The Ongoing Collapse of the Western Car Industry

A First Quarterly Report

Given the sheer speed of the probable collapse of the Western car manufacturers I plan to provide a comprehensive update every quarter. As the first of these updates, this one is especially comprehensive to provide a baseline, future quarterly updates will reference this baseline. I will also continue to provide short more specific updates through Notes.

The car industry is perhaps the most important industry in the world given its role in driving manufacturing excellence, its massive supplier networks, its integration with so many other industries (especially electronics, software and robotics), the applicability of its technologies and manufacturing capabilities to military applications, and its contributions to the overall economy of a nation. Until about the mid 2010s Western car manufacturers dominated, even in China. The Chinese found a way to leap-frog those car makers, the electric vehicle, and apart from Tesla the Western car manufacturers only lackadaisically responded. They are now paying the steep price for that lack of foresight, and their destruction will create a large hole within the material base that facilitates Western power. This is the first of a regular quarterly update that I will be carrying out given the pace of the decline.

In 2015 the list of top car producers was dominated by Toyota, VW, Hyundai-Kia, Stellantis, GM, Ford, Nissan, Honda, Mercedes and Renault. By 2023, the names had hardly changed with Toyota, VW, Hyundai-Kia, Stellantis, GM, Ford, Honda, Nissan, BYD, BMW and Changan. The important thing though was that the two new Chinese additions were growing, with BYD growing very fast - at a rate of 61.8%; with BYD only selling battery electric and plug in hybrid cars. Seeing the Chinese suddenly appear in their rear view mirrors, the Western car manufacturers reached for their governments and got increased tariffs on Chinese EVs in the EU and the 100% tariff wall in the US and Canada. But these will at best delay the inevitable, as Chinese manufacturers simply expand into the rest of the world - with a Chinese EV market that is growing at 30-40% per year toward market saturation by the end of 2026; a doubling of current EV sales in that country. The most significant impediment to Chinese EV exports may in fact be the rapid growth of the domestic market, as increased production is utilized in a fight over domestic market share. Once that market is saturated, foreign markets will feel the full pressure from the Chinese brands; from the survivors of what is a brutally competitive domestic market.

A good country to watch is Australia that currently has a low EV market share (8.5%, with 5.9% BEV) but is feeling the impact of well priced Chinese cars as it has no anti-China EV tariffs. Overall sales are dominated by the Japanese, Ford and South Koreans, but that could rapidly change as the Chinese focus more on exports. Toyota had 215,000 sales in Australia, and Mazda 100,000 in 2023, out of a 1.2 million sales national market; with sales dominated by SUVs and trucks (“utes” in Australia). The BYD Shark “ute” PHEV and Seallion 06 PHEV seem designed for Australia (and also South America).

The above high spec vehicle was bought for the equivalent of US$40,000 in Mexico, significantly less than the equivalent US models. Australian EV sales are currently dominated by Tesla and BYD, with the competition becoming overwhelming as more and more Chinese brands enter the market; very significantly driving down prices to a level that should drive EV adoption.

Another will be a UK that also does not have anti-China EV tariffs, having exited the EU. This market is critical to the German producers with VW group holding a 22.5% market share, BMW 5.9% and Mercedes 4.6% in 2023. The Chinese exporters can be expected to target such open markets.

A Quick Summary Of Findings

The US ”big three” retreat behind the North American EV Berlin Wall, where also Tesla will make nearly all of its profits as its sales stagnate, while sucking up government subsidies. The Japanese manufacturers come to depend on that NA EV Berlin Wall as well, with only an ailing Toyota remaining as a global player. Suzuki is an exception with its focus on Japan, India and a myriad of other small markets. The German VW will be the major car maker to be most damaged by losses in China and other at risk markets. Its premium Audi and Porsche brands, together with BMW and Mercedes Benz will also be severely damaged; perhaps seeing global sales halved. All three German car groups will come to rely heavily on the semi-protected European home base and to a lesser extent the NA EV Berlin Wall.

Hyundai and Kia may very well flourish, even possibly in the Chinese market (unless South Korea gets caught up in the US drive to limit Chinese microchip development). Only a few of the Chinese companies will be the big winners, such as BYD, Chery, Geely, Li, Huawei and Xiaomi. The Chinese companies that have joint ventures with foreign car companies, and also sell a lot of their own-brand ICE cars in China, such as SAIC, Changan, GAC, Dongfeng and FAW may be dragged down; with SAIC also hit with very high EU tariffs. Others may succeed, but fall far behind the leaders.

