By Chantal Marx
South African new vehicle sales statistics have recently shown an increasing preference for Chinese vehicle brands at the expense of the more established 'traditional' brands from European, Asian and North American manufacturers.
Indeed, since 2009, China has been the largest producer and consumer of automobiles and holds a commanding market share in the vehicle export market. The vehicles produced in the world's second-largest economy have also found traction with domestic consumers over 60% of new passenger vehicle sales in China are domestic brands (up from ~35% in 2020).
Chinese producers have also been leading the market in new energy vehicles (NEVs - electric vehicles [EVs] and Hybrids). Around 70% of EV batteries and more than 60% of NEVs globally are produced in China. Chinese brands control more than 80% of the NEV market, with NEVs now representing more than 33% of cars sold in the country.
Over the last 20 years, the automotive industry has experienced a lot of changes which have been disruptive to the overall industry and market dynamics. The above graph shows unit vehicle sales by region of sale, that is, domestic consumption. North America had ~36% of global vehicle sales market share in 2005 followed closely by Europe with around 29%. The Asia Pacific (excluding China) region has maintained a relatively steady global market share of around 16% over the last 20 years, while China, which had only ~11% in 2005, has been the biggest disrupter of the vehicle market over the last two decades. By 2015, China had grown its market share to 32% (+21ppts vs 2005) and ~41% in 2024 (+30ppts vs 2005), while North America accounted for 27% of the market in 2015 (-9ppts vs 2005) and 22% of the market in 2024 (-14ppts vs 2005). The European story is more curious, as the region saw rapid gains in market share up to a peak of 30% in 2006/07/08, before falling to 21% by 2015 and 18% in 2024.
It is also evident that Chinese vehicle manufacturers have rapidly expanded in sales and reach to a wider market given that Chinese brands accounted for only around 6% of new-vehicle global sales in 2005, the lowest across the four major markets, to being the second in 2024 with 28% of the market behind only the rest of Asia which is kept higher by the continued dominance of Japanese auto-giants like Toyota (~10% market share) and Suzuki (~4%) as well as South Korea's Hyundai-Kia (~10%). US manufacturers include names like General Motors, Fiat Chrysler Automobiles (formally DaimlerChrysler) and Ford, while European brands include Volkswagen, Renault, Mercedes-Benz, BMW, Fiat and PSA Peugeot Citroen.
A rise to prominence
Looking back in time, several key milestones have catapulted the Chinese auto industry to where it is today. It all started in the early 21st century with China's entrance into the World Trade Organisation which opened it up to favourable trade relationships. To take advantage of China's vast population, rapidly growing economy, and expanding middle class, major foreign vehicle producers rushed to sell into the Chinese market while also investing in production facilities within the country which allowed for cheaper production and scalability. Expectedly, production capacity and vehicle sales soared.
The Chinese government was also instrumental in supporting consumption over the years, with a variety of stimulative measures being taken over time like the reduction of sales taxes for passenger vehicles and the implementation of car-scrappage schemes (measures to incentivise new vehicle buying) in the late noughties.
Despite China being the world's largest auto market by 2009, with great support from foreign investments and government, local brands still lagged major foreign brands. To address the lack of demand for local brands, China aimed to gain an early competitive advantage in a different pillar of the vehicle market - NEVs. To do this, in 2009/10, China established the so-called "Corner-Overtaking" strategy (aka Automobile Industry Adjustment and Revitalisation Plan) and listed NEVs as one of seven strategic emerging industries. The strategy was aimed at empowering local innovation to gain a competitive advantage using NEVs.
NEVs were also considered to be part of a solution to China's energy and environmental concerns. By 2010, China had become the world's largest importer of oil, and the country's vehicles alone were accounting for 1.3 billion tonnes of annual carbon emissions per annum - more than the entire country of Japan (at the time the third-largest economy globally). This Corner-Overtaking strategy would set forth a series of government (local and state) support for EV consumers and producers such as EV sales taxes being waived in 2014. According to the Paulson Institute, tax waivers and subsidies by authorities resulted in the average local electric passenger vehicle selling for ~35% of the value it would have cost without these breaks.
