Five Wait-But-What Breakthroughs For China’s Auto Industry In 2016 – Forbes
China’s newly affluent will buy 25 million new vehicles in 2016. Industry insiders predict 30 million cars, trucks and bus sales annually by 2020. Imagine moving 80,000 new cars every single day of the year. Those numbers simply dwarf America’s 17 million vehicle sales this year.
What other records were set?
- Didi, Uber and Ride-Hailing: Didi Chuxing, the Uber of China, says it was transacting 19 million rides daily by the end of 2016. That works out to almost 7 billion rides a year.
> Big Picture. Didi shocked many when it took over Uber China operations in July, 2016. It should not have been a surprise. Uber was losing $1 billion a year in China. Didi operates in 400 Chinese cities and has 300 million active users. Unspoken agreement: Uber gets the U.S.. market. Did gets China. And the two will battles for other key markets including India and Southeast Asia. Didi also collected a $1 billion investment from Apple in April.
Big Picture: Germans automakers – Audi, BMW, Mercedes – Porsche – continue to dominate China’s 1.8 million million per annum luxury market. They take just under 80% of all premium sales. But Cadillac and Lincoln are gaining traction as fresh alternatives to the ubiquitous German marques. GM produces Cadillac XT5s, ATSs and other sedans at a new billion-dollar plant in Shanghai with its Chinese partner the Shanghai Automotive Industry Corporation. Lincoln imports its full set of offerings from the United States.
3. Exports to America. Since the 1990s, China has dreamed of exporting cars to America, just as the Koreans and Japanese had done before them. Who could have predicted that the cars would be American and European brands? China exported tens of thousands of Buicks, Volvos and Cadillacs to America in 2016.
Big Picture: Reality is that automakers do not always build where they sell. More accurately, they build where they sell the most. China is now Buick’s home, accounting for 80% of Buick’s worldwide production and sales. GM started shipping Buick Envisions (and Cadillac CT6 hybrids) to America over the summer. Volvo began exporting S60 sedans to the US in late 2015. Will other automakers follow? Volkswagen would be a prime candidate – should the Germans decide to abandon their tortured affair with U.S production. As the Chinese currency depreciates vis-a-vis the U.S. dollar and margins inside Chinese get thinner, look for more automakers to (quietly) ship product to America.
4. Great Wall Motors and China’s Red-Hot SUV Market. Hebei-based Great Wall became the first private Chinese carmaker to sell more than 1 million vehicles in a year in 2016.
Big Picture. Great Wall (think China’s Jeep) is in the right place at the right time. Demand for SUVs in China continues to accelerate. SUVs and crossovers now account for 40 percent of light vehicle sales. Great Wall produces the H6, China’s best-selling SUV. Great Wall’s million unit mark proves private Chinese car companies can hold their own against the state-owned automotive behemoths like Beijing Automotive and First Auto Works. One more thing: Chinese-branded SUVs now outsell foreign makes — an ominous sign for global automakers.
5. Electric Vehicle Leadership: China maintained its worldwide leadership in electric vehicle and plug-in hybrids, with sales surpassing 500,000 units in 2016. Chines brands account for 95% of sales. Most products are of the low-range, low-cost ((under $25,000 after subsidies), and uncertain reliability ilk.