How China's new auto giants left GM, VW and Tesla in the dust

By Nick Carey and Norihiko Shirouzu

In October 2023, Chinese automaker Chery demonstrated its remarkable speed and flexibility by completely overhauling the suspension and steering of the Omoda 5 SUV for the European market in just six weeks, a process that would take well over a year at traditional Western automakers.

This rapid adaptation was necessary to prepare the vehicle for Europe’s rougher roads, unlike the smoother streets of China for which it was originally designed.

Chery’s Jaecoo 7 SUV at a launch event near Windsor, Britain, in January. The Chinese automaker says it produces between five and 10 digital design proposals for every car it develops. If any model flops, the company can quickly replace it. REUTERS/Toby Melville

China’s auto giants have slashed vehicle development times to as little as 18 months, compared to over five years for Western competitors.

The average age of a Chinese-brand electric or plug-in hybrid model is just 1.6 years, versus 5.4 years for foreign brands, allowing Chinese companies to offer fresher, more competitive products.

Vertical Integration and Workforce Scale: BYD’s Formula for Speed

BYD leverages China’s lower labour costs and a massive workforce of nearly 900,000 employees to accelerate design and manufacturing. Unlike most automakers, BYD produces about 75% of its vehicle parts in-house, reducing dependency on suppliers and speeding up development while lowering costs.

China’s automotive market is fiercely competitive, with 93 of 169 automakers holding less than 0.1% market share.Overcapacity and price wars have led to aggressive discounts, forcing companies to innovate rapidly or risk failure.

Chery Omoda 5 and Omoda E5 models on display at Stoner Motor Company in Gillingham, Britain, in November. Chery is the leading exporter among China’s automakers.

This ruthless environment has created a few dominant players poised to lead the global market.

Chery, China’s largest auto exporter, and BYD, the world’s largest EV maker by volume, have both increased global sales by around 40% in 2024. Meanwhile, Tesla experienced its first annual sales decline, partly due to an aging model lineup and CEO Elon Musk’s controversial public image.

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Legacy Automakers Struggle to Keep Up

Global giants like Volkswagen, Toyota, and General Motors have acknowledged the competitive threat posed by Chinese automakers, especially their rapid development cycles. Volkswagen’s China chief has publicly committed to matching the speed of Chinese startups, signalling a shift in industry dynamics.

Initially mimicking foreign models, Chinese automakers have since developed their own engineering and production processes focused on speed and agility. They prioritize releasing “good-enough” vehicles quickly, using fewer prototypes and relying heavily on digital simulations and AI, rather than exhaustive real-world testing.

Toyota’s bZ3 electric sedan, a China-only EV released in 2023, emerged from a joint venture between the Japanese automaker and BYD. The companies’ contrasting approaches were evident during the vehicle’s development, according to two Toyota employees.

BYD’s founder Wang Chuanfu is known for his intense work ethic and hands-on leadership. The company’s rapid product launch pace vastly outstrips Tesla’s, with over 40 new vehicles launched since 2020 compared to Tesla’s five models. BYD’s broad product range includes hybrids and EVs under multiple brands, reflecting a diversified market strategy.

Zeekr and Geely: Digital Innovation and Flexible Manufacturing

Zeekr, a premium brand under Geely, employs advanced digital design, virtual reality, and AI to accelerate development.Its flexible manufacturing lines can switch between multiple models without downtime, enabling continuous 20-hour development cycles across global design centers.

Despite their rapid development cycles, Chinese vehicles consistently achieve top safety ratings from Euro NCAP, challenging stereotypes about quality and safety in Chinese-made cars.

Chery’s success lies in its ability to produce a wide range of vehicles, including internal combustion engines, hybrids, and EVs. Its European expansion includes new factories and a willingness to rapidly redesign or replace models based on consumer feedback, exemplifying its agile approach.

Cars waiting to be shipped to their different destinations

Chinese automakers BYD, Chery, Geely, and others have reshaped the global automotive landscape through unprecedented speed, vertical integration, and innovative development practices. Their rapid growth and global expansion pose a significant challenge to legacy automakers, who must adapt quickly or risk falling behind.

This structured format highlights the key themes and developments in the rise of Chinese auto giants, emphasizing their speed, innovation, and global impact. (Reuters)