The global expansion of Chinese car companies and the opportunities in the domestic car-grade chip market (Part 2)

As Chinese car companies expand globally, what opportunities will automotive chip companies face?

Since 2020, China's automobile export volume has grown rapidly. In 2022 and 2023, it will surpass Germany and Japan respectively and become the world's largest automobile exporter.

The growth of new energy vehicle exports is the core driving force for China's automobile export growth.

Chinese car companies' overseas expansion and investment while exporting high-quality industrial standards and supply chain management systems are crucial to building world-class brands.

It is estimated that by 2025, the volume of automotive chips exported to the five core overseas markets will reach 23 billion yuan.

China's automobile exports have entered a stage of high-quality development 

Analysis from a sales perspective: Since 2020, China’s automobile exports have continued to rise. In 2022, it will surpass Germany and become the world's second largest automobile exporter, with a year-on-year growth of 55.3%. In the first quarter of 2023, it surpassed Japan to become the world's largest automobile exporter. The growth of NEV exports is the core reason for the growth of overall automobile exports. Canalys predicts that in 2023, China's total automobile exports are expected to reach 4.4 million units, of which NEVs are expected to account for more than 30%.

Analysis from a supply and demand perspective: In 2021, the epidemic will cause instability in overseas supply chains, which is the core reason for the growth of China's automobile exports. After 2022, the overseas new energy vehicle market will see dividends. Chinese car companies have accumulated advantages in the following areas:

It has first-mover advantages in the field of electrification & intelligence, with sufficient production capacity and short product delivery time.

The establishment of a new global brand and a general electric vehicle platform.

High cost performance and high product strength have hit most foreign brands.

The transformation time of foreign brand NEV is lagging behind and the progress of core technology research and development is lower than expected.

Analysis from the perspective of core export areas: China's core automobile export areas are gradually shifting from "irregular areas" such as Africa, Central Asia, and South Asia to "economically developed" and "developed automobile industry areas" such as Europe and Southeast Asia. China's exports to The total volume of light vehicles in the above two core regions accounts for China's total export volume, increasing from 5.9% and 7.6% in 2020 to 22% and 14.3% in 2022. Among them, Chinese automobile products, the European market average in 2022 The export price exceeds 210,000 yuan. At the same time, the average selling price of China's automobile exports will increase from 112,000 yuan in 2021 to 140,000 yuan, an increase of more than 25%

Chinese independent car companies are actively exploring overseas markets 

Behind the continued growth in export volume lies the change in the core strategies and goals of Chinese car companies going overseas. Among them, the core overseas strategy has changed from the simple product trade overseas in the past to the current high product strength, innovative services and technology by cooperating with local dealers and relying on the advantages of the domestic complete industrial chain and cost-effective strategy to win the market. . The core goals of going overseas are also gradually transforming to high-end, localization, and branding.

In the process of localization in overseas markets, Chinese car companies will also face many challenges:

Political factors such as trade protection and local data management.

There are differences in localization needs for products in overseas markets, and the overseas ecology is not as rich as the Chinese market.

Brand reputation and sales strategy formulation issues.

Compliance issues such as chip communication certification and network security.

As the export volume of Chinese car companies continues to grow, and the strategic position of independent car companies in overseas markets changes. It is crucial for independent OEMs to invest in and build factories overseas while exporting high-quality and efficient industrial chains and management systems. It is crucial for independent OEMs to build world-class brands, achieve the best balance between product strength and cost, and resist external risks. The first-mover advantage generated by prioritizing overseas market deployment will outweigh the disadvantages of trial and error, which has become one of the consensus among mainstream car companies in overseas market deployment.

For supply chain companies, it is crucial to realize that the overseas layout of automobile companies must be a long-term strategy. Under such circumstances, how to identify partners with first-mover advantages, identify overseas markets with sufficient early-stage export volumes and high local market development potential in the future, and consider how to create innovative cooperation models with OEMs to jointly resolve overseas layout risks , is the key to whether supply chain companies can successfully borrow ships to go to sea. Understanding overseas market regulations in advance, solving compliance issues including overseas communication certification, and forming cooperation with overseas ecosystems will effectively make up for the shortcomings of enterprises' overseas ecological layout.

Combining the existing overseas layout measures of independent automobile brands and the needs of Chinese car companies to improve their comprehensive competitiveness in overseas markets, Canalys summarized the overseas layout development roadmap of Chinese car companies. In the past, due to technical barriers and brand power, most car companies limited their overseas layout. Limited to the 1.0 stage, a small number of car companies have deployed factories and channels in underdeveloped areas, or acquired overseas companies at higher financial prices, but it is difficult to develop further. In recent years, under the premise of leading NEV technology, some car companies have begun to try the 3.0 stage layout, considering global needs in the product development stage, and trying to export innovative operating systems to the outside world. Canalys believes that with the support of cost control, technology and concept advantages, the possibility of success for these companies in the 3.0 stage has been increased.

Forecast of the performance of Chinese automakers’ five core overseas markets in 2025 

Combining the local market appeal of Chinese products and the market appeal of various regions, Canalys predicts the regional market volume and penetration rate of Chinese automobile products in five core regions of Europe, Southeast Asia, Australia, India and Latin America in 2025. In the overall light vehicle market, the five core regional markets will maintain the same development trend as the global automobile market. It is expected that in 2025, the overall light vehicle market volume in Europe and Southeast Asia will grow to 13.7 million units and 3.8 million units respectively.

Southeast Asian market: Taking into account the existing market, the number of cars per thousand people is less than 100, which is far lower than the world average. Factors such as maintaining rapid GDP growth despite the emergence of the demographic dividend, Canalys predicts that in the next 10 years, the overall ASEAN automobile market will enter a period of rapid development. Although at this stage, the penetration of NEV light vehicles in Southeast Asia is lower than that of other mainstream countries, countries represented by Thailand and Vietnam continue to introduce support policies for the new energy industry and increase investment in infrastructure. Coupled with favorable factors such as the construction of the China-ASEAN Free Trade Area and the promulgation of the Regional Comprehensive Economic Partnership (RCEP), the penetration rate of Chinese automobile products, especially new energy products, in the Southeast Asian market will be further increased. It is expected that the penetration rate of Chinese automobile products in Southeast Asia will rapidly increase from 2.6% in 2022 to 12.8% in 2025. Of course, during the sales process of Chinese automobile brands in the Southeast Asian market, the average price of export products will be slightly higher than the average price of 14,000 to 17,000 US dollars in the local mainstream market, as well as the impact of the high brand recognition of Japanese and Korean brands in Southeast Asia. However, as Chinese automobile products are designed and produced locally, they will not only effectively solve costs and product adaptability, but also quickly increase the local recognition and influence of China's independent brands by assuming more social responsibilities.

European market: In 2022, European car companies will be less willing to increase NEV penetration. Coupled with the impact of geopolitical conflicts on the automotive supply chain, total sales will decline, thereby affecting NEV market demand. Starting from the end of 2022, the marginal effects of supply chain problems will weaken, coupled with Tesla's increase in European production capacity and the acceleration of the transformation of European car companies, the European market is expected to gradually resume growth in the future, accompanied by a further increase in NEV penetration. It is expected that by 2025, the European new energy market penetration rate will exceed 40%. At the same time, the average selling price of mainstream products in the European market is highly consistent with the average price of Chinese automobile export products, as well as the high educational maturity of the European NEV market. It is estimated that in 2025, the penetration rate of Chinese automobile products in the European market is expected to increase to 16.5%.