China’s Small Domestic Automakers Likely Out, EV Push Favors Big Names

APR 15 2018 BY MARK KANE 8

The Chinese car market is the world’s largest, but more than half of passenger car sales still comes from foreign automakers like Volkswagen and General Motors.

China

In the case of plug-in cars, China is the biggest market too, but domestic manufacturers have been leading the way so far.

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That could change soon because of upcoming quotas – manufacturers needs to achieve 10% credit score for New Energy Vehicles in 2019 (several credits can be earn with 1 plug-in sales) and 12% in 2020.

It means that both domestic and foreign makers needs to invest heavily in plug-ins and massive consolidation is expected as smaller manufacturers will be unable to survive on their own, according to a Bloomberg article.

“China’s breakneck push to lead the world in electric-vehicle adoption may cause collateral damage among the legion of domestic carmakers deemed superfluous to that mission.”

Acquisitions are already soaring, as in 2017 there were nearly 100, compared to 60 in 2016 and around 40,000 in 2014 and 2015.

Even the biggest state-owned manufacturers needs to set alliances or combine.

“A December partnership between state-owned carmakers China FAW Group Corp., Dongfeng Motor Corp. and Chongqing Changan Automobile Co. may be the start of consolidation, according to JSC Automotive Consulting. The trio signed a pact to cooperate on technology development, seeking new business models and outbound investments.

Add that trio to SAIC Motor Corp., China’s largest by sales; Guangzhou Automobile Group Co.; and BAIC Group, and the government has enough carmakers to meet its goals, according to Jochen Siebert, Singapore-based managing director of JSC Automotive Consulting.”

“That means a separate quartet of domestic rivals — collectively worth more than $17 billion — has no independent future and likely will be folded into other government-owned companies, Siebert said. The companies at risk include China’s biggest passenger-car exporter, Chery Automobile Co.; Hong Kong-listed Brilliance China Automotive Holdings Ltd.; Anhui Jianghuai Automobile Group Corp.; and Jiangling Motors Corp.

“They will be merged with big SOEs at some point,” Siebert said. “From the central government point of view, there is no need for any other SOE automakers.”

Source: Bloomberg

Categories: China

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8 Comments on "China’s Small Domestic Automakers Likely Out, EV Push Favors Big Names"

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Benz
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Benz

Any news regarding the Plug-In sales numbers in China in March 2018?

Benz
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Benz

March 67.778

and

142.577 in Q1.

mx
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mx

They need to form a consortium and use common parts and a common solution.

yo
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yo

Probably very true as companies that sell lots of cars in China like VW will be highly motivated to produce and sell their own BEVs vs buying credits off of another manufacture…
From a current BEV sales perspective it is mostly the big state owned companies selling BEVs in China with the exception of BYD…
BYD is about China’s 20 best selling brand (500k sales per year BEV and ICE) and their BEV and PHEV sales could be hit hard when the big companies all start selling BEVs in volume and maybe even at a loss to offset their ICE sales…
Not sure BYD truly knows their place in China’s auto market when they tried going up market and performance which could bite them in the end…

Pushmi-Pullyu
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Pushmi-Pullyu

A push for consolidation, and regulations in China which favor larger domestic auto makers over smaller ones, should come as no surprise to anyone who reads about the market there. China’s auto market is hampered by widespread local and regional (Prefecture and municipal) protectionist regulations, which favor cars made in the one region or locality over those made elsewhere in China. This has created a market in which new small auto makers pop up almost constantly, and the situation also hampers the ability of existing Chinese auto makers to grow to a truly national — and eventually international — seller. The central Chinese government regularly makes attempt to reverse this trend; I even once saw an article claiming that the central government had mandated that 90% of Chinese auto makers cease business, leaving just the largest ones to grow. However, I’m not sure that ever actually happened, as we regularly see articles indicating that the situation is as bad as ever.

John Doe
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John Doe
Yeah, like MX said too. Volume production has to do with.. volume. It is hard to survive in the auto industry be being small. They have to be able to mass produce a product with a fair quality, with quality parts at a competitive price. When I lived in Thailand, I lived with a woman I went to university with. Back in Thailand, she worked for a huge Japanese company purchasing components for complex office machines. Price pressure is extreme, and discussions about sums less then 1/10th of a cent for a component could take days. Always in the need to pressure suppliers to make it cheaper. Some of the results are massive specialized parts suppliers that produce one product to many brands, or at least very similar products. When a car supplier get an order for 50 million central locking systems to one supplier over a 5 year period, they get a much lower price then a company ordering 100K. With volumes, and the ability to use the same components in almost all models, prices are pushed. Manufacturers can invest in the best equipment, and automate as much as possible. During my training with plastic injection moulding machines, I… Read more »
Frank Blatterman
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Frank Blatterman

IMO this gives pure BEV manufactures a great opportunity for growth, especially those with factory’s already built. I read this as a steady source of income, as ICE producers purchase Carbon Credits until their own BEV facilities are completed.

robb
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robb

Where does Wuling motors fit in??