AlixPartners Predicts Chinese Automakers Will Have 33% Market Share By 2030

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The 2024 Global Automotive Outlook from AlixPartners suggests that traditional automakers are in for a very bumpy ride in the next few years as Chinese manufacturers increase their share of the world’s new car market to 33 percent. The financial pain to those companies who are used to being the perennial market leaders will be substantial, the company suggests.

The 2024 report is a wakeup call for the automotive industry. The report warns today’s leading automakers that they must urgently reinvent their standard automotive operating model because a rapid power shift from China is about to disrupt the global industry. As several transformative forces accelerate, automakers must be willing to change their approach to everything — from the way a vehicle is engineered to how revenue is captured over that vehicle’s lifetime.

The 2024 Global Automotive Outlook finds Chinese automakers are increasingly setting the standard for an industry historically steered by the West, Japan, and South Korea. By 2030, Chinese brands will be a dominant force around the world, selling 9 million units outside China, for a 33% global share. Growth will be built on cost advantages, localized production strategies in markets other than China, and highly tech-enabled vehicles that meet evolving consumer preference for design and freshness, the report says.

AlixPartners Sees An Inflection Point

“The global auto industry has been shaped by several inflection points over the past half-century, including the emergence of Japanese production techniques in the 1970s, then the rise of the Koreans, and the more recent disruption caused by Tesla,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners. “China is the industry’s new disruptor — capable of creating must-have vehicles that are faster to market, cheaper to buy, advanced on tech and design, and more efficient to build. For traditional OEMs, keeping pace with China’s strongest brands will require more than a course correction.”

Wakefield urged companies to avoid underestimating the scale of change the automotive industry is set to experience over the second half of this decade. By 2030, new energy vehicles, which in China means battery electric and plug-in hybrid cars and trucks, will represent nearly half of global vehicle sales, according to the Outlook report. China’s domestic brands will own one third of the international market, and automotive suppliers, who currently underperform OEM manufacturers globally in profit margins, could gain leverage amid a price war and increased demand for more advanced electrical and software features in tomorrow’s vehicles.

Impacts On US Manufacturing

The fundamental building blocks of automobiles will also transform, having major ramifications in the US, the analysis finds. The fleet of cars in the US today is comprised primarily of older vehicles designed using hardware-oriented engineering. They are therefore unable to truly operate like a smartphone that can be updated over the air. By 2032, 24% of sales in the US will be far more technologically sophisticated. That in turn will open the door to manufacturers being able to derive about $650 in annual revenue per vehicle, which will represent a substantial portion of all available revenue streams, according to the 2024 AlixPartners report.

“Automakers expecting to continue operating under business as usual principles are in for more than just a rude awakening. They are headed for obsolescence,” warned Andrew Bergbaum, global co-leader of the automotive and industrial practice at AlixPartners. “The revolution taking place in the global auto industry is driven by the incredible and once unthinkable maturation of Chinese automakers that do a number of things differently.

“Chinese brands put a higher value on features customers can actually experience, such as design and in-cabin tech; they are ruthlessly focused on maintaining their cost advantage even as they build factories abroad; and they have built a considerable lead in emerging NEV technologies – including battery production. Those capabilities have captivated China and will eventually define the global marketplace.”

US Brands Face Challenges In China

According to CNBC, the 2024 Automotive Outlook predicts Chinese automakers will achieve a 3% market share in North America, mostly in Mexico where one in five vehicles are expected to be Chinese brands by 2030. In most other major regions of the world, AlixPartners says the share of Chinese automakers is expected to grow exponentially. Those areas include Central and South America, Southeast Asia, the Middle East, and Africa.

Chinese brands in China are expected to grow from 59% to 72% in market share. Legacy automakers such as General Motors have lost significant ground in China in recent years amid the rapid rise of domestic brands such as BYD, Geely, NIO, and Xpeng. In Europe, where Chinese automakers have quickly grown in recent years, the market share of Chinese automotive brands is expected to double from 6% to 12% by 2030, according to the 2024 report. Forbes adds that the 2024 report shows Chinese brands have a 35% cost advantage and have the flexibility in Europe and other regions to lower prices to offset tariffs. The brands have lower labor costs and high vertical integration “from raw materials to component suppliers to final assembly to selling to other automakers.”

Among the findings in the 2024 AlixPartners report is that Chinese EV manufacturers have ripped up the playbook related to vehicle development time, creating new products in half the time — 20 months vs. 40 months — mainly by designing and testing to sufficiently meet standards vs. over-engineering. Chinese models are 2 to 3 years fresher than non-China brands, averaging only 1.6 years in the market. Further smoothing the path for export is the quick ramp-up of overseas shipping capacity, which has prompted Chinese automakers to secure their own transport capacity. In addition, Chinese companies utilize a direct-to-consumer sales approach, which promotes a unified and transparent customer experience. These automakers use multiple channels for marketing and sales, resulting in higher consumer engagement.

“The trends we studied point to a world where [new energy vehicles] are increasingly dominant, Chinese brands are increasingly prevalent, and traditional automakers, suppliers, fleets, dealers, and others are increasingly pressured to reinvent,” Wakefield said. “While we’ve long heralded the virtues of being more nimble, flexible, and adaptable, now is the time to approach those priorities with a greater sense of urgency and openness to new partnerships, operating principles, and expectations.”

Other key findings in the AlixPartners 2024 Global Automotive Outlook include:

• Battery packs, making up 35% of vehicle costs, are rapidly becoming more economical through chemistry innovation and materials price reductions.
• Raw material costs are declining overall, but ICE vehicles maintain a huge advantage. BEV material costs remain 85% higher than ICE counterparts.

The Takeaway

The likely dominance of the world new car market by Chinese companies is one of the expected benefits of more than $230 billion in direct and indirect subsidies by the Chinese government over the past decade. Whether one thinks those subsidies are fair or not, they happened and the Chinese auto industry is now about to reap the benefits. Erecting tariff barriers may serve some purpose — such as preventing an implosion of domestic production and the loss of hundreds of thousands of jobs — but it clearly is not a long-term solution.

Some may say the market for electric cars is shrinking and that some EV drivers are going back to conventional cars because they are frustrated by how difficult it is to find public chargers, but clearly, AlixPartners does not foresee the world at large turning its back on electric cars, especially low-cost examples from Chinese manufacturers.

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