Optimistic outlook: Chinese automotive manufacturers are set for increased profitability in 2024, even amidst escalating competition within the world's most extensive automobile market, according to analysts at UBS. This optimistic outlook stems from major improvements made to their electric vehicle (EV) portfolios.

Paul Gong, UBS' lead analyst for China's automotive sector, highlighted that the average selling price (ASP) of vehicles under Chinese brands has experienced notable growth over the past couple of years. This trajectory is expected to continue with a high single-digit increase this year, thereby reducing the pricing disparity with international brands. 

Gong further indicated that Chinese brands are projected to capture 63 per cent of the market share in 2024, up from 56 per cent in the previous year. This surge in ASP is anticipated to drive a 30 per cent uptick in revenue, enabling Chinese brands to command 41 per cent of China's passenger vehicle industry profits.

This represents a substantial shift from Chinese brands' market position, which accounted for merely 10 per cent of profits in 2019 and 17 per cent in 2022, as per Gong's insights. He observed that the inability of foreign brands to introduce compelling EV offerings in China has steered premium Chinese car consumers towards domestic EV alternatives or German gasoline-powered vehicles.

Eroding market dominance of international brands

The evolving landscape reflects the strategic manoeuvres of Chinese automakers like BYD, Great Wall Motor, and Geely, who have positioned themselves in the upscale market segment, eroding the dominance previously enjoyed by international brands. 

Historically constrained by lower pricing thresholds, Chinese automotive brands have made significant strides. In 2023, multiple models from these brands, priced above 150,000 yuan, registered monthly sales exceeding 10,000 units.

Conversely, Japanese brands face considerable challenges ahead. UBS forecasts indicate a substantial decline, with Japanese brands anticipated to witness a reduction in their revenue and profit shares from 2022 levels to 9 per cent and 19 per cent in 2024, respectively.

(With Reuters inputs)