So by the end of 2026 the global car company sales leader board may have a leading pack consisting of an ailing and protected Toyota, a flourishing Hyundai-Kia and a flourishing BYD; with little difference in their global sales levels. Then a second pack made up of ailing and protected VW and Stellantis. Then a third group made up of Geely, Suzuki, Chery and ailing and protected Honda, Nissan, GM, Ford, and Renault-Nissan-Mitsubishi (RNM) Alliance, together with a flourishing Li, Huawei and possibly Xiaomi. And quite possibly an ailing and protected Tesla, as its lack of new products leads to losses in China, and increasing inroads by competitors (including Hyundai-Kia and Geely-Volvo) in the slow growing US market which it relies upon for the vast majority of its profits. A slow growing and increasingly competitive European market will offer little if any offset, and even there non-EU markets such as the UK may stay open to Chinese brands.

So, China and South Korea (unless South Korea gets caught up in the US anti China technology restrictions) in the pole seats at the end of 2026 ready to do much further damage to the other manufacturers given their very significant lead in EVs and EV batteries. With so much protection, subsidies, and the lack of the intense levels of domestic Chinese competition, the ailing Western giants will continue to fall behind in technology, manufacturing capabilities, and price.

After 2026 those shortcomings may be in vivid display as the Chinese manufacturing plants in Europe and Turkey (which has a free trade agreement with the EU) come on line, with the greatest impacts upon the German (VW, BMW, Mercedes Benz), French (parts of Stellantis and RNM) and Italian (part of Stellantis) manufacturers. But Toyota and Tesla will also be significantly affected. Then only the North American EV Berlin Wall, and the Japanese non-tariff wall will be left, and even in North America the South Korea manufacturers and Geely will be within the wall. With a Trump presidency others may be too. And BYD is already working hard to breach the Japanese non-tariff wall, in a market of 4.8 million sales that is set for continuous decline due to Japan’s demographics.

The Ugly Americans

The “big three” of GM, Ford and Chrysler became GM, Ford and Stellantis in 2014. They have all been practising a strategy of higher prices and higher priced models which has greatly restricted the recovery in car sales after COVID; made worse by the cost of living crisis hitting many, many Americans. Vehicles are now stacking up on dealer lots, requiring deep discounts to move more product - while at the same time foreign manufacturers benefit from their different sales mix of smaller vehicles. At the same time, plans for the EV transition are constantly being reduced and delayed.

General Motors sales have already fallen from 10 million in 2016 to 6.2 million in 2023, predominantly caused by the halving of its sales in China (4 to 2 million), and its loss of its 1.2 million European sales. A million of the Chinese sales were by SAIC-GM-Wuling, in which GM holds only a 44% minority stake; in reality a Chinese car brand over which GM has no majority control. For the first seven months of 2024 in China, SAIC-GM sales were down 55% y-o-y (82.5% in July alone!), and SAIC-GM-Wuling (GM has a 44% holding) grew only 2% (but fell 32% in July). At this rate of decline SAIC-GM (2023 sales of 1.04 million) sales could be zero by the end of 2025, and SGW sales (1.2 million in 2023) very significantly reduced. With those Chinese sales disappearing between now and the end of 2026, together with other falls in Asia and Latin America, sales could be only around 4 million; with 2.9 million of those in the protected US and Canada and another million made by the Chinese SGW in which GM has no controlling stake. GM will be a predominantly a North American car company, with a minority stake in a Chinese company.

Within that protected market, GM is selling limited numbers of the Chevy Silverado full-sized EV truck for nearly double the price of the already expensive ICE version, just like Ford with the electric F150. Its US$75,000 for the “shockingly” basic work truck, and a more mainstream-equipped version starts at US$90,000. With the US cost of living crisis, these are already being discounted by up to US$20,000 which still puts them in the incredibly expensive zone.

There is the Chevrolet Equinox compact SUV priced between US$35,000 and US$45,000, compared to the market leading ICE compact SUV the Honda-CRV at US$30,000 to US$40,000. It has been a disappointment though, with slow charging and software issues; while GM loses money on each sales. All of GM’s EV offering have been disappointing, especially beset with GM Ultium EV battery and software problems. They are now pushing back and significantly defunding their EV plans.

Ford already shrank from 6.65 million sales in 2016 to 4.4 million in 2023, driven mostly by large sales losses in China and Europe. These are set to continue, especially with Ford discontinuing models in Europe where it sold 500,000 cars last year, and set to lose its remaining 200,000 Chinese sales and looking at sales falls across the rest of Asia; European sales are down 17% so far this year. So by end of 2026, perhaps only 3.8 million sales; with 2.3 million of those in protected US and Canada and a few hundreds of thousand in semi-protected Europe.

After initial enthusiasm the Ford F-150 EV has been a severe disappointment, as has been the Mustang Mach-E EV. The prices are just far too high with respect to ICE powered vehicles, and they have been beset with software and charging issues.

