The new normal: Stagnant domestic demand, surging exports

SHANGHAI — Annual vehicle shipments in China will reach a record 30 million in 2023, the China Association of Automobile Manufacturers predicts. 

But the reality is sinking in — growth is largely being driven by exports rather than vehicle demand inside the country. 

In fact, demand in China, which can be measured by excluding exports from overall vehicle shipments and adding imports, has stopped growing for years amid a weakening economy. 

In 2017, China’s annual vehicle shipments, excluding exports, reached 28 million, setting a record. 

From 2018 to 2022, the tally slipped from 27 million to 23.8 million. 

Domestic shipments show no signs of recovering to 2017 levels. 

For 2023, domestic shipments should reach 25.2 million. In 2024, the number will rise to 25.5 million, according to a forecast CAAM made last month. 

China’s vehicle imports started contracting in 2018 after topping 1.2 million a year earlier.  

The slump in imports continued in 2023. As of November, China’s vehicle imports dropped 12 percent year on year to below 720,000, according to a tally by the China Automobile Dealers Association.

With vehicle demand weak, Chinese auto manufacturers have taken the lead in boosting exports. They've been quite successful on that front. 

In 2021, China’s vehicle exports surpassed 2 million after hovering around 1 million the previous years.

Exports jumped 54 percent to exceed 3.1 million in 2022, when China overtook Germany to become the world’s second-largest vehicle exporter. 

As the Chinese market pivots to electrified vehicles at a rapid speed, global automakers such as Kia Corp. and Ford Motor Co. have also stepped up exports of gasoline vehicles from China to other emerging markets. 

In the first 11 months of 2023, Kia shipped some 76,000 vehicles from China, a 92 percent jump from a year earlier. 

In the same period, Ford China's exports surpassed 100,000. 

Other global automakers such as Stellantis and Nissan have also hatched plans to increase exports from China to make better use of local plants. 

China is now poised to eclipse Japan as the world’s largest vehicle exporter, after vehicle exports surged 58 percent to more than 4.4 million in the first 11 months last year. 

The flip side of the export growth is sluggish vehicle demand inside the country. 

That’s the reality automakers, domestic and foreign, now have to manage.