There are increasing numbers of media stories predicting a sharp decline in conventional vehicle sales in China that could lead to a substantial effect on the major automakers across the globe. Due to the implementation of new vehicle pollution rules and the surge in demand for electric vehicles in China, millions of conventional vehicles will soon be rendered unsellable in that country. For some traditional automakers, the coming three months are likely going to be disastrous given that China already has a dilemma with its automobile inventory.
The first significant market worldwide, where electric vehicles have a 25% market share, is China. With approximately 27 million cars sold last year, accounting for 34% of all vehicles sold worldwide, it will be the greatest auto market ever. Seven million of the 27 million automobiles sold in China last year were electric vehicles. As per the viewpoint of producers of conventional vehicles, that means that 25% of the largest market worldwide has vanished.
In Australia, the sales of fully electric vehicles have surpassed those of hybrids, grabbing 6.8% of the market for new cars, on which several automakers in Japan have staked their future.
Legacy auto manufacturers from Japan, Germany and America have remained sluggish in developing electric vehicle production, and not one of them is currently producing electric vehicles on a large scale. Several people are now realizing that electric cars are increasingly taking significant share of the market away from conventional automobiles, which is a worrying issue for the traditional automobile industry.
Legacy automakers have seen prices slashed by up to 40% as companies such as Chevrolet and Mercedes-Benz try to hold onto the market they gained through great effort. The challenges already present will worsen because of how quickly the market in China is developing. The market share for electric vehicles increased by an astounding 93% between 2021 and 2022.
As reported by Reuters back in 2021, the sales of electric vehicles were anticipated to reach 35% by 2025 in China. However, Bloomberg predicts that the Chinese EV market will most likely have achieved that target by March of this year. This essentially means that the conventional vehicle market will decline by millions considerably sooner than traditional auto brands had predicted.
What it will take to push legacy automakers over the brink is the key question. Can they withstand a continuous 30% decline in revenue in the Chinese markets? What will happen to them when the electric vehicle share in Chinese market reaches 50% in 2024? Volkswagen and Toyota both anticipate waiting until 2027 to begin offering mass production of electric automobiles. How will they be able to continue operating till then?
While conventional vehicle makers have plenty of reasons to worry about rising electrification, EV makers such as Rivian Automotive Inc. (NASDAQ: RIVN) can only look forward to greater sales and profitability as more people make the switch to electric vehicles.
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