The Zacks Analyst Blog Highlights BYD, Tesla, Volkswagen, BMW and Renault

For Immediate Release

Chicago, IL – January 12, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: BYD Co Ltd BYDDY, Tesla TSLA, Volkswagen VWAGY, BMW AG BMWYY and Renault RNLSY.

Here are highlights from Thursday’s Analyst Blog:

China Steps on Gas to Become Top Auto Exporter of 2023

China’s automotive industry is rapidly expanding its presence across the globe and disrupting the dominance of traditional legacy automakers. The country is expected to emerge as the world’s leading auto exporter in 2023, dethroning Japan. China’s vehicle exports have hit records for full-year 2023, solidifying its status as a formidable force in the global automotive arena.

China’s Swift Rise to the Top

In 2022, China ascended to become the second-largest automotive exporter, overtaking the longstanding #2 exporter, Germany. Within the initial six months of 2023, it not only maintained but exceeded its lead, claiming the title of the world’s largest exporter of vehicles, unseating Japan.

In 2023, China’s overseas vehicle sales reached 5.26 million vehicles, per the China Passenger Car Association. This figure is like a million more than exports of made-in-Japan cars. Per Japan’s latest official data, the country shipped just under four million vehicles abroad in the first 11 months of 2023. China’s record-breaking overseas auto sales positions it to surpass Japan as the world’s largest auto exporter in 2023. So, what’s behind this surge in China’s exports?

The Impact of Geopolitics

The ongoing geopolitical tensions, particularly the Russia-Ukraine conflict, have played a pivotal role in China’s rise as the top auto exporter. Russia’s shift from Western suppliers to China for various goods, including automobiles and computer chips, has significantly boosted the latter’s trade with Russia, exceeding $200 billion. Chinese automakers find themselves as major beneficiaries, filling the void left by Western carmakers in the aftermath of the war.

They have capitalized on the departure of Western competitors in the wake of the Ukraine conflict, selling over five times the number of vehicles in Russia in 2023 compared to 2022. This unprecedented success in the Russian market reflects the agility and adaptability of Chinese automakers, who swiftly adjusted their focus to meet the demand for gas-powered vehicles in the region.

And what’s the result? Chinese car manufacturers now command 55% of the Russian market, a substantial increase from the 8% they held in 2021, as reported by GlobalData Automotive. Quoting Michael Dunne, an automotive consultant based in San Diego, “Never before have we seen automakers from a single country gobble up so much market share so quickly — the Chinese came into a windfall.”

The Resilience of Internal Combustion Engine Vehicles

Despite being recognized as a global leader in electric vehicles (EVs), the surge in demand that fueled China’s dominance as the world’s top exporter came primarily from traditional gas-powered automobiles, mainly in Russia and Mexico. As some global markets experienced a decline in demand for gas-powered vehicles, Chinese automakers with factories in the country leveraged their production capabilities to meet the specific needs of these markets.

Chinese consumers were fast shifting toward eco-friendly vehicles, prompting some carmakers to shift their focus to exports. The continued demand for fossil fuel cars in Russia provided a lifeline to carmakers with factories in China that had been grappling with the country’s aggressive push toward EVs.

Challenges and Controversies

Despite China’s remarkable success, concerns have arisen in major auto markets about the possibility of a flood of Chinese vehicles entering their markets. The United States imposed prohibitive tariffs on Chinese auto imports, while the European Union initiated an anti-subsidy probe targeting low-cost Chinese EVs. Beijing has criticized these moves as protectionist and defended its position in the global auto market.

China’s EV Exports to Rise

While gas-powered vehicles have been the primary driver of China’s recent export success, the next wave is poised to include a higher proportion of EVs and hybrids. Notably, EVs are forecast to comprise 30% of China’s total car exports this year, per UBS.

With the growth of EVs slowing in the domestic market due to reduced government subsidies, manufacturers of such vehicles are witnessing a surge in overseas shipments and are planning to expand their export efforts further.

For instance, China’s BYD Co Ltd, which surpassed Tesla as the world’s top seller of EVs in the fourth quarter of 2023, saw its overseas sales skyrocket almost fivefold in 2023 and is now expanding its presence across Europe. The Chinese EV giant already sells five models in Europe and plans to introduce three additional models within the next 12 months.

BYD’s international presence extends across Asia, Europe and Latin America, with significant inroads in markets such as Japan, India, Malaysia, Australia, Singapore and Israel. The company’s diverse EV lineup, including models like the Seagull, Denza, and Yangwang brands, has contributed to its global success. Notably, BYD strategically sells EVs overseas at higher prices than in the domestic market, bolstering profit margins.

Reportedly, Tesla shipped 344,078 China-made EVs to foreign markets last year, contributing to the export boom.

Established global automakers like Volkswagen, BMW AG and Renault are exporting China-made EVs to Europe. This indicates China’s central role in the global automotive industry.

Volkswagen will begin exporting its China-made Cupra Tavascan EV coupe to Europe this year.It’s based on VWAGY’s MEB platform, which also underpins the auto giant’s ID series.

BMW manufactures the iX3 EV in China and also exports it to Europe. The company will begin exporting the electric Mini Cooper too this year.

Renault exports its Dacia’s Spring EV, an entry-level hatchback similar to the BYD Seagull, to Europe. It was the second-biggest EV exporter from China in 2022, after Tesla.

Journey to Auto Export Dominance

China’s journey to becoming the world’s leading auto exporter is a testament to Beijing’s industrial policies and strategic investments. While China has long been the largest auto market and production center globally, its growth was largely driven by foreign automakers until recent years. The state’s support for local manufacturers and subsidies for sales of electric vehicles played a pivotal role in its transformation.

China’s ability to adapt to changing market dynamics, meet the demand for traditional gasoline-powered vehicles, and expand its presence in electric and hybrid segments has solidified its position on the global stage. From being the world’s largest automotive and EV market, China has added another feather in its cap by becoming the foremost auto exporter. The momentum is only expected to strengthen. UBS expects Chinese automakers to control 33% of the global market by 2030, which is significantly up from 17% in 2022.

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