Ford has recently changed its EV plans, removing the plans fora a 3 row-SUV and delaying EV production in Canada until 2027 while also delaying a second US battery plant.

Stellantis is the combination of Fiat (Italy), Chrysler (US), and Peugeot/Citroen (France); a trifecta of industry laggards bound together. In 2023 Stellantis had sales of 6.4 million, a fall from about 8 million in 2019 due to losses in the US (2.5 to 1.8 million) and the Europe (4.2 to 2.7 million) offset by small rises in South America and MENA. It has only about 200,000 sales in Asia, so will be little impacted by the immediate Chinese onslaught. Two thirds of its sales are from semi-protected Europe and protected North America. Unfortunately for Stellantis, there is little cross-over between US products (large expensive trucks, jeeps, minivans and SUVs) and Europe (significantly smaller cars and cross-overs). In many ways the US and European parts are independent with little room for synergies; and could be easily split into two.

All of the big three massively raised prices in the past decade, and culled less expensive models, as they chased higher margins. Leaving the low and middle end of the market to foreign producers such as the Japanese and Europeans. The Stellantis US brands of Jeep, Chrysler, Dodge and RAM are viewed by the US buyers as the lowest quality brands, and therefore massively raising prices, 50% just between 2019 and the current day, was a great risk that did not pay off; hence the sales falls of recent years.

That sales fall has intensified in 2024, and Stellantis is looking at deep cost cutting in the US which may involve the offshoring of non-production jobs and the retirement of brands. Problems will only intensify as the ongoing cost of living crisis for the majority of citizens put these new cars far out of their price range; even more for EVs and PHEVs priced significantly higher than ICE vehicles, with new vehicles piling up on the lots of all US dealerships. All of the big three will be impacted, as they have to deeply discount and sales move to cheaper models from other manufacturers, but Stellantis may feel much more pain than average. Some of the ridiculous prices the company is trying to charge for their vehicles:

The Chinese EV Berlin Wall will simply produce a mediocre set of provider corporations that are not driven hard to innovate, and will drag their feet in moving to electric vehicles when compared to the Chinese producers. The EV Berlin Wall will not stop the Chinese EV industry from dominating the world.

The Good American?

Then there is Tesla, that was the pioneer of EVs in West but has significantly thrown away its first mover advantage through a lack of new model development and refreshes. Tesla took advantage of the COVID supply chain impacts to ramp up its car prices and rake in the profits into late 2022. Then with sales rolling over, and faced with brutal competition within China, Tesla has had to repeatedly cut prices to maintain demand. A very major issue for Tesla is its lack of any PHEV/EREV products, when the growth in the sales of these is significantly outpacing those of BEVs; especially in China. BYD is benefitting massively from its mixed EV strategy.

Tesla will sell just over 600,000 cars in China this year, but the brutal competition has created sales without profit. In addition, its sales are not growing while the general EV market is growing between 30% to 40%; Tesla is rapidly losing market share in China while offering 5-year 0% financing. In August 2024, Tesla’s Chinese sales were down 2% y-o-y while the Chinese EV market grew by over 40%. These sales were predominantly Model Y’s as the facelifted Model 3 has wilted in response to numerous directly competitive models from competitors (e.g. the Xiaomi SU7). Could this be the fate awaiting the 2025 facelift of the Model Y? The company will also sell just over 300,000 cars in Europe, but profitability there has fallen as competition increased and the market has stagnated; sales may be down as much as 16% y-o-y. The extra European tariffs on cars produced in China will also crimp profitability and specifically sales of the Model 3. The vast majority of Tesla’s profits come from its sales in the highly protected, low competition and highly subsidized US market. Even here, Tesla has repeatedly cut prices and offered 0.99% financing in attempts to maintain sales. Competition is rising from European, South Korean and even US competitors - resulting in Tesla’s market share falling below 50% this year. New competitive EV models from Volvo and others in 2025 threaten even more of Tesla’s relatively fat US margins, and a Trump presidency may result in the end of US government EV subsidies. Hyundai-Kia is producing more and more competitive US-built EV models, such as the Ioniq 5.

Overall Tesla sales and profitability are falling, in stark contrast to the Chinese companies. It will most probably have sales of less than 1.8 million in 2024, with profits at about the same level as in 2021 (half of the 2022 level). Not what would be expected for a company with a p/e ratio of over 100 when compared to projected 2024 earnings per share. The lack of new models in the face of rapid new vehicle introductions by its competitors, and the brutal cost and price cutting in the Chinese market, will continue to eat away at Tesla’s sales and profitability. Plans for a 6-seat version of the Model Y refresh (which is planned for some time in 2025) and vague plans for cheaper versions of the Model 3 and Y pale in comparison to the avalanche of new models and model refreshes that its competitors are releasing. Such as this Model 3 competitor from Xpeng at half of the price!

