In the Chinese market, Japan, US and European foreign carmakers are clearly in a slump. Honda and Nissan’s sales decline in 2023 exceeds the decline in China’s domestic fuel passenger car market. In the field of pure electric vehicles (EV) and other “new energy vehicles” are trapped in the passive. Fuel vehicles are also affected by price competition with Chinese companies, making it difficult to earn the capital needed for future investment. The plight of each automaker is deepening as they push forward with the transition to EVs.
In mid-October 2023, a “Guangzhou Mitsubishi” store in Guangzhou was empty. There were no employees and no cars on display. All that was left were promotional materials for the SUV “Outlander”. 11 days later, Mitsubishi Motors announced that it would stop production in China. Low sales are the main reason.
After that, the store removed the signboard of “GAC Mitsubishi” and started construction work, and in late December, a new store of Zhiji Automobile, a subsidiary of Shanghai Automotive Group, started business in the same place. In just over two months, traces of the Mitsubishi store disappeared.
Nissan sales down 16 percent
It’s not just Mitsubishi Motors that’s in a bitter fight. Looking at 2023 sales, Honda is down 10 percent from 2022 to 1.23 million units and Nissan is down 16 percent to 790,000 units. Toyota’s hybrid vehicle (HV) sales, among others, are holding firm, but they are also down 2% to just 1.9 million units.
China’s 2023 sales of fuel passenger cars (including HVs) decrease by 7%. Honda’s and Nissan’s sales decline outpaces the contraction of China’s fuel-vehicle market.
On the other hand, looking at the market as a whole, passenger car sales of new energy vehicles, such as EVs and plug-in hybrids (PHVs), increase by 30% on a pure basis. Chinese companies such as BYD have gone on the offensive by increasing their product offerings.China’s domestic passenger car market grew by 4% in 2023 to 21.92 million units.
European and American carmakers, which have been slow to act in the new energy vehicle sector, have also failed to keep pace with the market’s growth. Germany’s Volkswagen increased its sales in China by 2 percent in 2023 to 3.23 million vehicles. GM’s main brand “Buick” decreased by 20%, and premium car “Cadillac” decreased by 8%.
The competition for price cuts has also spread to fuel cars, adding fuel to the woes of Japanese automakers.
In early 2023, Tesla in the U.S. will launch a major price cut, followed by new-energy vehicles from Chinese companies. As the demand for fuel vehicles has also seen a decrease, Chinese car companies have started to cut prices in the fuel vehicle segment.
The average price cut in the Chinese market from January to September 2023 was 26,000 yuan per vehicle, according to data from the eCar Research Institute. Compared with 15,000 to 20,000 yuan in 2021 to 2022, the price cuts have expanded sharply. In addition, price reductions for fuel vehicles exceeded 30,000 yuan in September 2023, a significant increase compared with only 10,000 yuan for new energy vehicles.
Price cuts are evident in Japan and European and US car companies. Among the big brands, the largest average price cut from January to September 2023 was $115,000 for the British premium Jaguar. German BMW dropped 63,000 dollars and Cadillac was 56,000 dollars. Volkswagen, below the mid-range price point, also cut prices by 31,000 yuan.
From the Japanese car companies, Honda dropped prices by 25,000 yuan, and Nissan was 23,000 yuan. This is in stark contrast to BYD’s price cut of only 5,000 yuan.
Choice and centralization creeping closer
Honda proposes to EVize all new cars in China by 2035. Although Honda has begun selling the first cars under its new electric brand, the business is in the red due to expensive on-board batteries and increased development costs. Although the plan is to make up for this with profits from fuel vehicles, if it fails to generate the expected profits, the yellow light will go on for the model of using fuel vehicles to drive EV development.
Mitsubishi Motors has decided to pull out of the Chinese market, but other Japanese car companies are also facing choices and concentration of their business. Honda accounts for more than 30% of overall sales in China. Toyota and Nissan also have more than 20%. “The Chinese passenger car market is about 1.5 times the size of the U.S. market. We won’t give it up easily,” said Masayuki Igarashi, Honda’s China chief. Honda plans to concentrate its resources, including investment and personnel, on developing and selling HVs with accumulated technology. sales of PHVs in the Chinese market are increasing, but will be deprioritized. Toyota and Nissan are also stepping up to increase EV goods.
Statistics from the Passenger Vehicle Market Information Consortium show that Japanese carmakers’ share of passenger vehicles will be 17% in 2023, a decrease of 7 percentage points from 2020. Yuko Miura, chief researcher at the Japan Research Institute, said, “Amid a prolonged real estate slump and falling home prices, the firm automotive industry is also likely to decelerate, and concerns about the impact on personal consumption continue to emerge. In a market that is changing at a rapid pace, car companies also need to have the ability to respond more flexibly.”