One-third global car parc Chinese by 2030

A NEW report published by global business consulting firm AlixPartners suggests one-third of the global car parc will be produced in China by 2030 and says traditional OEMs must “urgently reinvent” if they are to survive in the decade ahead – including how a vehicle is engineered and how revenue is captured over its lifetime.

The report states that Chinese brands will account for 33.0 per cent of all new vehicles sold by the end of the decade, with an estimated nine million units annually exported globally.

The Alix Partners Global Automotive Outlook suggests Chinese growth will come largely from cost advantages and localised production strategies that will enable Chinese OEMs to develop a build-where-you-sell platform in outside markets.

Further, it suggests Chinese cars are more consumer-focused, better appreciating end-user desires for “design and freshness”.

“The global automotive industry has been shaped by several inflection points over the past half-century, including the emergence of Japanese production techniques in the 1970s, then the rise of the Koreans, and the most recent disruption caused by Tesla,” said AlixPartners automotive and industrial practice global co-leader Mark Wakefield.

“China is the industry’s new disruptor – capable of creating must-have vehicles that are faster to market, cheaper to buy, advanced on tech and design, and more efficient to build.

“For traditional OEMs, keeping pace with China’s strongest brands will require more than a course correction.”

Mr Wakefield urged traditional OEMs to avoid underestimating the scale of change the automotive industry is set to experience in the second half of this decade. He said currently underperforming OEMs may be leveraged out amid a price war and demand for more advanced electrical and software vehicle capabilities.

The report further suggests that the fundamental building blocks of vehicles will also transform, having “major ramifications” in the US particularly.

It says today’s car parc in compromised primarily of older-generation vehicles, designed using hardware-oriented engineering and “unable to truly operate like an easily updateable smartphone on wheels”.

By 2032, it is estimated 24 per cent of new vehicle sales in the US will be “far more sophisticated software defined vehicles: leading to eventual revenue of approximately $650 per vehicle annually and representing a “substantial portion of available revenue streams”.

“Automakers expecting to continue operating under business-as-usual principles are in for more than just a rude awakening – they are headed for obsolescence,” said AlixPartners automotive and industrial practice global co-leader Andrew Bergbaum.

“The revolution taking place in the global automotive industry is driven by the incredible and once unthinkable maturation of Chinese automakers that do a number of things differently.

“Chinese brands place higher value on features customers can actually experience, such as design and in-cabin tech; they are ruthlessly focused on maintaining their cost advantage even as they build factories abroad; and they have built a considerable lead in emerging new energy vehicle technologies – including battery production.

“Those capabilities have captivated China and will eventually define the global marketplace.”

Locally, Chinese-made vehicles now account for 15.3 per cent of all new vehicles sold. That number has risen substantially over the past five years when Chinese cars represented just 1.4 per cent of the total market.

As elsewhere, that percentage is forecast to continue its growth towards the end of the decade and beyond.

With AlixPartners