Press Release

As the global automotive market recovers more slowly than anticipated, China is rapidly emerging as an industry superpower.

June 27, 2023

Chinese car manufacturers now lead the world in export volume as the traditional western car industry is running out of time to defend its historic domestic market share.

London (June 27, 2023) – With supply chain bottlenecks and raw material shortages becoming a thing of the past, the global market for automobiles is growing once again – but at a significantly slower pace than many experts expected.

As a result, sales figures in Europe will be more than 15% below pre-Covid levels in the longer term with the UK fairing slightly better at c.10% below pre-Covid levels but levelling off at c.2.4m vehicles sold annually by around 2026.

At the same time, European OEMs are also increasingly under pressure in their home markets from Chinese manufacturers, more and more of whom are pushing into European markets with electric vehicles. In the first quarter of 2023, China replaced Japan as the world leader in automotive exports – an astonishing advancement from sixth place as recently as 2019.

These are among the key findings from global consulting firm AlixPartners 2023 Global Automotive Outlook, a regularly cited source of reference for the OEMS, suppliers and industry commentators alike.

Automotive market continues to grow, but at a slower pace

  • China drives global automotive market growth
  • Growth slows in other regions – contrary to earlier predictions
  • Sales figures in Europe are predicted to be more than 15% below pre-Covid levels in the long term
  • UK Sales figures are expected to fair slightly better plateauing at c.10% below pre-Covid levels
  • Battery costs not falling fast enough and threaten to dampen the rapid increase in sales of electric cars over the next three to five years and extending ICE lifetime

China is increasingly becoming an automotive superpower

  • In 2019, China was the world’s sixth largest automotive exporter. As of Q1 2023, Chinese OEMs have replaced Japan as the export world leaders for the first time
  • In the Chinese domestic market in 2023, and for the first time in decades, Chinese brands will surpass foreign brands (51%) and are predicted to reach a market share of 65% by 2030
  • While the industry has hitherto focused on Tesla as a single marque threat, now is the time to prepare for future competition from Chinese BEV imports from an ever-growing roster of manufacturers

Increasing pressure on margins and liquidity of European OEMs and suppliers

  • OEMs' earnings situation will deteriorate in a low growth market – with margins of OEMs and suppliers converging again
  • Suppliers' net debt rises to record levels (+27% since 2018) due to operational liquidity requirements; however, OEMs' debt has decreased (-8% since 2018)
  • Rising capital costs and ongoing record investments due to the switch to electric cars require active management of cash flow and liquidity, especially for suppliers

In the UK, investment in battery manufacturing capacity has not materialised at the levels seen elsewhere – increasing the UK’s reliance on China and recent drops in raw material costs have reversed yet again due to rising Chinese demand, remaining between 30-80% above pre-Covid levels.

"While UK sales volumes are expected to plateau in the long term, we do see conflicting tensions between continued lower scrappage rates and increasing average vehicle age in the car park being offset by sustained population growth and steady rates of car ownership per person”, said AlixPartners automotive expert Tom Beard regarding the UK picture. “Keeping an eye on changes to these trends will be key to understanding the real long-term impact in the UK”.

China continues its growth trajectory not only as an attractive sales market but also as an exporter and producer in equal measure. This is also reflected in the Chinese domestic market: in 2023, for the first time in decades, Chinese brands will surpass foreign ones (51%) and are predicted to reach a home market share of 65% by 2030.

Commenting on China’s increasing importance Andrew Bergbaum, a Partner & Managing Director in the Alixpartners Automotive practice, said, "China can now really be regarded as an automotive superpower. UK & European OEMs, on the other hand, are increasingly taking on the role of defenders of market share in their traditional, and shrinking, home markets. At the same time, having enjoyed some recent pricing power, they are now coming under pressure with tightening margins in the face of a low growth global market and increasing competition. For the UK, the proposed accelerated transition away from pure combustion engines by 2030 is going to position lower-cost Chinese imported BEVs as attractive alternatives”.

At the same time, costs are escalating and becoming a critical factor for OEMs and automotive suppliers alike. Raw material costs will not return to pre-Covid levels and have recently risen, yet again, to 30-80% of pre-Covid levels. With China’s continued market growth, forecast to achieve 117% on pre-covid volumes, AlixPartners does not foresee battery capacity catching up with demand and, in jurisdictions such as the UK, requirement, in the near term.

As a result, it is becoming increasingly apparent that combustion engines and electric vehicles will exist in parallel for longer than originally expected. The lengthening ICE lifetime is helped by the fact that the drawn-out decline in the cost of batteries will significantly dampen the pace of the transition to electric mobility in the medium term. This ‘twin-tracking’ prevents the establishment of rapid economies of scale and in turn further increases the acute financial pressure on the industry.

“The UK is already 3 to 5 years behind the rest of Europe in terms of building EV battery manufacturing capacity. This gap is widening, with the possibility of Europe largely removing its reliance on China by 2027. Even if additional UK investments were confirmed in the very short term, the challenging ramp-up process means the UK could still be reliant on importing more than a third of its batteries by 2030, adding further cost pressures to UK-built vehicles”, AlixPartners EV and battery expert Ken Henderson said of the UK’s EV conundrum.

Rising capital costs round off the negative scenario. Automotive suppliers are confronted with a rapid increase in net debt due to their sandwiched position (+27% since 2018). The chance of passing on further manufacturing cost increases from material and labour through to OEMs is low and yet at the same time the transition to electromobility requires a high level of operational liquidity.

AlixPartners Automotive and Restructuring Partner & Managing Director Nick Parker said, "The stress phase for suppliers, which has endured now for several years, will persist and continues to pose existential challenges for many of them. The debt of the supplier industry is currently at a record high, while at the same time the cost of capital and liquidity requirements for current business and investments are rising. The pressure on margins remains high. Cash flow and liquidity management must therefore be a top priority for suppliers. We expect that this situation will also lead to further consolidation in the supplier industry and the continued divestment of combustion engine-related operations”.

Notes to editors:

About the Global Automotive Outlook

2023 is the 20th year of the AlixPartners Global Automotive Outlook. The globally recognised study is considered one of the most important trend barometers of the automotive industry worldwide, allying industry data with the unique insights of AlixPartners Automotive experts.  For the study, the global consultancy evaluated the financial results of more than 300 automotive manufacturers and suppliers, undertook consumer surveys, and conducted almost 100 expert interviews.

About AlixPartners

AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical opportunities. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981 in Detroit, AlixPartners is headquartered in New York, and has offices in more than 20 cities around the world. For more information, visit

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