Big car companies like Volkswagen-Mercedes face tough challenge in China

China, the largest market for automobiles, has created a stir in the auto industry around the world. European companies like Volkswagen, Mercedes-Benz, Aston Martin, BMW are finding it difficult to sell their petrol and EV cars in China. At the same time, China is increasing the penetration of its cheap EV cars around the world.

The four-decade reign of German company Volkswagen is on the verge of collapse. The company's sales there have fallen by more than 10% this year. 30% of the company's income comes from China, but profits fell by 64% in the July-September quarter. The company is going to close 3 factories in Germany for the first time in 87 years. Production is also being reduced in China.

The reason for this change in the auto industry is China's aggressive policy. Actually, China's government banks and other government undertakings are giving huge subsidies to local auto companies. This is reducing the cost. According to AlphaValue analyst Adrian Brasi, the cost of Chinese cars is 30% less due to subsidy. Electric cars are being launched at a discount of up to 50%.

According to CAAM, the association of automobile manufacturers in China, more than 30 million cars were manufactured last year. 52 lakh were exported. However, China's exports are in the initial state where the Korean company Hyundai was in the 70s.

More than 50% of EVs are sold in China

China made an aggressive policy to shift to EV in 2000. It realized that it would not be able to beat American, German, Korean, Japanese companies in petrol-diesel cars. Auto engineer turned minister Wan Gang started giving subsidy to EV companies from 2009. More than Rs 2.5 lakh crore was given as aid till 2022. Today more than 50% of the world's EVs are sold in China.

Sales of Chinese cars outside China increased 5.5 times, share also increased

According to the JATO Dynamics report, sales of Chinese cars outside the domestic market increased 5.4 times between 2020 and 2023. In 2023, global sales of light Chinese vehicles reached a total of 1,35,54,305 units registered by US companies. It is seeing an increase of 23% annually. In contrast, sales of light vehicles of American and European brands grew by 9%, while sales of light vehicles of Japanese brands grew by 6%. However, there are signs of slowdown in Chinese car sales in the European and US markets this year due to rising tariffs.