Or this from Nio which may be better than the Model Y at 15% less cost.

Tesla’s China sales may well be lower in 2026 than in 2024, with it relegated to the position of a tiny niche player when compared to the Chinese EV winners. In the US, Hyundai-Kia, Geely and other manufacturers may have made it just one of many EV providers. The same in Europe. It will have totally squandered its first mover advantage, perhaps becoming the DeLorean of EVs in later years.

There are also a number of EV startups in the US but none of them is doing well. Rivian is the most “successful” but looks to have a dim future, it is covered in the section on VW below. Fisker went bankrupt, and Canoo is very close to bankruptcy (its stock price is down 99% from its high). Nikola’s (stock price down 98% from its high) founder was sentenced to four years in prison for fraud and the company had to pay a US$120 million fine for misrepresentations.

Lucid delivered all of 2,394 cars in Q2 2024 (well below its plans) while losing about two thirds of a billion dollars each quarter (with about US$5.5 billion in cash, including a US$1.5 billion investment from Saudi Arabia).

Slow Motion Japanese Hara Kiri?

All of the Japanese manufacturers benefitted greatly from entry to the Chinese market and are now suffering from being unceremoniously being booted out of that market due to their incredible lethargy with respect to EVs.

The biggest is of course Toyota that sells more than 10 million cars worldwide. Due to its worship of the internal combustion engine and hydrogen technology, it stands to lose all of its 1.9 million Chinese sales; down 10.6% in the first eight months of 2024 y-o-y and 13.5% in August alone. The recent moves by especially BYD to directly attack the ICE and plug in hybrid low and medium end vehicle markets with radically lower priced PHEVs, using its 5th generation DM-i technology, is extremely dangerous to the bulk of Toyota’s (as well as Honda’s and VW’s) sales. Like the Camry-sized (and VW Lavida-sized) Seal 06 and Qin L PHEVs, starting at the equivalent of US$13,750 (compared to US$24,000 for a Camry and US$17,000 for the smaller Corolla). The Corolla-sized Qin Plus PHEV starts at the equivalent of only US$11,000, even the EV version is only US$15,000. Other Chinese manufacturers have matched these prices, or even gone below them. Here is the Qin L PHEV being range tested.

Then there is the all electric VW-golf sized BYD Yuan Up small SUV, starting at US$14,000.

As these only recently released cars gain traction in the balance of this year and the start of the next, we may either see deep discounting from Toyota (and VW and Honda) and/or an acceleration in the fall in sales.

Toyota is also seeing its sales fall in South East Asia (down 10% in Indonesia and 15% in Thailand) and the Chinese have made a rapid entry into Australia. As the Chinese EVs drive out Toyota in Asia excluding Japan, its sales will be predominantly in protected North America (2.6 million), non-tariff barrier protected Japan where it enjoys a 45% market share (1.67 million) and somewhat protected Europe (1.13 million); a core of 5.4 million sales. Then add in 568,000 in MENA, 479,000 in South America and 248,000 in Africa - 6.7 million; even when those will also be exposed to direct Chinese competition.

Toyota has changed its CEO and had “huge” plans for BEV and EV battery production, to produce 1.5 million BEVs in 2026 and 3.5 million in 2030, but even these plans were revised down; to 1 million in 2026 (about 10% of vehicles sold). In 2023 Toyota only sold 100,000 BEVs (less than 0.9% of vehicles sold), is not doing that much better in 2024, and only plans to sell 400,000 (4%) in 2025. At the end of 2026 the biggest car market in the world will already be approaching 100% EV market share!

Due to its sheer heft and geographic diversification, Toyota will at least stagger on for quite a while. The loss of some of its halo for quality engineering with respect to its new models will not help. Especially when it needs to release a huge amount of new models to be competitive in the EV space.

The other Japanese producers don’t look so fortunate. In addition, the Japanese market is set for a continuous slow decline due to the nation’s demographics. The past few years have not been fortunate to Honda, which has seen sales fall from 5.3 million in 2019 to 3.7 million in 2023. Its Chinese sales fell 12.3% in 2023 to 1.2 million, a further 27.2% in the first 8 months of 2024, and 44.3% in August 2024 alone; as it seems to be a major casualty of the BYD-led pricing attack upon ICE vehicles. Minus those Chinese sales and its South-East Asian sales, and Honda becomes a North American car company (1.3 million sales) with a Japanese subsidiary that enjoys a 22% market share (600,000 sales) plus some sales in MENA and South America - totalling about 2.3 million sales. Its plans to sell only EV or fuel cell cars by 2040 shows an utter disconnect with the current reality of EV adoption in China, and the rest of the world.

