Auto & Transportation

From 2020 to 2022, China's automobile exports achieved two leaps, with an increase of 1 million vehicles in 2021 and 2022, respectively. "Sun Xiaohong, Secretary General of the Automotive Branch of the China Chamber of Commerce for Import and Export of Mechanical and Electrical Products, recently stated at the China Automotive Import and Export Summit Forum that although automobile exports have developed rapidly, the export situation is not stable enough and the foundation is not solid enough.

According to customs data, in 2022, China's automobile exports exceeded 3 million vehicles, becoming the second largest automobile exporter after Japan. According to customs data released by the General Administration of Customs on March 7th, China exported 682000 vehicles in the first two months of this year, a year-on-year increase of 43.2%. The export value of automobiles reached 96.83 billion yuan, a year-on-year increase of 78.9%.

Exit two-stage jump

Over the past few years, China's automobile exports have been hovering around 1 million vehicles until 2021, when they began to show explosive growth. Among them, new energy vehicles are the main growth force for automobile exports. In 2022, China exported 679000 new energy vehicles, an increase of 1.2 times year-on-year, accounting for 22% of the total export volume. On the other hand, the demand release of the pickup truck market in overseas markets has also brought about a certain increase.

According to a customs data provided by Sun Xiaohong, in 2022, China's top 10 automakers exported 2.8 million vehicles, with a share of 90%, including SAIC, Chery, Tesla, Changan, Dongfeng, Geely, Great Wall, Jiangqi, BAIC, and Heavy Duty Truck. From different markets, Asia, Europe, and Latin America are the main markets for China's vehicle exports. From customs data, in 2022, China exported 1.013 million vehicles to Asia, accounting for 32.2%; Exporting 864000 vehicles to Europe, a year-on-year increase of 76.3%, accounting for 27.5%; Exporting 773000 vehicles to Latin America, a year-on-year increase of 49.4%, accounting for 24.6%.

Against the backdrop of rapid growth in vehicle exports, the market distribution is more balanced. The Latin American market is gradually returning to normal, and its share of exports to Europe will continue to increase, with Oceania becoming a new growth point, "said Sun Xiaohong.

Specifically, by country, Mexico, Saudi Arabia, and Chile rank in the top three in terms of export quantity; Ranked by growth rate, Spain, the United Arab Emirates, and Israel rank in the top three.

According to customs data, it is worth noting that although the export volume to Asia is the highest, in terms of export value, China's total vehicle export to Europe is the highest, reaching 22.57 billion US dollars, accounting for 37.6%; Next is Asia, with exports reaching 18.14 billion US dollars, accounting for 30.2%; The export value to Latin America reached 9.34 billion US dollars, accounting for 15.6%. Specifically, Belgium, the United Kingdom, and Russia rank among the top three countries in terms of export value. From the growth rate of export value, Spain, Israel, and the United Arab Emirates rank in the top three.

In the era of gasoline vehicles, the unit price of products exported from China was relatively low, and the brand competitiveness was poor. In the era of new energy vehicles, China has become the world's largest new energy vehicle market, and some companies' electric vehicle products are high-end models that have been favored by the market. Compared to the domestic market, Chinese car companies generally have higher pricing in the European market. Thanks to its mature industrial chain advantages, China's new energy vehicles have strong competitiveness and brand premium capabilities have significantly improved compared to the era of gasoline powered vehicles.

A senior executive of an independent car company stated in an interview with a reporter from First Financial that the cost of car exports not only includes the vehicle itself, but also includes tariffs and shipping costs. The COVID-19 pandemic in 2022 has led to a continuous increase in freight rates, which account for 10% of the overall export cost for each vehicle.

On the other hand, the sales of pickup trucks in overseas markets are growing rapidly. In 2022, the export sales of pickup trucks reached 200000 units, a year-on-year increase of 77%. Among them, Datong, Great Wall, Jianghuai, and Chang'an are the top export camp, with exports accounting for over 70%. In the overseas pickup truck market, American and Japanese car companies have a high market share. In recent years, as Chinese pickup trucks have strengthened their overseas business, more and more high-end products have gone global, competing directly with Japanese American pickup trucks. Among the top 10 global pickup truck sales models, the Great Wall Cannon has already ranked ninth among them.

Zeng Lang, Assistant General Manager of Jianghuai Automobile International Company, believes that pickup trucks in the overseas market have stronger multifunctional and passenger attributes, and users are willing to purchase more high-end, intelligent, and comfortable pickup truck products. The dual use of commercial and passenger vehicles is the best manifestation of the multifunctional properties of pickup trucks, balancing cargo transportation and daily travel, and is the largest segment market for overseas pickup trucks. Passenger pickup trucks are mainly used for personal purposes such as commuting, self driving, and outdoor off-road, and their proportion in the high-end market exceeds that of commercial and dual use pickup trucks. The emission standards for pickup trucks in overseas markets are generally lower than those in China, but the safety standards are higher.

