Chinese brands eye profits in 2024 with EV upgrades

Chinese auto brands are set for better profitability in 2024 despite intensifying competition in the world’s largest auto market, UBS analysts said on Tuesday, thanks to upgrades they have been making in their electric vehicle product mix.

The average selling price of Chinese-branded cars has surged in the past two years and will see high single-digit growth this year, narrowing the gap with foreign brands, said Paul Gong, UBS’ head of China autos research.

Together with a market share increase to 63 percent in 2024 from 56 percent last year, the increased ASP will help Chinese brands to enjoy a 30 percent increase in revenue this year and account for 41 percent of the overall profit pool in China’s passenger vehicle industry, Gong told reporters in Shanghai.

That compared to 10 percent of the profits for Chinese brands in their home market in 2019 and 17 percent in 2022, he added.

“Foreign brands failed to bring good enough EVs to China market in recent years, which has forced Chinese consumers of premium cars to either choose gasoline cars of German brands or Chinese-branded EVs,” Gong said.

The trend underscores efforts by Chinese automakers such as BYD, Great Wall Motor and Geely to move upmarket and sell their cars in a more lucrative segment, taking market share from foreign brands which were previously favored by Chinese consumers.

Chinese automakers, despite rapid growth in sales volume and market share, had struggled to sell their cars at a price range higher than 100,000 yuan five years ago.

But in 2023, several Chinese-branded models priced above 150,000 yuan achieved monthly sales of more than 10,000 units.

Japanese brands will be among the biggest losers in China, losing nearly half of their shares in revenue and profits from 2022, to 9 percent and 19 percent in 2024, respectively, UBS forecast.