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<\/a><\/p>\nSHANGHAI (Reuters) -China’s auto market, the world\u2019s largest, is accelerating toward an electric future \u2013 leaving established global brands stuck in the slow lane.<\/p>\n
When auto executives convene in Shanghai for the auto show starting Tuesday, they will return to a sharply different market from the one they left in 2021 when the industry gathered for a limited event under strict COVID-19 controls.<\/p>\n
The biggest change: China-made brands now lead in key segments and their rise has been powered by new electric-drive models that are gaining share at home and overseas.<\/p>\n
The biggest winner has been BYD, which will use the Shanghai show to unveil a new hatchback electric vehicle (EV) for value-seeking buyers and a pricier EV styled as an SUV. <\/p>\n
BYD\u2019s sales in China are up almost 69% this year, giving it an 11% share of the overall car market, more than the Volkswagen brand or the Toyota brand, according to an analysis of sales data.<\/p>\n
“The stratification of this market into clear winners and losers is becoming clear,” Bill Russo, founder of consultancy Automobility said in a note issued on Tuesday. “And there are very few winners and a whole lot of losers.”<\/p>\n
China\u2019s passenger car sales were down 13% in the first quarter, data from the China Passenger Car Association show. <\/p>\n
But sales of EVs and plug-in hybrids \u2013 an area where Chinese automakers led by BYD now dominate \u2013 were up 22%. Sales of internal-combustion vehicles were down by an almost equal margin.<\/p>\n
The result has been a double whammy for the likes of Volkswagen, General Motors, Honda and Nissan. Sales are down and so is market share.<\/p>\n
More than 40 auto brands have followed Tesla in cutting prices on EVs since January in a price war that has supported sales of EVs and plug-in hybrid electric vehicles (PHEVs), both of which are classed as \u201cnew energy vehicles\u201d in China. It has also cut into industry-wide profitability, analysts say.<\/p>\n
THE \u2018FINAL BASTION\u2019 FOR COMBUSTION <\/p>\n
For years, China\u2019s entry-level market for passenger cars was dominated by combustion-engine cars made by global automakers in partnership with Chinese brands. <\/p>\n
But for cars priced between $22,500 and $30,000, this year has been a wipeout for gasoline-only vehicles. Sales were down 20.5% in the first quarter, compared to a 68% gain for EVs and plug in hybrids. <\/p>\n
BYD\u2019s Song plug-in hybrid SUV, with a starting price of about $20,000, outsold the Nissan Sylphy, which had been China\u2019s top-selling car for three straight years. BYD\u2019s Dolphin EV, which starts at about $17,000, was ahead of the Volkswagen Passat.<\/p>\n
Because of the cost pressure on EVs from battery materials, the entry-level market is likely to be \u201cthe final bastion\u201d for gasoline-only vehicles in China, Xu Haidong, deputy chief engineer at the China Association of Automobile Manufacturers said.<\/p>\n
In China\u2019s premium market, with prices between about $52,500 and $60,000, electric-drive cars are already the best sellers.<\/p>\n
BYD dominates China\u2019s market for plug-in hybrids, cars that have a combustion engine but are capable of being charged and running for shorter distances on electric power. <\/p>\n
Plug-ins represent more than half of BYD sales this year, giving the company scale to compete on price across its line-up, analysts say.<\/p>\n
TESLA\u2019S \u2018HEART AND LUNGS\u2019<\/p>\n
Tesla saw a 27% increase in Chinese sales in the first quarter to just over 137,000 of its Model 3 sedans and Model Y crossovers. Tesla also increased share after cutting prices in China by between 6% and almost 14% in January.<\/p>\n
That put starting prices for Teslas in China between $7,500 and about $10,700 lower than current U.S. prices, which have also been discounted.<\/p>\n
Analysts and investors will focus on what that means for margins when Tesla announces first-quarter results on Wednesday.<\/p>\n
\u201cGaining further share in the key China market will be the hearts and lungs of the Tesla growth story,\u201d Wedbush analyst Daniel Ives said in a note on Monday.<\/p>\n
In a further threat to established brands, China\u2019s exports are growing fast, led by EVs and PHEVs. Industry-wide exports from China were up 83% last quarter from a year earlier.<\/p>\n
BYD, which markets its cars in Europe and Southeast Asia, had a 13-fold increase in exports from China.<\/p>\n
(Reporting by Zhang Yan in Shanghai and Kevin Krolicki in SingaporeEditing by Mark Potter)<\/p>\n
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