SO HERE we are, midway through the decade of the 2020s. It started turbulently with a pandemic, recovered in 2022 and 2023, and is now back to business as usual.
Almost, that is. Geo-political events like the Ukraine-Russia war, the conflict in Gaza, and the ouster of President Bashar al-Assad in Syria have gotten in the way of sure-footed global economic growth. The election of Donald Trump as the new President of the United States has also sent the world spinning in the face of potentially protectionist trade policies.
Tectonic shifts are also happening in the automotive field. The biggest, I believe, is the recently announced potential merger of global Honda and Nissan, with Mitsubishi waiting on the sidelines. This is envisioned to create a powerhouse company with combined sales of over eight million units, third only to Toyota and Volkswagen. Opinion is split about the strategic value of the planned merger, but one thing is clear: Nissan is in really dire straits. How the second largest automaker in Japan ended up in this situation will surely be fodder for many case studies and industry analysts for a long time to come.
Industry observers are already contending that the Honda-Nissan tie-up portends other major alliances or mergers. It would not be a surprise, actually. The stakes in this generational shift in mobility, automotive manufacturing and distribution are extremely high — and expensive. Research and development (R&D) for future technologies in the Connected, Autonomous, Shared and Electric (CASE) field needs very deep pockets. First, transformative technology costs a lot more than evolutionary ones. It’s a build-from-zero gambit that includes creating an entire supply chain and ecosystem, not just the technology. Second, the gestation period for R&D is long. That means payback will take many years and valuable capital will be tied up in an era where technology is very rapidly changing.
China is arguably ahead of the curve in the global race to electrified and autonomous mobility. A research article by Yuan Jia-Zheng and Carlo Braso Broggi in Business History chronicles domestic auto production in China as having only started in earnest in the mid-1980s to mid-1990s. In 2009, they report, the country became the largest automotive producer in the world, and in 2020, it accounted for a third of global auto production. As it grew its industry, the Chinese government bet huge on battery electric vehicles (BEV) or what it calls new energy vehicles (NEV). This allowed the state to focus its resources on building the requisite ecosystem to support electrified mobility.
Yuan and Broggi assert that China used “inward internationalization” to grow its capabilities. The authors explain that this may have included “foreign transactions, joint ventures or other activities that occur when firms lack capacity to invest abroad.”
They continued, “Inward internationalization is not so much driven by market mechanisms as by the necessity of acquiring technological skills and foreign market knowledge.” Global automakers had to play by China’s rules because they needed to be represented in the world’s largest auto market. Today, Chinese automakers have developed their homegrown ability to build cars as well as their savvy for international investment. This, in my mind, is what is driving the wave of exports, new Chinese factories and distribution partnerships that we are presently witnessing — in the Philippines and in many countries across the globe.
BYD is taking the fight to Tesla in terms of sales of electric vehicles. In fact, Statista recently reported that BYD already beat Tesla to become the world’s largest EV manufacturer, albeit by a nose. BYD reported 1,777,965 units produced in 2024 versus Tesla’s 1,774,442 units. In terms of sales, BYD reportedly sold 1.765 million BEVs and an additional 2.485 million plug-in hybrid electric vehicles (PHEVs) for a total of 4.3 millions units sold globally. This represents 41% growth versus 2023. China is teeming with car brands and distribution channels. It is not unlikely that a shakedown and consolidation might take place.
For example — even if it seems like a minor blip on the radar — it was announced last November 2024 that Geely would merge its Lynk & Co and Zeekr brands. Nikkei Asia reported that in a conference call, Gui Shengyue, a senior executive at Geely, said that if the two brands did not merge, it would lead to competition between them and result in a redundant investment, which would negatively impact Geely Auto, their major shareholder. “The integration is imperative as competition in the domestic market is heating up. We need to enhance our competitiveness by (increasing) scale,” Nikkei Asia quoted Gui as saying. Could this be a harbinger of what lies in the wings?
In the Philippines, Chinese automakers have entered in force, introducing a slew of many different brands and models. By varying counts, there are supposedly between 20 to 30 such brands. Adding to the mayhem, the Chinese OEs have tied up with different local partners, with some taking over the distribution in short time. Dealer networks have also been established by each brand. If mergers and alliances among the Chinese brands happen, the pregnant question is how the surviving brand will support the cars on the road of the acquired brand. Also, how will the distributor organizations and dealer networks be integrated given the inevitable overlaps in operations? Case in point are the Lynk & Co and Zeekr brands. How will this merger unfold in the Philippines where Lynk & Co is being distributed by the United Asia Automotive Group, Inc (UAAGI) and Zeekr is handled by the Autohub Group? I am certain the parent company of both brands — Geely Auto — has a plan in mind. Presumably, the same question can be asked of the planned Honda-Nissan (and Mitsubishi) merger. We will have to wait and see.
There is much going on in the auto industry and, to be sure, much more is waiting to unfold. The generational transition in mobility will entail a number of upheavals but, ultimately, this will take us to better days ahead.
