Chinese automakers, stung by over capacity and intense competition in the home market, have a new headache: a slowdown in exports.
Only 84,400 Chinese-made cars were exported in June, around 20% less than the corresponding period last year, according to the China Association of Automobile Manufacturers (CAAM). It’s the second straight year-over-year monthly drop. In May, exports slumped 16%. The export slowdown comes at a time when foreign automakers are tightening their grip on the world’s biggest auto market, which has grown 12% this year. In 2010, Chinese brands commanded a 50% market share in China. By June 2013, their share had shrunk to 38%.
China mainly exports its cars to South America, the Middle East and Russia, where customers still preference price over quality. In 2012, Chinese auto exports grew over 30% and crossed the 1 million mark. But the tide changed in 2013 due to softening demand in markets like Vietnam and Chile, protests in Brazil and Turkey, and the appreciation of the yuan. In the first half of the year, exports dropped 0.6% from the year earlier.
The exports slowdown is bad news for Chinese automakers already suffering from excess capacity. There are over 170 auto makers in China, compared with around 35 in the in the US. By 2018, manufacturers are expected to have a combined output of 30 million cars, which would amount to an excess of 10 million units. Chinese government efforts to reduce pollution and congestion by imposing restrictions on car buyers don’t help.
And the competition is growing. Foreign automakers, desperate to offset declining sales in Europe, are investing heavily in China. General Motors has plans to boost its capacity to 5 million vehicles by 2015, and has outlined an $11 billion investment plan for the next four years. Ford opened a $300 million plant that will more than double its capacity in China. German giant Volkswagen wants to increase its workforce by a third by 2018, while luxury automaker Jaguar Land Rover is looking to boost its number of dealerships in Cina to 200 from 116.
In 2012, Dong Yang, the vice chairman of CAAM predicted (paywall) that half of China’s carmakers would disappear in the coming years. If exports continue to slide, his prediction could come true.
Here’s a look at exports by the top three exporters of passenger cars this year.