In 2023 Nissan still had 687,000 sales in China, after a y-o-y drop of 14.3%. In the first 7 months of 2024 sales fell 20.85% (in August alone 24.2%). Globally in 2023, Nissan’s sales increased by 4% to 3.44 million. Sales boomed in the US reaching just under a million, and in Europe to nearly 300,000 (90,000 in the unprotected UK), while increasing to nearly 500,000 in Japan; a base of 1.8 million. In the other markets, such as South-East Asia, Oceania, and South America (Nissan sold 250,000 cars in Mexico in 2023, where Japanese brands dominate) the company will be directly open to Chinese competition. So, most probably Nissan drops to about 2.5 million sales - with half of those in North America, one fifth in Japan and one eighth in Europe. Just as with Honda, Nissan becomes centred on North America.

In fiscal year 2023 (April 2023 to March 2024), Suzuki sold 3.2 million vehicles - 1.8 million in India and 675,000 in Japan. With the balance being sold to a myriad of countries, and Suzuki exited the Chinese market in 2018. Its geographical sales mix heavily protects it from Chinese competition and therefore it may be little affected in the period up to 2026. Any allowance of Chinese manufacturers into India, which has not been possible so far due to the animosity between the two nations, would be extremely dangerous for Suzuki. After 2026 its sales outside India and Japan may also become increasingly affected by Chinese competition.

Mazda sold 1.1 million cars in 2023, with only 85,000 (and rapidly falling) of those in China. North American sales increased to 407,000, Japanese to 165,000, European to 160,000 (30,000 in the UK), Australian to 100,000. So, quite possibly Mazda becomes centred on North America, with an offshoot in Japan and declining sales elsewhere; with sales falling in the UK and Australia.

The centrality of the North American market to the Japanese car producers, excluding Suzuki, will become greater and greater over time. The region will become a protected area for them, behind the new EV Berlin wall and pressure on Mexico to not allow too much dominance by the Chinese. With an accelerating population decline in Japan, the “home country” will become less and less important. Especially when so many of the Japanese manufacturing facilities are located in North America.

A German Stalingrad

The German car industry also massively benefitted from the Chinese car market, at one time reaping up to 40% of their global profits from that nation. Those times are over, and their China sales are set for a very rapid destruction by the end of 2026. This will have devastating consequences for the three major German automotive groups between now and the end of 2026.

Volkeswagen sold 9.24 million vehicles in 2023, compared to a high of 11 million in 2019, of which 3.2 million were in China and another 360,000 in the rest Asia. 3.8 million sales were made in Europe (427,000 in the UK), 1 million in North America, 520,000 in South America (more than half in Brazil), and 75,000 in Australia. The loss of the Chinese and much of the other at risk sales would represent a loss of around 40% of VW’s sales; its China sales dropped 20% y-o-y in Q2 2024 as BYD replaced it as the best selling car company in China. It would then be a European company with 5.68 million sales; 3.8 million in Europe (462,000 in the UK exposed to Chinese competition), 1 million in North America, and 500,000 in South America (the latter very exposed to Chinese competition). Last year it took a US$700 million stake in Xpeng to try to help its EV efforts, but Xpeng is not a leading player in China. The travails of VW’s attempted reorientation toward EV’s is documented in this story from Fortune magazine.

In June 2024, VW decided to invest US$5 billion in the faltering US EV startup Rivian - a company losing about US$1.5 billion per quarter and needing the extra cash just to stay afloat until it brings out cheaper more mass market models. Its first model the R1 costs between US$72,000 and over US$100,000 depending on the trim and options; and the company loses about US$40,000 on every one sold. Sales of only 13,800 in Q2 2024 were lower than the previous quarter, and the company announced cuts of 10% of its workforce. Its R2 model, with a target starting price of US$45,000, is not scheduled for availability until the first half of 2026. Rivian will need all of the VW cash and its current cash pile to stay afloat until that time, and then can they even make money on a much cheaper product? The VW investment points more to desperation than a confident long term strategy.

The German luxury brands, which include Audi and Porsche from the VW group, are being absolutely assailed across the board from multiple Chinese brands; their sales in China may be on the edge of a sales cliff. Li Auto is aimed straight at the Mercedes Benz and Audi/BMW SUV sweet spot, with its smallest model a direct competitor for the MB GLE SUV

Huawei-backed AITO is also aimed squarely at the German luxury models. The M9 is aimed at the Mercedes GLS and BMW X7, at half the price. With over 100,000 firm orders in the first 6 months after launch; the highest for any car selling for over RMB 200,000.

