Automotive Market Structure: China versus West

What are the major differences between the Chinese automotive market structure and the Western more developed markets?

From our understanding, the major difference between the Chinese automotive market and the Western automotive market is that the Western industry is already developed, which means it is stable. We can see that in the US and in Europe the penetration rate for premium autos is around 15% and currently stable. In China, the penetration rate for premium autos is around 10-11%, which means there is still some room to increase. As I said, we expect around a 4-5% increase maybe in the coming 5 years. I think that is the major difference.

Currently in Europe and the US, the competition between the OEMs is a holding volume competition, which means each year, the sales volume is stable. It consists of a lot of consumption upgrading, which means people who are changing their current cars, who will buy some new brand, maybe upgrading their current vehicle. In China, the volume is still increasing, which will cause a volume increase competition in the OEMs in China. So I think this is a major difference between the Chinese automotive industry and the Western one.

Is there any difference in the way the dealer networks are structured, in terms of the stocking systems, the organisation of the networks, in the fact that the Chinese dealer networks are much younger and the Western ones are much more mature?

The Western dealer networks are more mature, which means they have more experience by comparison to the Chinese market. The difference is that the dealers in Western countries have more availability for the consumers, for them to do DIY, buy themselves. In China, most of the workers use dealers.

In China, another new tendency is online sales, whereby the online service is taking the place of the current dealers, 4S stores and so on. You can see that new energy vehicles such as BYTON and BYD in China are trying to eliminate the dealers. The buyer can place orders online and they can purchase autos this way. This is another difference compared to Western countries. Currently in China, information technology is expanding very fast, which influences every sector of society, it doesn’t matter if it’s the electronic industry or the automotive industry. The future in China, especially for the new energy vehicles, will eliminate the middle dealers and eliminate this kind of system in the future. This will be the tendency in the near future I think.