Automobile export has become a compulsory course for Chinese brand car companies. Instead of involuting in the Chinese market, it is better to fight for a place in the broader overseas market. This has become the consensus of almost all domestic car companies.

According to the data released by the China Association of Automobile Manufacturers on January 11, in 2023, my country's automobile production and sales will both exceed 30 million vehicles for the first time, setting a historical high. Among them, the most exciting thing is that last year's domestic vehicle exports reached 4.91 million vehicles, with a year-on-year growth rate of 58%. On the basis of China surpassing to become the world's second largest automobile exporter in 2022, we are expected to be crowned the world's first automobile exporter in 2023.

In 2024, can our automobile exports continue the high-speed growth in 2023 and continue to be an important driving force for China's automobile industry? Which domestic auto companies can stand out and take up the banner of Chinese auto companies' exports, etc., are all worthy of our focus.

What are the characteristics of automobile exports in 2023?

In the past two years, why have the three levels from the country to the local and then to the auto companies attached so much importance to automobile exports?

On the one hand, from the national level, the recovery speed of domestic consumption after the epidemic did not meet expectations. Exports need to continue to carry the banner of driving China's economic growth. The export of a large number of complete vehicles with leading performance and reliable quality has not only become a new engine to drive China's foreign trade and even the national economy, but also further polished the brand of "Made in China" in the global market.

On the other hand, from the perspective of car companies, the domestic automobile market has been extremely involuted in the past two or three years: on the supply side, a large number of new brands continue to enter the WTO, and overcapacity is becoming more and more serious; on the consumer side, China's market sales have reached 30 million, and the probability of maintaining double-digit high-speed growth in the future is very small. Automobile exports have brought new opportunities to vehicle companies: according to data released by the China Association of Automobile Manufacturers, in 2023, automobile exports will contribute 55.7% to the growth of total automobile sales.

Therefore, considering the above two factors, automobile exports have become the key to breaking the current Chinese automobile industry and even China's foreign trade. Judging from the export results in 2023, China's automobile exports have fulfilled their mission well.

Developed countries have made significant breakthroughs in the market. 

According to the data released by the China Association of Automobile Manufacturers, the top ten countries in my country's automobile exports in 2023 are Russia, Mexico, Belgium, Australia, Saudi Arabia, the United Kingdom, the Philippines, Thailand, the United Arab Emirates and Spain.

 Among them, nearly 800,000 vehicles were sold to the Russian market, which increased China's vehicle exports to Russia by 5 times year-on-year. Against the backdrop of multinational auto giants withdrawing from Russia, Chinese auto companies have filled the gap in the market well. The Russian market has also become one of the important factors driving China's annual exports to a new high last year. 

Therefore, compared with Russia, among the top ten countries in China's automobile exports, developed European and Oceanian countries such as Belgium, Australia, the United Kingdom and Spain are prominently listed. These countries usually have strong purchasing power, and local consumers are familiar with vehicles and are all "old drivers". Being able to occupy some places in these countries not only shows that Chinese-made cars are more cost-effective, but also that our car brands and vehicle quality have begun to be accepted by consumers in developed countries. In the past few years, in the domestic market, fuel vehicles/hybrid vehicles including BYD, Geely and Great Wall have been completely comparable to second-tier joint venture brands in Japan and South Korea in terms of quality, so it is natural for us to occupy a place in the European and American markets. However, we have to admit that the most important reason for helping us gain a foothold in European countries is that we have a relatively obvious system advantage in the field of new energy vehicles.

New energy vehicles have become the biggest highlight

In terms of energy type, in the export of new cars throughout last year, the export volume of fuel vehicles was 3.707 million, a year-on-year increase of 52.4%; the export volume of new energy vehicles was 1.203 million, a year-on-year increase of 77.6%. Although traditional fuel vehicles still have a relatively large advantage in volume, the export volume of new energy vehicles is rising rapidly, and the growth rate has exceeded that of fuel vehicles. At present, the awareness of energy conservation and emission reduction has been formed worldwide, so the export potential of new energy vehicles in the future is still very large.