The BYD Denza brand is also aimed squarely at the German brands, here with the Z9 GT aimed at the high end performance sedans S-Class/EQS and Panamera type cars at less than half the price. Deliveries starting in September. Demand for the S-Class and EQS already tanked in China.

Then there is the BYD Yangwang brand super-SUV U8, priced at the equivalent of US$150,000. Already available and very well priced against the Range Rover, BMW iX, Mercedes G-Series etc.

There is nowhere for the German luxury brands to hide in China, and soon probably across South East Asia, Australia and the Middle East.

BMW global sales increased to 2.25 million in 2023, with 943,000 in Europe (160,000 in the UK), 825,000 in China, 410,000 in North America, and 26,000 in Australia. This includes significant success in selling fully electric vehicles, including 100,000 in China. Unfortunately in 2024 things took a turn for the worse, as even extremely large price reductions did not stem a sales fall of 4% in China in the first half of the year. BMW has now reversed the steep discounts to rebuild margins, but that will most probably result in a much steeper fall in sales (an actuality which then caused BMW to bring back deep discounting). The loss of those Chinese sales, and perhaps many in Australia, the UK and other nations without China-specific import tariffs, could halve BMWs sales and turn it into a Europe and North America only producer. Even if it manages to maintain a presence in China, it may be profitless or even loss making.

Mercedes Benz Cars had 2 million global sales in 2023, of which 737,000 were in China (down 2%), 230,000 in the rest of Asia (down 2%), 660,000 in Europe (up 7%, 88,000 in the UK) and 340,000 in North America (down 1%), and 24,000 in Australia; an exposure of over 50% of sales. Chinese sales fell 6% in the first half of 2024, with a greater fall for the company’s EVs which are seen as not up to par. We can expect a much more rapid sales fall given the Chinese onslaught into the luxury car space. Mercedes is also highly exposed to any Chinese retaliation against the European anti-China tariffs, as such retaliation could involve increased tariffs on imported high engine displacement internal combustion engined cars. The loss of China and much of the rest of Asia would be a phenomenal blow to a company that would then be relying totally upon Europe and North America.

South Korea Survives the Onslaught?

The South Korean car industry is represented by Hyundai (4.2 million sales) and its affiliate Kia (3.1 million sales), together with the very well priced Hyundai luxury brand Genesis. Of those sales for Hyundai 1.1 million were made in North America, 762,000 South Korea, 650,000 Europe, 605,000 India, 245,000 in China, 200,000 in Brazil, and 75,000 Australia. For Kia sales 955,000 in North America, 572,000 Europe, 560,000 South Korea, 255,000 India, 166,000 China, 76,000 Australia.

Both companies are heavily developing EV (both BEV and PHEV) models and are competing successfully, even recovering somewhat in China. They look to be the best Western producers to have the capability of withstanding the Chinese onslaught.

Protected from Chinese competition, Hyundai and Kia could be very big winners in Europe and North America between now and 2026. The biggest downside risk would be if South Korea gets caught up in the US attempts to stifle Chinese microchip development, as this could create both a Chinese consumer backlash and Chinese retaliatory tariffs and limitations on the export of EV-related critical minerals to South Korea.

And the Chinese …

Between now and the end of 2026, the Chinese domestic market is on track to achieve nearly 100% EV market share. The intense levels of competition are driving the Chinese EV manufacturers to continuously innovate and reduce prices at a rate that the Western manufacturers (except perhaps Hyundai and Kia) cannot keep up with. The result will be a domestic market nearly totally dominated by Chinese EV manufacturers, with levels of efficiency, innovation and tight profit margins unheard of in the West. The sheer scale of this EV market, and the related EV supply chains, will provide an insurmountable benefit for the successful Chinese EV manufacturers. To get a feel for the sheer number of players in, and the sheer dynamism of, the Chinese market here is 2 and half hours of the Beijing 2024 Auto Show. The US version pales in comparison.

As noted by Fortune magazine, with respect to the Beijing 2024 Auto Show:

“The non-Chinese stands had no interest from the public or the press,” recalls Felipe Muñoz, senior global analyst for JATO Dynamics, an automotive consulting firm. “The Western carmakers were looking at how [Chinese rivals] had become so powerful so fast, and wondering what to do and why did they let this happen.”

At the same time outsiders Huawei, Xiaomi, Baidu and Alibaba are bringing deep pockets to fund their expansive EV plans; there will be no reduction in the brutal level of competition.

