The traditional automotive operating model is poised for a seismic shift as Chinese brands are projected to capture one-third of the global market by 2030, according to a forecast by AlixPartners, a global consulting firm. Despite healthy post-pandemic profits and revenues, traditional automakers are being urged to urgently reinvent their approaches to engineering, production, and revenue capture to keep pace with this impending disruption.
The 21st edition of the AlixPartners Global Automotive Outlook highlights the accelerating influence of Chinese automakers, which are redefining industry standards long dominated by Western, Japanese, and South Korean brands. By 2030, Chinese brands are expected to dominate, selling 9 million units outside China, representing a 33% share of the global market. This growth is attributed to cost advantages, localized production strategies, and the development of tech-enabled vehicles that cater to evolving consumer preferences for design and innovation.
“China is the industry’s new disruptor – capable of creating must-have vehicles that are faster to market, cheaper to buy, advanced in tech and design, and more efficient to build,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners. He emphasized that traditional OEMs need more than minor adjustments to compete with China’s leading brands.
The forecast indicates that nearly half of global vehicle sales will be new energy vehicles (NEVs) by 2030, with Chinese brands owning a third of the international market. Automotive suppliers, who currently trail OEMs globally in profit margins, might gain leverage in the evolving landscape characterized by a price war and increasing demand for advanced electrical and software capabilities in vehicles.
AlixPartners’ analysis also predicts a significant transformation in the foundational aspects of automobiles. The current global car parc, predominantly comprising older-generation vehicles, will give way to sophisticated software-defined vehicles (SVDs) by 2032, potentially generating approximately $650 in annual revenue per vehicle in the U.S. market alone.
“Automakers expecting to continue under business-as-usual principles are headed for obsolescence,” warned Andrew Bergbaum, global co-leader of the automotive and industrial practice at AlixPartners. He noted the revolutionary impact of Chinese automakers, who prioritize customer-experienced features, maintain cost advantages, and lead in NEV technologies, including battery production.
Key findings in the report regarding China’s automotive business model include:
- Supplier-OEM Profit Equation: Chinese suppliers report a 10.4% operating margin, outpacing OEMs by 3.3 percentage points, contrasting with global trends where suppliers trail OEMs.
- Rapid Development and Fresh Showrooms: Chinese EV automakers develop new products in 20 months, half the global average, and their models are notably newer, averaging only 1.6 years in the market.
- Cost Advantages: Chinese brands enjoy a 35% cost advantage, enabling competitive pricing strategies in international markets. This advantage stems from lower labor costs and high vertical integration.
- Direct-to-Consumer Sales: Chinese automakers employ a direct sales approach, enhancing consumer engagement through multiple marketing and sales channels.
Sales forecasts from the report indicate modest growth across major markets, with NEV sales surging globally:
- Europe: Sales will rise 2% in 2024, with a 1% growth rate through 2027.
- U.S.: Sales will increase by 3% in 2024, with NEVs expected to constitute 41% of the market by 2030.
- China: Sales will grow by 4.7% in 2024, reaching over 32 million vehicles by 2030, with 70% sold by Chinese brands.
- NEV Sales: Expected to surge by 32% in 2024, with a 45% market share by 2030.
“The trends we studied point to a world where NEVs are increasingly dominant, Chinese brands are increasingly prevalent, and traditional automakers and suppliers are under increasing pressure to reinvent,” said Wakefield. He stressed the importance of agility, flexibility, and openness to new partnerships and operating principles to navigate the forthcoming industry changes.
