In the immediate aftermath of the 2008-2011 financial crisis and the European economic recession between 2010 and 2013, the automotive industry saw a considerable number of brands go out of business.
The crisis has had a direct impact on sales and has made the markets smaller in terms of volume. As the strong growth seen in the late 1990s and early 2000s faded, many automakers were forced to get rid of their weaker car brands.
GM’s Slimming Cure
General Motors is probably the manufacturer that has suffered the most. In the late 1990s, this portfolio included nine different brands. Today there are just four left. Chrysler and Ford have also dropped some of their brands in the last 20 years: Plymouth, Eagle, and Mercury to name a few. In Europe, brands such as Rover and Saab have disappeared, while others like Lancia have been relegated to a single model.
Meanwhile in China, the situation is practically the opposite. In the early years of this century, the Chinese market featured about 25 brands. At the time, the Asian country mainly produced imitations of old European and Japanese cars that were sold locally in a still small market. Between 2001 and 2010, 14 other car brands arrived.
China was becoming a safe haven not only for domestic manufacturers but also for Western brands grappling with the economic crisis. As of 2008, China’s auto industry is the largest in the world in terms of automobile production. Since then, the growth has been exponential.
Baby-Brands From China
As demand continues to grow and Chinese consumers’ income increases, the industry has started to introduce more models with new brands. Between 2011 and 2015, a total of 12 new brands hit the local market: Maxus, Beijing Auto, VGV, Haval, Xpeng, Nio, Cowin (currently Kaiyi), Hozon, Leap Motor, Weltmeister, Enovate, and Li Auto.
The arrival of the electric vehicle and its consequent popularity, together with the strong commitment of the central government for its right positioning, has favored the emergence of even more brands than in the previous period considered.
Between 2016 and today, there are upwards of 50 new car companies in the region, allowing Chinese consumers to choose from a total of 99 different brands. And as such, the Chinese auto manufacturing sector is both large and very young: 58 percent are less than 10 years old.
Much of this exponential growth of brands can be explained by the interest of local automotive groups in being recognized as innovative and in line with the EV boom.
China, The Largest Auto Market In The World
China is the largest light vehicle market in the world, with about 25 million units sold annually. Last year it accounted for almost 32 percent of global auto sales, or the equivalent of the combined deliveries of the US, India, Japan, and Germany.
Therefore, there are plenty of opportunities for everyone. For this reason, the strategy, as was the case for the American market in the ’70s and ’80s, is to expand the offer by introducing more shared models with different brands and positioning. The 99 brands available today are collected into around 40 automotive groups. However, not all are successful. In recent years, some brands have been dropped due to low sales.
The dynamics of the Chinese auto market are unique. Massive local demand, strong government support, and commitment to electric vehicle development are the perfect scenario for the introduction of new brands. Six brands have been introduced this year alone, and three more are expected to hit the roads by December.
Europe, the United States, Japan, and Korea cannot tell the same story. In reality, in the last eight years, only a few brands have been introduced or revived: Alpine, Polestar, Cupra, Jetta, Genesis, RAM, and DS.
The author of the article, Felipe Munoz, is an Automotive Industry Specialist at JATO Dynamics.