More recently, the increased global demand for electric vehicles has further cemented China's position as the top vehicle exporting nation. China's leadership in the market is underpinned by its massive and efficient production capacity, and extensive lineups of vehicles that have also become synonymous with innovative technology and competitive pricing.
Geographic expansion
While China has been the largest producer of vehicles, both internal combustion engine (ICE) and NEV, for a long time, consumption was mostly domestic. In fact, in 2017 new car sales peaked in China, with subsequent years seeing consumers show preference for pre-owned cars or other more affordable means of travel like e-hailing. As domestic consumer demand continued to wane post-2017, production capacity was much higher than local consumption demand.
Faced with overcapacity in the ICE sector and rapid capacity expansion in the EV sector, Chinese manufacturers had to seek expansion into outside markets. As such, rapid expansion into foreign markets would begin in 2020 and China went from 994 000 units exported in that year to over 5.9 million in 2024. Notably, though, more than 75% of their exports have been ICE vehicles, which are less favoured in the Chinese market where consumer preference shifted to NEVs. Most countries where China exports to, especially emerging markets, still mostly prefer ICE vehicles as digitisation and electrification technology needed for EVs has grown at a limited rate. Automobility Research and Auto in China note that the rapid uptake of Chinese cars in emerging markets like Southeast Asia, Central and South Asia, Middle East, Africa and Latin America are due to China's integrated supply chains across these markets which have allowed for the shipping of cars that are affordable, with cutting edge designs and advanced technology all through a wide range of models and makes. Leading the foreign expansion drive have been key players like GWM, Geely, BYD, and Chery.
While Chinese production and exports have increased, European brands have gone the other way. Indeed, global automakers have seen sharp declines revenues in Europe post Covid-19. This has been due, in part, to strict regulations in the European automotive sector. The EU targets new vehicle sales to be 80% EVs by 2030, despite a slow uptake of NEVs, and has been increasingly lowering the caps on CO2 emissions. Analysts have also cited other reasons for soft demand for European makes globally including the relatively higher costs of the vehicles, with consumers opting for more affordable options and even looking at other mobility options to counter a notably higher cost of living in many countries. This is particularly true for popular manufacturers like Renault (sales: - 40% vs 2019), Mercedes Benz (-29%), VW (-18%) and BMW (-3%). Against the tide has been luxury brands like Ferrari (+36%) and Porsche (+11%) who do not cater to the mass market. Worth mentioning is Stellantis, which is up 27% relative to pre-Covid-19 levels, but this was mainly due to the acquisition of Fiat in 2021, and it has come under some pressure more recently (-12% vs 2023).
The Japanese auto industry, the third largest in the world behind China and Europe, has, despite the rise of the Chinese automakers, seen its OEMs enjoy relative stability post the Global Financial Crisis of 2008-09, although the recovery post Covid-19 has been limited. Since its rise to prominence in the early '90s, Japanese as well as Korean automakers have benefitted from their globalised production and supply networks, and efficient production of cars that are focused on quality, durability and reliability. Toyota exemplifies this and this is evidenced by its dominant market share (~10%) and position as the most in-demand brand in the world.
China in Africa
In its most recent first-half filing (to the end of December 2024), Super Group's management, accounting for a 4% decline in both its revenue and operating profits in the 'Dealerships SA' segment, stated that "The entry of numerous new Chinese manufactured vehicle brands negatively affected the market share of a number of the traditional brands and also had an impact on later model pre-owned and demonstration vehicle sales and gross margins... The Group is increasingly well represented within these new product ranges and now has one Chery, three Haval, Jetour and GWM dealerships and four Foton dealerships."
China's heavy investment in Africa and increasing efforts to forge stronger bilateral relations in the continent is no secret. Africa accounts for ~0.6% of global new vehicle market share, with South Africa accounting for ~0.4%. Mordor Intelligence estimates that in 2024, used vehicles accounted for 68% of Africa's total market. However, growth in new vehicle sales remained supported by a growing African middle class, robust financing institutions, and persistent investments from various global automakers in local vehicle production facilities and automotive industrial zones. South Africa is at the forefront of the African automotive industry. The country's advantageous position stems from its advanced manufacturing and logistics infrastructure, strategic export positioning global markets, and government interventions such as the Automotive Production Development Program (APDP). The country also has well-established dealer networks and financing solutions. It makes sense, therefore, that as part of its foreign markets expansionary push, the Chinese are infiltrating the South African market.
