Impressions from the Shanghai Motor Show: The Rise and Realities of China’s Automotive Industry

1- Last week, I had a packed schedule in Shanghai including technology companies, automotive suppliers, and the Motor Show itself. It’s clear: the world’s largest and most influential auto show is now held in Shanghai. Similar events in Europe and the US feel more like miniatures in comparison.

2- With nearly 30 million vehicles produced annually and countless suppliers, China has built the largest automotive ecosystem ever. There is a massive supplier industry designing and manufacturing vehicle chassis, cabins, seats, door panels, dashboards, and more. When it comes to electric vehicles, China hosts the world’s most advanced battery industry — from mining raw materials to metallurgy and refining. Six of the world’s top 10 battery producers are Chinese companies.

3- Thanks to this strong infrastructure, it’s possible to develop highly successful vehicles without owning production facilities. A prime example is Huawei. Without its own factories, Huawei partners with various automakers providing technologies such as software, autonomous driving, and smart cockpit systems. Currently, it collaborates with companies like Jac, Changan, Cherry, and Saic, producing 5-6 different models.

4- For instance, Luxeed is a luxury brand jointly developed by Cherry and Huawei. The vehicle boasts a very low drag coefficient of 0.21 (for comparison, Tesla Model Y is 0.23). It offers 82 kWh and 100 kWh battery options, delivering ranges of 500 km and 600 km respectively. The Extended Range Electric Vehicle (EREV) version, supported by a 1.5-liter engine, extends the range to 1,500 km. Motor options include 292 hp and 496 hp. Thanks to an 800V architecture, the car can charge 200 km in 5 minutes and 400 km in 15 minutes. Interior material quality is well above average and comparable to German premium segments. Huawei’s NOA (Navigation Assisted Autopilot) system uses multiple radar and lidar sensors to offer a driving experience close to Tesla’s Full Self-Driving (FSD). Prices in China range from $35,000 to $46,000.

5- All these capabilities rely fundamentally on mold and machine manufacturing and raw material processing, areas in which China has long had a strong infrastructure. A competitive ecosystem is built purely on supplier industry without needing vehicle assembly. Thanks to this, vehicle development cycles have shortened to as little as 18 months. With its 30 million annual vehicle production, China fully leverages the advantages of industrial scale. European and Japanese suppliers are no longer as dominant, yet China hasn’t produced supplier giants like Bosch or Denso.

6- During the show, a senior Chinese executive accompanied me. Interestingly, even he was unfamiliar with some of the brands at the show. Currently, there are about 150 automotive brands in China — 97 domestic and the rest joint ventures with foreign companies. In 2019, there were around 500 electric vehicle startups in China; today, it’s estimated this number has dropped to about 100.

7- Of course, not everything is perfect. There is fierce domestic competition, with installed production capacity around 48 million. Many brands — especially those producing internal combustion engines — rely on exports to survive due to declining domestic demand. Contrary to common belief, about 70% of exports are still internal combustion engine vehicles.

8- This ruthless competition and fast development cycles cause various problems. Many brands make mistakes in their product ranges — for example, offering both luxury D-segment and entry-level A-segment models under the same brand. Cabin material quality is often low, and screens are everywhere (which Chinese consumers love). Rapid technological advances also bring quality issues. Profit margins are generally low, and brand building is almost entirely left to influencers and social media activities. Hundreds of influencers were visible throughout the show. Domestic brands’ market share has increased from 40% to 60% in the last six years.

9- The supplier side also faces serious challenges. Vehicle manufacturers put significant pressure on suppliers. BYD is among the toughest in this regard. Unlike Europe, China lacks legal protections for small suppliers against large firms, forcing suppliers to fight hard for survival. Global supplier giants like Bosch, Valeo, Denso, or Hitachi are still not present in China, and no such developments are expected soon. Payments to suppliers can be delayed up to 120 days. Orders shipped to Europe take about 90 days by sea, causing a heavy cash flow burden on suppliers.

10- The topic is very deep, with many aspects to be further detailed. To be continued.