China in High Gear

How China's automakers went from being bit players at home to dominating the world's biggest auto market.

- Adam Bernard

THE WORLD'S A DIFFERENT PLACE from what it was in 2001. Back then, the only jobs threatened by AI were those of NBA players competing against Allen Iverson, Donald Trump was a registered Democrat, and Chinese consumers bought about 700,000 new passenger vehicles. Today, the so-called AI that's threatening jobs is a multitude of large language models masquerading as artificial intelligence, Donald Trump is serving his second term as a Republican president, and Chinese consumers are on track to buy north of 30 million new vehicles in 2025.

For years, the rapid growth of new-car sales in China filled the coffers of foreign automakers. For instance, the Volkswagen Group's China arm saw its operating profits balloon from roughly $143 million in 2006 to almost $3.4 billion in 2011. That year, foreign automakers accounted for 67 percent of the new-car market in China. Through the 2010s, domestic brands made some inroads, but even in 2019, foreign companies still held 62 percent of the market. The tides turned fast, however, and within a few years, Chinese automakers took the lion's share. Now two out of three new cars sold in China are from domestic brands.

How did non-Chinese automakers cede so much share of the world's largest market? "Automakers lost ground because China treated autos and batteries as strategically vital industries," says Usha Haley, PhD, a professor whose research lies in technology development and the Chinese auto industry.