Automotive manufacturers will face many challenges over the coming decade and a half. Pressure from ongoing macroeconomic and geopolitical tensions will grow and technological shifts, especially around electrification and connectivity, will radically reshape the competitive environment. However, the precise trajectory through 2040 is not yet clear, and we believe that OEMs (original equipment manufacturers) can shape their own fate by taking decisive strategic action early on.
Our market analysis reveals a clear shift in power in recent years towards Chinese OEMs. These Chinese players have grown rapidly, increasing their market share by 19 percentage points since 2019 in their domestic markets and achieving sizeable gains in Europe and parts of the Global South. How have they managed this? Largely by exploiting their superior cost position, competitive technology and successful brand development.
However, not all Chinese players have been equally successful, with some failing to achieve their own ambitious growth targets. Recently announced trade measures make the environment even more challenging. Competition is fierce, with more than 30 local OEMs fighting for a share of the Chinese market and many of them not yet operating profitably. The future is not equally bright for all Chinese OEMs, and some may fall victim to future consolidation.
For their part, European OEMs have long relied on China as the growth engine of the global industry. However, more recently they have faced severe headwinds and now find themselves down six points in terms of market share since 2019. North American OEMs still enjoy a strong position in their domestic market, where they enjoy a strong brand reputation and a large customer base. However, many incumbent North American players have lost market share over the past five years in both Europe and China, mainly to new BEV (battery electric vehicle) players.
To visualize how things may change in the period to 2040, we have developed two scenarios describing two extremes of future market development. In the first scenario – Dominance of Chinese OEMs – Chinese OEMs have grown fast in all markets globally by 2040, reaching a 70 to 75 percent market share in China, 15 to 20 percent in Europe and five to ten percent in the United States and Canada. Indeed, the industry may have reached a tipping point in which Chinese OEMs have won the race and other OEMs can no longer catch up. In this scenario, Western OEMs have accounted for just 18 percent of global OEM revenue growth in the period 2024-40. In the second scenario – Revitalization of Western OEMs – Western car manufacturers have faced challenges but by 2040 have managed to stabilize their market position at a level comparable to or slightly below 2024, not only in China but in their home markets, too. This has resulted in decent growth for Western OEMs, accounting for around 36 percent of global OEM revenue growth in the period.
OEMs need to take decisive action in order to remain competitive through 2040. Company leaders should look at incorporating five priorities into their strategy:
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