China’s electric car drive, led by BYD, leaves global brands behind

SHANGHAI��–����󾱲Բ�’����auto market, the world’s largest, is accelerating toward an������𳦳ٰ�������future – leaving established�������Dz��������������Ի����stuck in the slow lane.

When auto executives convene in Shanghai for the auto show starting Tuesday, they will return to a sharply different market from the one they left in 2021 when the industry gathered for a limited event under strict COVID-19 controls.

The biggest change: China-made �������Ի����now lead in key segments and their rise has been powered by new������𳦳ٰ�����–�����������models that are gaining share at home and overseas.

The biggest winner has been BYD, which will use the Shanghai show to unveil a new hatchback������𳦳ٰ�������vehicle (EV) for value-seeking buyers and a pricier EV sty�������as an SUV.

BYD’s sales in China are up almost 69% this year, giving it an 11% share of the overall����������market, more than the Volkswagen VOWG_p.DE brand or the Toyota 7203.T brand, according to an analysis of sales data.

“The stratification of this market into clear winners and losers is becoming clear,” Bill Russo, founder of consultancy Automobility said in a note issued on Tuesday. “And there are very few winners and a whole lot of losers.”

China’s passenger����������sales were down 13% in the first quarter, data from the China Passenger���䲹����Association show.

But sales of EVs and plug-in hybrids – an area where Chinese automakers �������by�����۶���now dominate – were up 22%. Sales of internal-combustion vehicles were down by an almost equal margin.

The result has been a double whammy for the likes of Volkswagen, General Motors GM.N, Honda 7267.T and Nissan 7201.T. Sales are down and so is market share.

More than 40 auto �������Ի����have followed Tesla in cutting prices on EVs since January in a price war that has supported sales of EVs and plug-in hybrid������𳦳ٰ�������vehicles (PHEVs), both of which are classed as “new energy vehicles” in China. It has also cut into industry-wide profitability, analysts say.

THE ‘FINAL BASTION’ FOR COMBUSTION

For years, China’s entry-level market for passenger��������s was dominated by combustion-engine��������s made by�������Dz�������automakers in partnership with Chinese���������Ի��.

But for��������s priced between $22,500 and $30,000, this year has been a wipeout for gasoline-only vehicles. Sales were down 20.5% in the first quarter, compared to a 68% gain for EVs and plug in hybrids.

BYD’s Song plug-in hybrid SUV, with a starting price of about $20,000, outsold the Nissan Sylphy, which had been China’s top-selling����������for three straight years.�����۶�’s Dolphin EV, which starts at about $17,000, was ahead of the Volkswagen Passat.

Because of the cost pressure on EVs from battery materials, the entry-level market is likely to be “the final bastion” for gasoline-only vehicles in China, Xu Haidong, deputy chief engineer at the China Association of Automobile Manufacturers said.

In China’s premium market, with prices between about $52,500 and $60,000,������𳦳ٰ�����–drive��������s are already the best sellers.

���۶���dominates China’s market for plug-in hybrids,��������s that have a combustion engine but are capable of being charged and running for shorter distances on������𳦳ٰ�������power.

Plug-ins represent more than half of�����۶���sales this year, giving the company scale to compete on price across its line-up, analysts say.

TESLA’S ‘HEART AND LUNGS’

Tesla saw a 27% increase in Chinese sales in the first quarter to just over 137,000 of its Model 3 sedans and Model Y crossovers. Tesla also increased share after cutting prices in China by between 6% and almost 14% in January.

That put starting prices for Teslas in China between $7,500 and about $10,700 lower than current US prices, which have also been discounted.

Analysts and investors will focus on what that means for margins when Tesla announces first-quarter results on Wednesday.

“Gaining further share in the key China market will be the hearts and lungs of the Tesla growth story,” Wedbush analyst Daniel Ives said in a note on Monday.

In a further threat to established���������Ի��, China’s exports are growing fast, �������by EVs and PHEVs. Industry-wide exports from China were up 83% last quarter from a year earlier.

BYD, which markets its��������s in Europe and Southeast Asia, had a 13-fold increase in exports from China. – Reuters