International brand pickup trucks have a moderate design, simple configuration, and high prices. Chinese brand pickup trucks are leading the trend in passenger use, intelligence, and new energy, providing better choices for overseas users. Nowadays, many countries' exchange rates have fallen below the issuance price, with a reduction of 70% to 80%. Therefore, the actual purchasing power of the main target market has significantly decreased, and some users with high loyalty to international brands will consider higher cost-effectiveness in this situation Chinese brand. Of course, Chinese brand pickup trucks are not cheap to sell overseas, and Chinese brands are moving towards a high pricing strategy Zeng Lang said.

Trade "fragmentation" trend strengthened

It is worth noting that although China has become the second automobile exporter in the world. But in terms of export value, China ranks fourth, behind Germany, Japan, and the United States. Sun Xiaohong believes that although automobile exports have developed rapidly, the export situation is not stable enough and the foundation is not solid enough.

There are still objective factors contributing to the outbreak of China's automobile exports in 2022. For example, in terms of ocean shipping, due to the insufficient production capacity of Japanese and South Korean car factories during the epidemic period, they were unable to fully meet the demand of Japanese and South Korean freight companies to distribute goods to Europe. In addition, China's strong export capacity demand has led Chinese car companies to use sweeping methods to package large quantities of Japanese and South Korean cargo ships, giving the Chinese automotive industry both supply and transportation capabilities.

It should be pointed out that the high cost of transportation capacity and freight rates remains a major challenge for China's automobile exports. Meng Qingwen, General Manager of Longevity Logistics International Business Unit, stated that in the face of rapid market demand growth, the global roll on/roll off capacity reserves are in short supply. At present, the global number of car ro-ro ships is 750 (including 600 ships with over 4000 parking spaces), some of which are nearing their service life and urgently need to add new capacity to supplement. Due to the long manufacturing cycle of ships and the delayed effect of supply and demand matching, it is expected that the market for roll on/roll off ships will still be in short supply in the next 3-5 years. Compared to the low prices in the past two years, freight rates have increased by nearly 8 times, and in the event of a shortage of transportation capacity, freight rates will continue to rise.

According to Clarkson's research data, in February 2023, the one-year rent for a 6500 car level car transport Ro/Ro ship was $110000 per day, compared to $17500 per day in February 2021.

Some Chinese car companies' products are first transferred from the Middle East and then exported to the European market. Electric vehicles produced in China are first registered in the Chinese market, and after registration, the new car becomes a second-hand car, which is exported to the Middle East as a second-hand car, and then to the European market. The purpose of doing so is to avoid certification and other costs, achieve maximum profits, and have high efficiency. "A person from the overseas business management of an independent car company told reporters that in addition to sea transportation, Chinese car exports also face export certification Exchange rate and other challenges. In addition, subsidies for electric vehicles in several European countries have decreased this year, and the growth of the new energy vehicle market may slow down.

According to data provided by Zhang Xiaochen, Senior Product Manager of CITIC Bank's International Department, according to financial data of listed companies, in the past three years (2020~2022), listed companies in the automotive industry have been affected by exchange rate fluctuations, resulting in a cumulative exchange loss of 3.67 billion yuan. In the process of RMB internationalization, the factors that affect RMB volatility are complex and variable, making it difficult to accurately predict exchange rate fluctuations. Gao Yang, Deputy Director of the Foreign Trade Driver Electric Export Department of the Ministry of Commerce, believes that the current increase in trade risks, emerging economies and developing countries facing challenges such as debt defaults and economic downturn, will have a negative impact on automobile exports.

China's automobile exports have surged, highlighting its cost advantage, and the cost advantage of the new energy industry chain is difficult to shake. The rise of foreign investment in new energy vehicles has repositioned cooperation with Russia. In 2023, the overall tone of seeking progress in automobile exports will remain stable, with an expected growth rate of 20% for the entire year. The contribution rate of pure electric passenger vehicles to the growth of automobile exports is expected to exceed 50%, but attention should be paid to the Black Swan incident (Japan's hexavalent chromium and Türkiye's electric vehicles will be taxed 40% more). " Sun Xiaohong said that the trend of "fragmentation" of trade is severe. With the surge of global trade restrictions, trade tensions among countries have been increasing. At the same time, emergencies such as the epidemic and the Russia-Ukraine conflict also put countries in reasonable economic and national security considerations, and began to attach importance to the defense of the supply chain.