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in the first half of 2024, foreign automakers' sales performance generally declined, while chinese brands generally achieved high growth. the decisive factor behind this was the high-intensity and high-efficiency r&d investment.

recently, the 2024 semi-annual or second quarter reports of leading chinese and foreign automakers have all been disclosed. combining their global production, sales and profit data, we found that:

the market share of chinese brands continues to rise, while overseas automakers generally experience a decline in performance;

chinese brands have high r&d investment intensity and efficiency. although the total r&d investment of overseas automakers is high, the effect is limited.

the turning point of overseas automakers

in the first half of 2024, the macro-economy slowed down, and the automobile consumption demand that was suppressed due to insufficient supply and restricted consumption conditions during the epidemic was basically released in 2023. the global automobile market cooled down, and overseas automakers generally saw a year-on-year decline in sales in the first half of this year.

sales are difficult, and car companies can only offer discounts and promotions, which will affect their performance. in the first half of 2024, the net profits of overseas car companies generally declined year-on-year.

toyota, the world's largest automaker, saw its sales fall 4.7% year-on-year in the first half of the year. over the past decade, toyota's sales have either increased or remained basically flat, except for 2020, which was hit by the pandemic. volkswagen, the world's second-largest automaker, saw its sales fall 0.6% in the first half of the year and its net profit fall 14%. bmw and mercedes-benz's net profits fell 13% and 20% year-on-year, respectively. tesla's sales and net profit also fell.

the sales inflection point of honda, nissan and mitsubishi appeared earlier, and they entered a downward trend as early as 2020. the decline rate has slowed down in recent years, but the sales volume of the three automakers has directly dropped a level. nissan and honda fell below the 4 million mark, and mitsubishi fell below the one million mark.

chinese automakers are climbing up

in the first half of 2024, although the global market has slowed down, the overall growth rate of china's independent brands is still on the fast track, and sales generally increased significantly year-on-year. the net profit and r&d investment scale of the three representative car companies of independent brands, byd, geely and great wall, are also at a relatively high level.

the international status of chinese independent brands is also rising step by step. in the global auto sales ranking, changan, byd, geely, and great wall all ranked after 13th in 2022. in 2023, byd ranked among the top ten in the world for the first time. in the first half of 2024, byd, changan, and geely all rose to within the top 13. among them, byd ranked seventh in the world in the second quarter of this year. chinese auto companies that rely more on joint venture brand sales generally fell in the rankings.

if calculated based on monthly sales, byd has surpassed honda, ford and hyundai in july 2024, ranking third in the global automaker sales list.

(picture from yiche.com)

the key to differentiation: r&d investment

the progress of chinese brands is the result of continuous accumulation in recent years. chinese brands have made resolute investments in electrification and intelligent technology, and have rapidly iterated, gradually catching up with and surpassing the competitiveness of overseas brands, while also expanding their inherent cost-effectiveness advantage.

the root cause lies in the high-intensity and high-efficiency r&d investment of chinese automakers.

leading overseas automakers are large in scale, well-funded and have strong financial resources. toyota and volkswagen have annual revenues of more than 2 trillion yuan, and they usually spend about 3% of their annual revenue on research and development, which means at least 50 billion yuan a year.

chinese automakers have a weak foundation but strong r&d intensity. in the first half of 2024, the r&d investment of most chinese automakers exceeded their net profit in the same period. byd, in particular, spends about 7% of its operating income on r&d every year. since separately disclosing r&d expenses in 2017, byd's r&d expenses have been higher than its net profit attributable to the parent company in all other years except 2017, when they were slightly lower than the net profit attributable to the parent company.

as the business scale grows, byd's r&d expenses will reach 20.2 billion yuan in the first half of 2024, exceeding tesla and approaching stellantis. it ranks first in r&d investment among chinese automakers. in terms of r&d intensity (the proportion of r&d expenses to receivables), byd's r&d intensity has exceeded that of overseas giants such as mercedes-benz, bmw, stellantis, and tesla.

byd's r&d investment not only ranks the highest among chinese automakers, but is also the company with the highest r&d expenses among a-share listed companies that have released their 2024 semi-annual reports.

moreover, china's r&d investment is more efficient. foreign engineers have higher salaries and more holidays. in comparison, chinese engineers invest more effective working time. in the field of automobile r&d, which is more inclined to engineering r&d, as long as the effective working time invested is enough, more r&d results can be produced.

in general, foreign automakers are declining from high to low. their scale is still high, with the top five automakers having a total sales volume of about 40 million vehicles, nearly half of the world's total, but their main products are still fuel vehicles, which are easily dragged down by the overall decline in the fuel vehicle market.

overseas car companies also invest more in r&d, but due to the large number of existing r&d teams, many personnel who only have the ability to develop fuel vehicles are still consuming the r&d investment of car companies. their huge r&d investment has not produced a large number of results in new energy and intelligent technologies. in an era where new energy and intelligent technologies are changing with each passing day, if r&d is one step slower, the product will be ten steps slower.

since 2024, the price of toyota camry in the chinese market has dropped to about 120,000 yuan; toyota dealers in thailand and indonesia have officially reduced prices, comprehensively utilized loan interest rate discounts, and maintenance discounts for promotions; mitsubishi, honda, and nissan have also vigorously promoted discounts; the price of volkswagen's electric car id.3 in china has dropped to about 130,000 yuan. many leading foreign automakers have also begun to reduce production and close factories.

in comparison, china's independent car companies have gone from low to high, and most of their r&d investment has been used on new energy technologies, with their product strength constantly improving.

in general, the r&d achievements of chinese automakers and upstream supply chain companies in the past decade have surpassed those of their overseas counterparts. as long as this r&d lead can be maintained, it will have more and more positive impacts on production and sales in the terminal market.

wang chuanfu, chairman and president of byd, said in 2019: "byd has a technological 'fish pond' with a variety of technologies. when the market needs it, we will fish one out." 2019 was the most difficult time for byd's performance, and it was also when the market share of china's independent brand automobiles fell below 40%. even when standing on the edge of the cliff, it still insisted on the value of technology and insisted on r&d investment.

it is precisely the continued investment in research and development over the years that has enabled chinese brand car companies to demonstrate a positive trend amidst the general decline of international leaders in the first half of 2024.

note: the data in this article comes from wind data, company financial reports, and company official websites. the exchange rates are calculated as follows: eur/rmb 7.8678, usd/rmb 7.0972, jpy/rmb 0.0495, and krw/rmb 0.00533.

(the author of this article is a researcher at the caijing industry research center. editor: yin lu)