Chinese automakers to claim 33% of global market share by 2030

China’s car makers are a growing threat to the automotive status quo, one that will require global manufacturers to re-examine the traditional industry business model.

This is the assertion of a new market forecast from financial advisory AlixPartners, which expects Chinese car brands to account for around one-third of the world’s auto sales by 2030.

Why this matters: While lawmakers in the U.S. and Europe are hoping to protect their own industries through tariffs, competition with China seems inevitable. As manufacturers adjust to this paradigm shift, it will be critical to identify the trickle-down effects for both consumers and dealers, who stand to lose or gain depending on how the industry adapts to this new challenge.

How is China capturing market share so fast?

• Streamlined development: The average length of time it takes to bring a vehicle from concept to production is around 40 months. However, China’s electric vehicle manufacturers are accomplishing this process in just 20 months (EVs are set to account for more than 40% of the country’s car sales this year).

• More car releases: As a result of shortened production times, Chinese cars are entering the market at a faster pace than others. A China-made vehicle spends only 1.6 years on the market before receiving a model refresh, two years less than foreign automakers.

• Lower production costs: Cheaper labor, strong domestic supply chains of key resources and ownership over multiple production stages have given Chinese car manufacturers a 35% cost advantage over their competitors. It remains unclear if this will be enough to offset aggressive tariffs implemented by other countries, but it certainly makes these policies less effective than lawmakers may have hoped.

A step back

• While the AlixPartners report suggests that China’s efficiency in launching new vehicles has been attained through an avoidance of “overengineering,” it is important to note that this may be having an adverse effect on quality control. A J.D. Power study published last month found that the number of quality issues found in domestically manufactured Chinese cars has risen about 18% year-over-year.

• Although much of China’s advantage in cheap manufacturing comes from its ownership of key supply chains, this isn’t guaranteed to last in the long term. Other countries are investing more heavily into their own domestic resources, such as lithium mining and refinement. Furthermore, as foreign car brands are pushed out of China, this may force companies to redirect investments back into their home countries.

Bottom line: China’s newfound role in the global automotive sector isn’t guaranteed to have a negative impact. In fact, increased competition in high-tech, low-cost cars could have a positive effect for consumers and dealers. But whatever happens, automakers run the risk of putting their own success on the line by not taking the threat posed by Chinese manufacturers seriously.

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