Introduction

Introduction

Going abroad is the beginning of becoming powerful.

In recent years, the evolution of the Chinese automotive market has been evident to all, with the most prominent feature being the strong impact of domestic brands on joint venture brands. This trend has convinced many that Chinese automotive brands have truly emerged and demonstrated their strong capabilities. Indeed, in the domestic market, we have witnessed the rise of a group of domestic automotive brands, which have gradually won the favor of consumers with their excellent product quality, advanced technological innovation, and precise market positioning.

However, another viewpoint suggests that although the Chinese automotive market is bustling, it is merely a small part of the global automotive market. Although foreign brands have seen declines in sales and profits in China, from a global perspective, these international automotive giants still maintain astonishing profitability. Some have even suggested that even if certain foreign brands choose to withdraw from the Chinese market, they will remain industry giants globally.

Amidst these two distinctly different voices, opinions vary widely on whether the Chinese automotive industry is truly strong. Interestingly, this debate is not limited to China. Overseas automotive industry observers have also begun to discuss this issue, and recent international discourse has increasingly expressed concerns about foreign brands.

Especially in some key automotive markets, Chinese automotive brands have begun to launch 'attacks,' undoubtedly posing new challenges to international automotive giants. The globalization of Chinese automotive brands is accelerating, which may indicate a new round of reshuffling in the global automotive industry, warranting our continued attention.

Starting in Southeast Asia

With China's rapid rise in the global automotive market, Japanese automakers are facing unprecedented challenges. As traditional automotive powers, Japanese companies such as Toyota, Honda, and Mitsubishi enjoy a global reputation. However, electric vehicles from Chinese local brands are flooding the market, posing a serious threat to these Japanese companies.

In China, the world's largest automotive consumer market, Japanese automakers are struggling to cope with fierce competition from local competitors. Wave after wave of Chinese electric vehicles flood into showrooms, quickly capturing consumers' attention with advanced battery technology and intelligent software configurations.

At the same time, these Chinese companies are actively expanding into the Southeast Asian market, quickly occupying sales strongholds that originally belonged to Japanese brands. Analysis shows that from 2019 to 2024, Japanese automakers have suffered significant market share losses in China and Southeast Asian countries such as Singapore, Thailand, Malaysia, and Indonesia.

In the Chinese market, the market share of the six mainstream Japanese automakers has declined, and even industry giants like Toyota have seen stagnation in sales and production. In Southeast Asia, despite consumers' once high loyalty to Japanese brands, Chinese brands are gradually eroding the Japanese market, especially in Thailand and Singapore, where Japanese automakers' market share has plummeted from over 50% in 2019 to 35%.

This trend is undoubtedly a huge blow to Japanese automakers. As a global sales leader, Toyota maintains a leading position in certain areas such as the pickup truck market, but overall, its market position is being seriously challenged. More worryingly, the decline in market share in Asia may only be a harbinger of a broader decline in Europe and the United States.

In the transition to electric vehicles, Japanese automakers have made relatively slow progress, which may cost them more in future competition. Meanwhile, Chinese brands are creating new winners in the industry with cutting-edge battery technology and intelligent software.

To address this challenge, Japanese brands are actively seeking partnerships and investing in long-term projects to develop key technologies such as in-vehicle software and solid-state batteries, aiming to regain market advantage. However, in China, the world's electric vehicle capital, their efforts seem unable to reverse the declining trend.

In addition, Japan's reputation for mass production is gradually declining. Over the past two decades, Japan's share of global automobile production has fallen from over 20% to 11%. China, on the other hand, has emerged as the world's largest automotive manufacturing center, with its electric vehicles not only dominating the domestic market but also actively seeking expansion into overseas markets such as Europe and the United States.

Research indicates that China's advantage in low-cost batteries and its ability to establish supply chains overseas may provide it with greater competitive advantages in emerging markets such as Southeast Asia, the Middle East, and Africa. As Chinese brands intensify their attacks in these markets, the future prospects for Japanese automakers are undoubtedly challenging.

Japanese cars are the biggest rivals

Some foreign voices believe that the Japanese automotive industry is going through a difficult period, with leading companies Toyota, Nissan, and Honda all experiencing profit declines in the most recent quarter. These three automakers are struggling to cope with fierce competition from the Chinese market and face challenges in transitioning to electric vehicles.

As the world's largest automaker, Toyota's profit for the quarter ending in September plummeted to 573.7 billion yen (approximately $3.7 billion), a significant decrease from nearly 1.28 trillion yen ($8.3 billion) in the same period last year. Meanwhile, Nissan plans to lay off 9,000 employees due to declining sales, and Honda reported a 15% decline in operating profit for the second quarter.

The common problem faced by these three companies is poor vehicle sales in the Chinese market. Toyota's sales in China declined by more than 10% in the first nine months of this year, which the company attributed to a 'severe market environment' with 'intensifying price competition.' However, a Toyota spokesperson noted that profit declines were not only influenced by the Chinese market but also by weakness in the Japanese and North American markets.

Honda and Nissan also reported declines in sales in China, with Nissan's retail sales in China falling by more than 5%, the largest decline among all regions.

In China, Japanese automakers are facing strong competition from local rivals. These competitors have quickly captured market share by offering affordable and technologically advanced electric and hybrid vehicles. Meanwhile, leading Chinese electric vehicle companies such as BYD, ZEEKR, and NIO are expanding overseas, putting increasing pressure on Japanese companies like Toyota and Honda.

Japanese automakers generally take a cautious approach to the transition to electric vehicles, focusing more on the development of hybrid vehicles. While this strategy paid off when demand for electric vehicles slowed, the rapid electrification of the Chinese market has put Japanese automakers at a disadvantage in competing with local products due to their lack of a strong electric vehicle lineup.

There are signs that Japanese automotive giants are adjusting their strategies to adapt to market changes. Nissan has pledged to accelerate the launch of new electric vehicles in China and introduce hybrid vehicles in the United States. Toyota also plans to expand its production scale in China to better compete with local enterprises.

However, Japanese automakers may face new challenges in the coming years. Especially with Donald Trump's victory in the U.S. presidential election, his proposed tariffs on cars imported from Mexico could significantly impact Japanese automakers with factories in Mexico.

Overall, the Japanese automotive industry is facing multifaceted pressures and challenges, including fierce competition in the Chinese market, difficulties in the transition to electric vehicles, and potential policy risks. To adapt to these changes and restore profitability, Japanese automakers need to flexibly adjust their strategies and increase innovation efforts.