Rise of China's EV makers threatens Western automakers, UBS report says

Western automakers are set to lose a fifth of their global market share due to the unstoppable rise of more-affordable, cheaper-to-produce Chinese electric vehicles, according to UBS Group analysts.

Led by BYD, Chinese automakers will almost double their share of the auto market to 33 percent by the end of the decade, UBS analysts including Patrick Hummel and Paul Gong wrote in an Aug. 31 report. 

Chinese manufacturers including Nio and Xpeng have ramped up their presence at this week’s IAA Mobility auto show in Munich, and while German powerhouses Mercedes-Benz and BMW unveiled their next-generation EVs, which will not hit the market until 2025.

“The global auto industry is going to undergo seismic changes over the next 10 years or so,” Gong, UBS’s head of China autos research, said in an interview.
 
The report predicted Western automakers’ global market share will slump to 58 percent from 81 percent by 2030.

“That would be a crisis moment for Western legacy companies,” Gong said.

Tesla’s share is likely to rise to 8 percent from 2 percent.

BYD, China’s biggest-selling auto brand, has a 25 percent cost advantage over North American and European brands, giving the Shenzhen-based company ample firepower to undercut rivals on their home turf as it expands globally.

A UBS teardown of a 2022 BYD Seal sedan found 75 percent of the components were manufactured in-house.

The figure — double the global average — is the secret to BYD’s cost-advantage in its quest to control its own fully integrated supply chain.

The Seal is almost wholly made in China, with around 10 percent or less of parts from foreign suppliers, UBS estimates.

“It’s really a showcase of Chinese engineers and engineering dividends,” said Gong, pointing to BYD’s 600,000-strong workforce — five times larger than Tesla’s — including 90,000 engineers.

BYD, which also makes its own batteries and semiconductors, has a 15 percent cost advantage over Tesla’s Chinese-made base Model 3 sedan, and a more than 30% advantage over VW’s ID3, according to the UBS report.

BYD dethroned Volkswagen as China’s top-selling car brand earlier in 2023.

UBS’s predictions for the global auto market in 2030 are also notable for the view that Chinese automakers will not be operating in the U.S. — the world’s second-biggest car market — or have any material success in Japan, South Korea and India, which all have strong domestic incumbents.

Automakers such as BMW, VW and Mercedes, which all count China as one of their biggest markets, are speeding up their transition to EVs.

BMW unveiled a prototype of its Neue Klasse electric car at the IAA on Saturday. The two-door coupe has a digital display projected onto the width of the windscreen, as well as software that can process voice commands and hand gestures — functions that Chinese consumers have come to expect in EVs.

The shift away from a decades-old tradition of mainly advertising driving performance shows BMW’s determination to catch Chinese EV makers, said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.

Of the three big German luxury brands, BMW is demonstrating speed and focus on EVs, with sales of its battery-powered models in China leading Mercedes and VW’s Audi, Zhang said.
 
“BMW still needs to catch up to Chinese EV makers in intelligent driving solutions such as smart cockpit and autonomous driving,” he said. “But this concept car has shown a radical shift in its style and application of the smart cockpit. It’s one to watch.”