A report by Jato Dynamics reveals that Chinese automakers have surpassed U.S. brands in sales for the first time. Chinese automotive companies, led by Shenzhen-based BYD BYDDF backed by Warren Buffett, sold 13.4 million new vehicles last year, outpacing the 11.9 million sold by American brands.
What Happened: The report indicates that China’s sales growth exceeded the U.S., with a 23% increase from the previous year compared to the U.S.’s 9%, CNBC reported on Friday.
“Negligence from legacy automakers, which has resulted in consistently high car prices, has inadvertently driven consumers toward more affordable Chinese alternatives,” said Jato senior analyst Felipe Munoz.
Chinese carmakers, especially BYD, have been expanding globally, driven by an electric-vehicle price war at home that has reduced prices and impacted profit margins. They have made significant progress in emerging economies, where one in five new car sales were made last year.
Buffett's Berkshire Hathaway Inc. is an investor in BYD. It acquired a 20.49% stake in the company's Class H shares with an investment of $230 million in 2008. However, it has reduced its stake over time and now holds approximately 87.6 million BYD H Shares, equivalent to a 7.98% stake.
Despite rising trade tensions between China and the West, Chinese car makers gained substantial market share across the Middle East, Eurasia, and Africa, while also recording growth in Latin America and Southeast Asia.
However, the industry faces increased trade challenges in 2024, with more countries implementing measures to protect local industry from cheap Chinese exports. The EU recently announced an increase of tariffs on Chinese EVs of up to 38%, following the U.S.’s move to quadruple tariffs on Chinese EVs to 100%.
Why It Matters: Chinese automakers’ strategy of competing on price in overseas markets has been a double-edged sword. While it has led to increased sales, it has also raised concerns about the quality of their products. Helen Liu, a partner at Bain & Co., warned that this approach could potentially backfire.
Furthermore, the aggressive pricing strategy of Chinese automakers, particularly BYD, has put global automotive leaders and politicians under pressure.
Read Next: Why Tesla Stock Is Shooting Higher In Today’s Premarket
Photo via Wikimedia Commons
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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