European market. Whether they will finally settle in Barcelona will be known in the coming weeks. As you continue to grow, keep these names: FAW, Dongfeng, SAIC, GAC, BAIC, Changan, Chery, JAC, Geely, BYD, Great Wall, Seres, Nio, Xpeng, Lepmotor, Hozon, Li Auto, Baidu, Lynk&Co, Polestar, Omoda, Jaecoo, Aiways. They are the kings of the new era of the automobile, the Chinese, and in the expansion phase.