In the NAAMSA 2024 BRICS+ Research Report, the South African Automotive Council said that between 2010 to 2023, automotive imports from China, India and Brazil increased by significant margins. The report noted that China has been the county's second-largest country of origin for vehicle imports since 2022 as local consumers gravitate towards the more affordable variety of options from the region. Traditional names like Toyota, VW, Suzuki, Hyundai and Ford have remained resilient at the top of the South African market, but market share has slowly crept away in favour of new Chinese entrants. Indeed, NAAMSA data shows that in 2024, total vehicle sales in the domestic market decreased 3% y/y, with passenger vehicles sales up 1.1%. However, over this period, Chinese brands (GWM, Chery, JAC, BAIC and Omoda and Jentour) saw sales increase ~19%. For the year, Chinese cars share of the passenger vehicle market increased to 13% from 11% in 2023, and to 9% of the total local market (2023: ~7%). Naamsa classified the 2024 year as one that saw sales remain under pressure as it "Continued to reflect a shift in matrix as various new entrants, in particular Chinese brands, offered options at the more affordable end of the pricing spectrum as consumers battled a tough economic climate."
Outlook and investment considerations
The outlook for the automobile manufacturing sector is relatively uncertain at current, all due to mixed realities in different regions due to economic and geopolitical variances. According to Bloomberg Intelligence, margin pressures are set to continue for global automakers as demand remains impacted by monetary policy easing slowing down, and tariff uncertainty persists. Consumers may delay spending, while lenders could loosen credit policies at a slower rate. As such, rising inventories may continue driving down prices for more established mass market manufacturers like Toyota, Hyundai, VW, Nissan, Stellantis and General Motors. Premium brands, like BMW, Mercedez and Audi, are expected to struggle in a trade war environment due to the difficulty of passing on higher prices to consumers who are already squeezed by high rates and costs-of-living pressures.
Luxury manufacturers like Ferrari, could fare better due to its relative immunity to mass market trends. Additionally, Ferrari's first EV is set for release in the latter half of 2025, which could drive new customers to the brand. The stock has derated on tariff fears more recently and is trading below its average rating over time.
The bargain hunting environment is set to continue supporting market share gains by Chinese automakers like BYD, GWM and Chery. BYD may also continue to benefit from thematic tailwinds as it continues to cement itself as the leader of the EV market. BYD's new five-minute super charging system, which allows 500 km worth of range, comparable to petrol refuelling, is a game changer and supports rapid market share gains. Trade barriers in the US and EU continue to see Chinese automakers expand production facilities and supply networks out of China and into the foreign markets.
Locally, companies like Metair that sell components in the domestic auto manufacturing segment (which mainly composes traditional OEMs) is still cautious on the near-term outlook. While it expects a recovery from certain manufacturers, the threat of continued weak demand in the export market and preference to Chinese brands locally, could temper a much-required recovery for the business.
In dealerships, the domestic market has not recovered to pre-pandemic levels and the South African Automotive Council expects further improvement in 2025, supported by growth-accretive reforms as well as improved economic indicators and investor sentiment. According to the NAAMSA leading CEOs Confidence Index, the outlook is cautious for the next six months but the strong sales performance of the passenger car segment in 4Q24 (+5.8% y/y, +4.5% q/q) set a solid foundation for continued momentum. A positive confluence of economic indicators also supports a positive outlook (below target inflation, improved consumer confidence, and potential further rate cuts). However, threats to the outlook include high borrowing costs, high electricity prices, volatile oil prices, port constraints and the effects of US foreign policies which threaten higher export restrictions, higher global inflation and slower rate cuts which all may have negative ripple effects for EMs. A continued recovery of the passenger market will benefit the likes of Motus, WeBuyCars, CMH and Super Group in their dealership business. However, the growth of the numerous lower cost Chinese manufactured vehicle brands may continue to eat away at the market share and margins of traditional brands - so the correct exposure is key.
