From replicas to global dominator

China's auto revolution is surpassing global giants in race for market leadership

KARACHI:

The Chinese automobile industry has been surpassing global market leaders in terms of cost, features, durability, and comfort. According to well-placed sources, Japanese and European companies, which set up plants in China four decades ago, are now wrapping up their businesses as Chinese companies take their place.

Japan, the EU, and US technology were once the benchmarks, and their vehicles outsold Chinese brands. However, China has undergone a complete transformation from its days of making replicas two decades ago. Today, Chinese companies offer high-quality vehicles at lower prices. With a vast domestic market, they conduct extensive testing within the country, leading to success in international markets.

China initially lagged behind in engine technology and had to import engines. However, over the last 15 years, China has made significant strides in research and development (R&D), and now manufactures its own engines. Japan and Europe, once leaders in engine technology, are now trailing behind China. With the growth of the electric vehicle (EV) industry, China is beginning to outpace its rivals.

Auto sector expert, industrialist, and dealer Muhammad Sabir Shaikh noted that 20 years ago, the Chinese auto industry produced low-quality vehicles. However, in the last 15 years, it has surpassed almost all market leaders in terms of quality and price. China's vast domestic market has provided the opportunity to refine and improve its products.

"Chinese manufacturers are focusing on EVs and moving away from hybrid vehicles. Only Japan continues to push hybrid cars, but it will likely be defeated in the coming years," Shaikh said.

Consumers in Pakistan have given positive feedback about Chinese brands such as Haval, Changan, and FAW. China has been exporting fuel-driven and electric vehicles to international markets for about 10 and four to five years, respectively.

In countries like Pakistan, where vehicles are often seen as movable assets, resale value is an important consideration. While the resale value of Chinese brands is still developing, it is expected to improve as their quality continues to rise.

Auto sector analyst Mashood Khan stated that the US and European countries remain leaders in the EV market, while Japan leads in hybrids. However, China's R&D efforts have closed the gap between fuel-driven and electric vehicles, and it is now surpassing Western markets. The global automobile market is now divided into three main players: the US/EU, China, and Japan.

China's vast domestic market produces 27 million vehicles annually, compared to Pakistan's 200,000. More than 50% of China's total vehicle production consists of local brands. As China's local production continues to grow, it is giving Western countries tough competition and emerging as a market leader.

Although China entered the international market after some delay, it has quickly established a strong position and secured a significant market share.

Eminent researcher on China's industrial growth and economic analyst Zamir Ahmed Awan noted that China invited global leaders such as Volkswagen AG, Toyota Motor Corporation, Honda Motor Company Limited, Mitsubishi Motors Corporation, Mazda Motor Corporation, Volvo Cars, General Motors (GMC), and Chevrolet to set up plants in China.

The first Volkswagen plant was established in Shanghai in the 1980s. Awan, who was in China at the time, recalled that the plant produced appealing models at reasonable prices.

He stressed that Pakistan has a great opportunity to benefit from China's technology, as China is a close friend and is always ready to share its expertise. Chinese investors are eager to invest in Pakistan, but they need assurances that their investments and lives will be protected.

"I hope Pakistan's government will address these concerns so that China can make significant investments in the automobile sector, particularly in EVs," Awan said.

Pakistan is a developing country where many locals cannot afford fuel-based vehicles, but there is significant potential for EVs. If the Pakistani government establishes a long-term, sustainable policy and assures Chinese investors that there will be no policy shifts after investments are made, they will be ready to invest without delay.

The prices of Chinese EVs could be reduced to half the cost of fuel-driven vehicles in Pakistan. Taking all stakeholders on board to formulate a robust automobile policy could transform the local industry, but sustainable and long-term policy is essential for revitalising the sector. Foreign investors trust policy continuity; without it, they will be hesitant to invest. Background and future outlook:

The Chinese automobile industry was based on Russian technology 40 years ago. These vehicles were durable but not fuel-efficient and lacked modern features. Once China embarked on its journey of modernisation and reforms, it developed a long-term policy to attract global market leaders in the automobile industry with useful incentives. This policy included cheap labour, tax relief, improved law and order, and liberal conditions, which attracted foreign investors to establish automobile plants in China. Initially, market leaders manufactured vehicles under their own rules and quality control, but as China developed a skilled workforce, it began producing its own local brands.

Over the last two decades, these local brands have gained momentum and popularity due to their cost-effectiveness, quality, and latest technology. China's self-sufficient automobile industry now exports vehicles, including cars, buses, trucks, and motorbikes, with state-of-the-art designs and advanced R&D.

China's next step was to dominate the EV market. Today, China is the world's largest EV manufacturer and a global leader without competitors in this field. Chinese quality and cost of manufacturing have surpassed other global leaders in the automobile industry.

Recently, the US and Europe imposed strict measures, including new taxes and duties, to curb the rapid growth of Chinese EVs and protect their struggling local industries. These measures aim to make Chinese EVs unaffordable in the US and EU markets. Despite these challenges, Chinese EV brands like BYD have significantly impacted the sales of US and European EV industries due to their attractive features and low cost.

In the coming years, China is expected to be a dominant market leader as its cost-effective electric cars and motorbikes continue to gain global popularity.

THE WRITER IS A STAFF CORRESPONDENT