• Chinese original equipment manufacturers (OEMs) to lead the next chapter of growth and transformation of the global auto industry with their winning operation model.
  • Global protectionism is set to accelerate Chinese electric vehicle (EV) makers’ localized production strategies, especially in Europe.
  • New Energy Vehicles (NEVs) to represent nearly half of the global market and 77% of the Chinese market aby 2030, while internal-combustion-only (ICE) vehicles will slip below 40% globally.
  • China to lead major markets in near-term volume growth as momentum in U.S. and Europe slows.

SHANGHAI (July 10, 2024) – Profit and revenue for traditional automakers remain at healthy post-pandemic levels, but they must urgently reinvent today’s Automotive Operating Model as a rapid power shift from China is about to disrupt the global industry, according to a comprehensive analysis published by AlixPartners, the global consulting firm.

As several transformative forces accelerate, automakers must be willing to change their approach to everything, from the way a vehicle is engineered, to how revenue is captured over that vehicle’s lifetime. The 2024 AlixPartners Global Automotive Outlook, the 21st edition of the annual survey, looks at Chinese OEMs’ recipe for success and lessons for traditional automakers.

“Chinese automakers are taking center stage and setting new benchmarks for an industry historically steered by the West, Japan, and South Korea,” said Dr. Stephen Dyer, Partner & Managing Director, Co-Leader of Greater China, and Head of the Asia Automotive and Industrials Practice at AlixPartners. “Chinese brands are set to keep the throne at home and take over 70% of China’s market share by 2030. Globally, we also expect Chinese brands to be a dominant force, selling 9 million units outside China, accounting for a 33% global market share by 2030. Chinese automakers have plenty of lessons to offer to global peers that are not only relevant in China but also applicable across global markets.

“Mature automakers must find a way to be competitive against the Chinese counterparts, or else they will cede the volume EV market to the Chinese brands, much like how the U.S. automakers lost the domestic small car market to the Japanese automakers in the 80s. Traditional brands who fail to get out of their business-as-usual mindset are in danger of being disrupted by inexpensive ‘good enough’ products.”

AlixPartners analysis summarized lessons learned from the winning operating model of top Chinese NEV OEMs compared with traditional approaches:

  • Supplier-OEM profit equation is flipped: Globally, automotive suppliers are reporting a 10.6% operating margin on average, trailing OEMs by nearly two percentage points. In China, where OEMs are more focused on near-term market share growth, the 10.4% supplier margin outpaces OEMs by 3.3 percentage points.
  • Faster development, fresher showrooms: Chinese EV automakers have ripped up the playbook on vehicle development time, creating new products in half the time of Chinese legacy brands (20 months vs. 40 months), mainly by ruthlessly prioritizing their speed to market and customer value propositions, such as strong infotainment and intelligent driving assist technology, over traditional ride-and-handling, noise and vibration, and reliability performance, etc. Meanwhile, China-branded models are 2-3 years fresher than non-China brands, with China NEV-dedicated brands averaging only 1.6 years in market, equipped with the latest technology and batteries.
  • “Made-in-China” advantage: Chinese brands enjoy a 35% cost advantage, affording them flexibility in Europe and elsewhere to lower prices to offset tariffs. This advantage is built on lower labor costs and higher vertical integration throughout the value chain, from raw materials and component suppliers, to final assembly and selling to other automakers. The quick ramp up of overseas shipping capacity further smoothens the path for exports, prompting Chinese automakers to secure their own transport capacity.

 

  • Higher sales-lead conversion: Many Chinese automakers utilize a direct-to-consumer sales approach, enabling a unified and transparent customer experience. These automakers use multiple channels for marketing and sales, resulting in higher consumer engagement.

Acceleration of localized production prompted by trade tensions

“Chinese EV makers have strong incentives for overseas expansion – to seek additional growth, fully utilize their resources, and complement their domestic operations,” said Yichao Zhang, Partner of the Greater China Automotive Practice at AlixPartners. “The recent EV tariff discussions came as no surprise to Chinese EV makers. Although U.S. or European tariffs will present significant obstacles to Chinese EV makers, they are set to drive the inevitable localization of assembly operations in key export markets across Southeast Asia, Mexico, and Europe.”

Zhang added, “Many Chinese automakers either have mature expansion plans or have already made significant investments to set up assembly operations in Europe. These new tariffs may further accelerate those plans which will give them a competitive edge and allow them to thrive in the continent. [A1] [A2] Chinese OEMs may also consider setting up joint ventures or pursuing acquisitions to expand into the European market. Against this backdrop, we expect Chinese brands’ market share in Europe to double to 12% by 2030, from an estimated 6% in 2024.

“Having a robust global production and dealership network is a key characteristic of leading global automakers. Eventually, the most successful Chinese EV makers will become truly global brands and manufacture in the same countries where they sell, just as the incumbent giants do.”

NEV and Software-Defined Vehicles trends to lead the transformation
China’s NEV market is much more mature than that in Europe or the U.S.. Globally, NEVs are predicted to represent nearly half (45%) of the global market by 2030, driven by surging demand for plug-in hybrid-electric vehicles (PHEVs), while demand for ICE vehicles is expected to slip below 40%. In China, AlixPartners forecasts NEVs to grow to 77% of the total market by 2030, up from an estimated 41% in 2024. This can be attributed to the battery electric vehicle (BEV) price parity, good charging infrastructure, and easier licensing for NEVs in China, while Western customers see BEV priced 35-55% more than ICE alternatives.

Meanwhile, as software-defined vehicles (SDVs) become prevalent by the end of the decade, it is set to fundamentally transform the way automobiles are engineered, sold, and operated. Today’s global car parc is comprised primarily of older-generation vehicles, designed using hardware-oriented engineering and unable to truly operate like an easily updatable smartphone on wheels, equipped with strong infotainment and intelligent driving assist technology and providing personalized features and real-time connectivity. In contrast, Chinese models use 20 times more OTA (over-the-air) updates post-launch than global traditional automakers.”

The AlixPartners Global Automotive Outlook also contains several sales forecasts. Among them: 

  • China sales will grow a relatively modest 4.7% in 2024 to 26.7 million vehicles. That number will exceed 32 million by 2030, 70% of which will be sold by China brands.
  • Sales in Europe will increase 2% in 2024, and track marginal growth of roughly 1% through 2027, led by Eastern Europe.
  • U.S. Sales will increase 3% in 2024, with growth juiced by resurgent interest in PHEVs. By 2030, ICE vehicles will only represent 35% of sales, upstaged by NEVs, which will hit 41% share by that time.