On August 28, 2024, we discussed the competition between China and the German automotive industry on Bloomberg HT. Understanding the dimensions of this competition is critical for developing future strategies.
Here are some key points on this topic:
📍 China’s Production Power
China produces 30 million vehicles per year. This figure is twice that of the US and nearly three times that of the European Union. Moreover, China has a production capacity of 48 million vehicles. This means it has the capacity to meet nearly half of the world's needs. Therefore, it is no surprise that China has become the world's number one automotive exporter.
📍 Competitive Production Costs
China can produce at costs that are 30-35% cheaper compared to the West. This cost advantage gives China a step up over its competitors. While China may not be technologically far ahead of the West, we are observing that the gap is closing. This situation should alert the West and prompt it to act swiftly.
📍 China’s Technological Development and Domestic Market Differentiation
Over time, China’s domestic market will differentiate itself from the rest of the world with “electric-connected-autonomous” vehicles. China is adopting a highly pragmatic approach to electric vehicles. Currently, electric vehicles account for 70% of sales in China. Europe, on the other hand, has not yet moved quickly enough in this area. China’s approach should prompt the West to take serious action.
📍 Limited Options for the West
Western countries have limited options. Apart from hiding behind tariff barriers to protect their industries, they have few alternatives. However, this will not be sufficient in the long run. The West needs to enhance its technology and competitiveness. Instead of remaining on the defensive, we must increase our pace of innovation and development.
📍 Conclusion
China’s technology may not be superior to the West’s. However, we must acknowledge that China is incredibly competitive. This competition forces the West to reassess its own strategies. We need to move faster, particularly in the realm of electric vehicles. Otherwise, we risk falling behind in the face of China’s rapid rise.
China’s impressive performance in the automotive sector serves as a warning not only for the West but for the entire world.
To watch the interview recording, click below 👇🏻
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