(Yicai Global) April 25 -- At the 20th Shanghai International Automobile Industry Exhibition, where more than 1,000 companies exhibited 1,200 car models, visitors' attention was focused on China’s new energy vehicle makers rather than well-established overseas brands.

The most crowded hall of the Shanghai National Exhibition and Convention Center, where the Shanghai Auto Show is held, was Hall 6.1, where most Chinese NEV brands exhibited their products. There are so many visitors to this hall that staff have to limit the flow.

Meanwhile, the neighboring Hall 5.1, where the booths of traditional automakers such as Volkswagen and Audi are located, looks deserted. The stands of joint venture brands between Chinese and foreign firms, including Nissan Motor and Honda Motor, also look pretty much deserted.

“One of the biggest takeaways from this year's Shanghai Auto Show is the breakthrough made by Chinese brands in the market segments where they used to be weak or even absent before,” Zhang Honghan, vice president of Chinese NEV startup Hozon Auto, told Yicai Global.

The same trend was also clear for high-end brands. Hall 8.2, also called the Luxury Car Hall, is the second-most popular at the Shanghai Auto Show. But most visitors are not checking out the cars shown by traditional fuel vehicle giants like Bentley and Maserati. They have eyes only for the Yangwang, the luxury electric vehicle brand under China's BYD.

Pictures of the Yangwang U8, a high-end sports utility vehicle, took Chinese social media by storm. According to sources, BYD had received 14,000 orders for the SUV, which has a presale price of nearly CNY1.1 million (USD160,000), as of April 23. Deposits had already reached CNY300 million (USD43.5 million), the sources added.

“The market for cars priced at CNY1 million was dominated by international brands back in the era of fuel vehicles, but the Yangwang U8 has achieved a very strong breakthrough by entering this market,” Zhang added.

Luxury Slump

Nearly 3.5 million luxury cars were sold in China last year, down 2.7 percent from the year prior, according to data from the China Association of Automobile Manufacturers. However, sales of luxury fuel vehicles fell at a faster pace, sinking 7.8 percent to 2.8 million units. BMW, Mercedes-Benz, and Audi reported that their sales fell in the Chinese market for the first time in years, down 6.4 percent, 0.9 percent, and 9.3 percent, respectively.

Sales of NEVs priced between CNY150,000 and CNY200,000 (USD21,760 and 29,0150) were the ones that gained the most last year, recording a three-fold leap from 2021, according to the CAAM.

With the surge in NEV sales, domestic automakers are making all-around breakthroughs in various market segments to take on JVs and luxury brands. For instance, Chinese NEVs such as BYD's Seal and Changan Automobile's Deep Blue are taking market share from fuel cars, including Honda's Accord and Volkswagen's Magotan.

“I went to see the Volkswagen ID.7 and was shocked,” Jiang He, a marketing executive at a car company, told Yicai Global about the latest electric vehicle released by the German carmaker. “The windscreen of the exhibition car was still displaying photos, and there was no way to let users experience the in-car smart vehicle service.”

But when checking out IM Motors’ LS7, Jiang could see and experience the efforts in product innovation and user scenarios the model's creators SAIC Motor and Alibaba Group had made.

“This year's Shanghai Auto Show was a turning point, from a competition between several major players to a full-scale war that involves all parties,” auto industry insider Sun Shaojun told Yicai Global. “Whether some of the brands we saw at the Shanghai Auto Show these days will survive to attend next year's Beijing Auto Show is a big unknown.”

Charter Flights

Overseas car companies sent large contingents to the Shanghai Auto Show this year, many of whom flew on charter flights. Half of BMW's board of directors and the heads of the German firm's main business lines boarded charter flights to China, Yicai Global learned.

During the BMW Brand Night event, the automaker’s Chairman Oliver Zipse proposed using the slogan: “Trends in the Chinese market today will lead the future of the world tomorrow.” On April 18, the day the Shanghai Auto Show kicked off, five groups of BMW managers visited Nio’s booth to meet with managers and employees of the Chinese EV startup.

Volkswagen also booked two charter flights to bring the board members of Volkswagen, Audi, and Porsche to Shanghai. Ola Källenius, chairman of the board of Mercedes-Benz, was reported to have brought a team of nearly 300 people to the event.

Honda, Toyota Motor, and Hyundai Motor also sent management and business teams of more than 100 people to participate in the Shanghai Auto Show.

Groups of three to four employees from South Korean car companies with translators and research forms were spotted collecting information about Chinese automakers. Some staff of Japanese car brands even lay on the ground and used tape measures to carefully note technical data, including door openings.

Bankrupt Chinese NEV maker Zotye Auto attracted widespread attention in the past for taking down vehicle details with tape measures during auto shows.

But some industry insiders still believe overseas car giants may fight back. It is not good news for Chinese automakers with unstable foundations that foreign competitors are rethinking the definition of 'smart electric car,' embracing China's industrial chain to cut costs and increase efficiency, making up for the shortcomings in their capabilities, and refusing to give up their premium products.

Global car giants such as Mercedes-Benz and Volkswagen have strong research, development, manufacturing, distribution, and supply chain capabilities as well as popularity, a manager at a Chinese EV startup said, warning that they may crush Chinese competitors once they complete their transformation.

More Price Cuts?

China’s auto market, the world’s largest, is in the midst of a price war after US EV giant Tesla cut the cost of its China-made Model 3s and Model Ys in January. Since then, more than 40 electric and fuel auto brands have followed suit with discounts and subsidies.

But with the market becoming increasingly competitive and domestic companies gaining the upper hand, speculation about another round of Tesla price cuts are spreading.

Although Tesla has refuted the speculation, Yicai Global learned from the carmaker's suppliers and stores that it is undertaking an extreme stocking in the upstream and downstream segments. Some staff at Tesla stores believe this may be the prelude to a new stage in the price war.

Most companies that participated in the first round of price cuts, excluding Tesla and BYD, got a brand awareness boost but did not see sales grow. Footfall at showrooms in Shanghai and in other cities that Yicai Global visited has increase, but transaction volumes remain sluggish.

“Traditional pricing logic has disappeared,” Wu Di, a product manager at an NEV startup, told Yicai Global. “The price of many models is not profitable anymore, but everyone is cutting prices by any means to survive and defeat their opponents.”

Intensifying competition will reduce the number of China’s NEV manufacturers to eight by 2030, He Xiaopeng, founder of Xpeng Motors, said last week.

Editor: Tang Shihua, Futura Costaglione