In 2023 BYD sold 3 million vehicles, all of them EVs, and is on track to sell as many as 4 million plus in 2024 and quite possibly as high as 6.5 million in 2026. Probably only second to an ailing Toyota. BYD has rapidly become the “big dog” in the EV business, with a 34% share in China and looking to significantly grow its exports. Most recently it has triggered a new price war to drive EV prices below those of ICE vehicles, leading to a renewed growth spurt in EV sales. Its new DM-i hybrid technology is industry leading, and with BYD pricing its hybrid vehicles at or below the price of competitor (e.g. German and Japanese) ICE-only vehicles, it aims to rapidly speed up the death of the ICE vehicle in China and abroad; which would be a disaster for those ICE vehicle manufactures, which include some of the big Chinese manufacturers (see below). The release of the Sealion 5 DM-i compact SUV in the fourth quarter (starting at RMB 189,800, USD26,770) and the updated Han flagship sedan with DM-i on September 9th (starting at RMB 168,900, USD 23,300) may accelerate further the move to EVs; to possibly above 60% in December compared to 54% in August. These prices are far below those for the competing ICE and hybrid VW, Toyota, Honda and GM models, and even below smaller vehicles from those manufacturers. BYD received one of the lowest EU tariff levels, and will also have its 200,000 unit Hungary factory start production in 2025; facilitating a slow but sure increase in its European sales; also be helped by its planned factory in Turkey. BYD also has production plants in Brazil and Thailand. Some of their newest cars at the Chengdu Auto Show below, BYD is so big it has its own hall at the show.

SAIC sold over 5 million cars in 2023, but these were still predominantly internal combustion engine models. Just over half at 2.8 million of these sales were for SAIC own brands, while the balance was with its joint ventures with VW and GM. With the fall in the sales of these foreign brands, together with the struggling sales of SAICs own ICE vehicles and even its SAIC-GM-Wuling EV joint venture, 2024 is turning out badly for SAIC. In addition, it will also be impacted by the stiff EU tariffs placed upon its exports which include the very successful MG brand. SAIC is building production plants in Thailand, Indonesia, and Pakistan but currently has no production presence in Europe. We should assume that SAIC will struggle to replace its lost ICE sales in the hyper-competitive Chinese market, and may be a major casualty of the rapid move to EVs. In the first seven months of 2024, SAIC global sales were down by 37% and this decline may very well worsen with so many competitively-priced BEV and PHEV new models hitting the Chinese market together with the harsh EU tariffs; even EV and export sales fell heavily.

Changan sold 2.55 million cars in 2023, targeting 2.8 million for 2024 of which 750,000 will be EVs (a target that is looking quite a bit optimistic). With the pace of the move to EVs, Changan may struggle to replace its majority ICE sales fast enough although it has made major strides in this direction. The 233,000 sales of Changan Ford and 89,000 of Changan Mazda are also directly at risk. It is opening a plant in Thailand to drive expansion in South East Asia and it is growing overseas sales quickly from a low base, but these are not on a scale to offset the domestic losses. Sales actually rose 3.6% in the first 8 months of 2024, but dropped 10% y-o-y in August alone (with a 45% drop for Changan Mazda and 10% for Changan Ford). Its own-brand EV sales did increase by over 50% in the first 8 months (to about 1/4 of overall sales), and its exports by 66%. It is not on track to meet its 2024 sales target, but may fare much better than SAIC, GAC and Dongfeng. Vehicles such as the incredibly cost-effective Changan Lumin Corn below may stand it in good stead.

GAC sold 2.5 million vehicles in 2023, more than 20% of which were EVs. It is though very significantly exposed to the fall in foreign car brands through its joint ventures with both Toyota (950,000) and Honda (640,000 in 2023). It will struggle to replace the decline in these sales. GAC Toyota sales fell 25% in the first half of 2024 y-o-y, while GAC Honda sales fell 28% with a 43% fall in June. With sales of the GAC AION EV brand (406,000 sales in 2023) also falling significantly in the first half of 2024, and GAC Motor (406,000 sales in 2023) exposed to the move away from ICE vehicles, GAC looks to be one of the biggest losers from the EV transition. Overall GAC sales were down 26% in the first half of 2024, and 31% in June y-o-y, and the opening of a plant in Thailand will not arrest this decline.

Last year, Dongfeng Motor delivered 2.4 million sales in 2023, of which 524,000 were EVs (many of which were from Honda and Nissan). This includes 600,000 vehicles from Dongfeng Honda and 800,000 from Dongfeng Nissan; a total of 1.4 million. Honda sales were down 24% in the first 7 months of the year, and 40% in July y-o-y, while Nissan sales were down 6.7% and 20.8% respectively. The company had announced a sales target of 3.2 million for 2024, but it may have trouble just stabilizing sales at 2023 levels given the large drops in its joint ventures. Its overall sales were down 3.1% y-o-y in the first seven months of 2024, but that drop accelerated to 34% in July alone; its sales of EVs were flat in July y-o-y. As with SAIC and GAC, Dongfeng looks to be one of the biggest losers of the EV transition. Below is the latest compact electric SUV from its specialist EV Voyah brand, which is on track to exceed its 100,000 sales target for 2024. But such volume increases will not offset the much larger volume decreases elsewhere, and the possibility of a plant in Italy will also not materially offset the latter.

