24/7 Insights
- China is becoming a graveyard for car companies that are not local.
- That is especially so for those trying to sell electric and hybrid vehicles there.
Toyota Motor Corp. (NYSE: TM), the world’s largest car company, is struggling. Its sales fell by 0.5% in April. That was not the bad news. Sales in China slid 27%. That was, according to Reuters, even though it had aggressive incentive programs. It is tough news for manufacturers that compete with rising Chinese rivals, particularly those in the electric vehicle (EV) and hybrid segments. The market is crucial to Tesla Inc. (NASDAQ: TSLA), which counts on it for a very large percentage of its sales.
Although Toyota sells hybrid models in China, it does not sell EVs. The market has moved quickly to locally made hybrids and EVs, which has helped local companies like BYD but hurt manufacturers like Tesla and now Toyota.
Toyota and Tesla will continue to struggle in China because there are 200 hybrid and EV makers there. Some are relatively large, including BYD, the largest EV company in the world. Although not all 200 companies will stay in business, each represents a market share challenge to Tesla, Toyota, and other Western vehicle operations.
China has become a graveyard for several Western car companies. Ford’s sales have trended down by double-digit percentages from last year. General Motors has posted similar numbers.
Tesla has been described as a very different company from Toyota because of their product mixes. However, they share a major hurdle in China’s crowded market.
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