Export is not smooth sailing

Because the automobile industry has a certain inertia. If there is no special impact, the export of Chinese brand cars will still be able to remain at a high level in 2024. Data predicts that China's automobile exports are expected to reach 5.5 million vehicles in 2024, an increase of 600,000 vehicles compared to 2023. In addition, we are also expected to surpass Japan in terms of export value, reaching about 10% of the global scale.

But for Chinese automakers, exports in 2024 are not without problems. The price subsidy investigation launched by the EU against China in 2023 became the biggest black swan event, sounding the alarm for Chinese automakers. As for the new battery bill passed by the EU, it has begun to count the carbon footprint and carbon emissions of Chinese-made batteries. In the future, the threshold for Chinese battery companies to enter Europe will only become higher and higher.

The initiation of relevant investigations does not mean that the EU's imposition of tariffs on Chinese electric vehicles/batteries is a foregone conclusion, but the EU's resistance to the entire industrial chain of Chinese electric vehicles has gradually emerged. After all, importing electric vehicles/batteries produced in China squeezes out local GDP and employment opportunities in Europe. Before the European economy has fully recovered to its pre-epidemic state, the new energy vehicle industry, which is regarded by Europe as a new economic engine, will naturally become the focus of EU trade protectionism.

Before the EU tariffs came down, European countries such as France, Italy, and Turkey had already excluded Chinese cars from the subsidy list. Not to mention the United States, whose "Inflation Reduction Act" provides up to $7,500 in subsidies for each electric car, not only makes Chinese vehicle and battery companies completely unable to benefit, but also completely decouples key materials in batteries from China.

To completely avoid the risk of potential trade wars, building a factory locally is undoubtedly the most direct way. At the end of 2023, BYD officially announced that its first passenger car factory in Europe will be located in Hungary. Before that, its bus factory and battery factory had already landed in Hungary. In addition, SAIC and Chery, which also have ambitions in Europe, have been rumored to be looking for locations for their European factories, especially Chery is said to be locating its European factory in the UK. Outside of Europe, a number of Chinese vehicle and battery companies have also regarded Thailand/Malaysia as a bridgehead for their layout of the ASEAN market.

The benefits of building a factory locally are self-evident. In addition to avoiding the impact of potential tariffs, it can also greatly reduce logistics costs and reduce the waiting time for vehicle delivery to better meet the needs of local consumers. Of course, building a factory in Europe can also obtain considerable subsidies from local governments. However, there are also some problems in building a factory in Europe. Whether it is the management of local labor or the fact that the related auto parts industry may still need to rely on domestic support, these problems and difficulties need to be paid attention to in the early stage.

Prospects for Chinese brands going overseas

To export well, we must make good use of the two powerful weapons of technology and industrial chain cost.

In terms of technology, in 2023, Volkswagen and Stellantis, the two major European auto giants, have successively invested heavily in two domestic new forces such as Xiaopeng and Leapmotor. European multinational auto giants have changed from "masters" to "students" overnight. As for GM and Ford's electric vehicles, it seems that there is no other trick in the domestic market except price reduction. Configurations like Huawei's Hongmeng smart cockpit and ADS 2.0 smart driving have generational advantages in user experience compared to a number of multinational auto groups.

In terms of industrial chain costs, our advantages are also very obvious. A Volkswagen ID.3 has a sales price in Europe of about 2.5 times that of the same model in China. In addition, Renault, Volvo, BMW, Volkswagen, etc., all sell electric vehicles made in China overseas. Renault's Dacia Springo and Volvo's EX30 are typical representatives. In addition, while Tesla is building a new super factory in Mexico, it also requires its parts suppliers in Shanghai Lingang to build factories in Mexico and continue to provide supporting services for it, which also shows that Musk favors Chinese suppliers to a certain extent.

Finally, we would like to say that operating overseas markets is a long-term project and a systematic project. In the early stage of the project, whether it is to enhance brand awareness or to lay out a sales network, it not only requires a lot of resources, but also requires a long period of accumulation. Chery's success overseas is inseparable from the result of more than 20 years of loneliness and gradual hard work. If you want to solve the domestic market problems through overseas markets in a short time, you still underestimate the difficulty of laying out the global market. Not long ago, SAIC's MG5 only scored zero stars in a test by the Australian New Car Assessment Program (A-NCAP), which shows that it is not easy to occupy a certain market share in overseas markets, especially in developed countries.