FAW will also be a very major loser from the move to EVs and the loss of sales by foreign brands as the vast majority of its sales come from joint ventures with Toyota, VW and GM. It has its own small volume luxury brand Hongpi, and the cheaper priced but also low volume Bestune brand.

Chery sold 1.88 million cars in 2023, a 50% increase on the year before; half of them exported. The company is heavily export driven, doubling its exports in 2023 - which are sold in 80 countries and it is the leading Chinese vehicle exporter. It has ten overseas full production and kit assembly plants, predominantly in South America, MENA and Russia. In addition, an agreement has been signed for a production plant in Spain. The company operates at the cheap end of Chinese cars, but is making progress in developing EV models, and has also set up a joint venture with Huawei - Luxeed; it is on track to sell at least 500,000 EVs in 2024. In the first eight months of 2024 it sold more than 1.5 million cars, an increase of over 40% over the same period in 2023; up 62% in the domestic market and 25% in exports. On a growth trajectory to be one of the major global players, here is the new Chery brand iCar 03.

Chery is providing Chinese level electronic features and good quality at very competitive prices in foreign markets, even with ICE cars; together with a long history of off-roading vehicles. A nightmare for the Japanese (even possibly Suzuki) and VW in the smaller and emerging markets. The basis of its success abroad, here is its Jaecoo brand J7 reviewed in South Africa, “a crazy amount of bang for the buck”.

Geely sold 1.68 million cars in 2023, and is on track to equal or beat its 2024 target of 2 million. It is making a successful move to EVs, and should be a major beneficiary of the growth in Chinese EV market share - with the Galaxy, Volvo, Polaris, Zeekr, Lynk & Co. and Geometry brands. In addition, it has manufacturing plants in both Europe and the US (Volvo, Polaris and Lynk & Co.) that allow it to sideline the European and US tariff walls. The new Volvo EX30, EX60 and EX90 EVs are extremely competitive models. With the ability to learn and benefit from the Chinese market while having access to Europe and the US, Geely could be extremely successful. It could easily be selling 3 million plus cars in 2026, and be one of the top 10 global car producers.

The new Zeekr 7X SUV, a direct competitor to the Tesla Model Y, is also incredibly impressive with industry leading fast charging, more range and power than the Tesla, and an extremely attractive design. It received 20,000 pre-orders in its first week of availability.

Great Wall Motors had sales of 1.2 million in 2023, with sales of EVs doubling to 262,000; a quarter of the company’s sales were made overseas, increasing 80% y-o-y. GWM seems to be struggling in the Chinese market with an overall sales increase in the first half of 2024 of only about 8% (overseas sales leapt 60% and EV sales 42% from a low base) that deteriorated to no growth in the first 8 months as a whole. It seems to be in the middle of a transfer from ICE to EV, causing it to seriously lag behind the big EV players.

The startups of Xpeng (VW has a 4.99% stake), Nio and Leap Motor (Stellantis holds a 20% stake) never reached their potential and are still struggling with low sales figures of about 150,000 each in 2023 with some improvement in 2024 for Nio and Leap Motor. But even then, all of these smaller players have cars that beat the Western manufacturers; a reason why many of the latter are forming alliances with the former. When another small player that you probably haven’t even heard of, Hozon Neta, has a car as good as shown below it underlines both the brutal competitiveness of the Chinese market and the scale of the challenge the Western auto makers have. Neta is already expanding into Mexico.

Li Auto has been able to grow more quickly and may nearly double sales in 2024 to 550,000 with its predominantly luxury EREV/PHEV SUV lineup that competes with the German manufacturers. It has no current plans for exports, but its products would have significant appeal to Western buyers if/when it decided to start exporting and/or producing abroad. The Huawei-backed Seres AITO EV brand sold 95,000 cars in 2023, and targeted a huge expansion to 600,000 sales in 2024; it may fall short but still reach an impressive 500,000 sales. Xiaomi set a target of 120,000 sales for its successfully launched SU7 sedan BEV, which it has announced it will exceed in November 2024 (only 8 months of sales and limited by factory capacity). With plans for a SUV BEV in early 2025, a direct competitor to the Tesla Model Y in the high selling mid-size SUV segment, and a SUV EREV in 2026 Xiaomi could be selling over a million cars per year by the end of 2026; and the Xiaomi business has deep pockets to fund its EV venture.