When it comes to China, the sheer size of the country is always puzzling. And given its current economic growth path, it will soon be the largest economy of the world. This also translates to different markets, like digital or automotive.

Since China is not a Western-style democracy, the country poses some hard challenges to the Western world. For instance, the Great Firewall separates the Chinese internet from the rest of the world, despite all the early internet enthusiasts claiming that this would not be feasible.

Western companies have to play by the rules set by the Chinese government. While the same is true for other countries as well, it is different in China, since the country is run by a Communist Party that combines capitalism with a centrally planned economy.

The digital China has pretty much resisted the colonialisation by the giants of Silicon Valley and Seattle. With Baidu, Alibaba, and Tencent, or BAT in short, China has its own breed of GAFA-like companies, aiming for internet domination, at least in the long run.

As Westerners, we often expect that the Chinese people will someday demand freedom of speech and other freedoms we take for granted. But in reality, not too much has changed since the Tiananmen Square protests of 1989, almost thirty years ago. Comparing the Chinese internet with the Western one comes close to an A/B study. The jury on the long-term success is still out.

The ginormous size, combined with fast growth, provides for lots of opportunities. China is simply too big to ignore. To give a simple example: Despite China being the homeland of a new, mobile internet, the smartphone penetration is still lower than in Germany: 55.6%, compared to 71%. But with 775,028,000 smartphone users, China already boasts the world’s largest mobile market.

Both the economies of scale and the network effect are quite strong in China.

The same applies to the automotive market. China has been both the world’s largest automotive market and automotive manufacturing country for years, with a global market share of 30%, and Volkswagen as the dominant market leader. While China already has almost as many cars on the road as the US, the car penetration is still low, with 151 cars per 1,000 people, compared to 910 in the US (and 572 in Germany). This leaves room for growth.

The current fuel-based business model obviously has some scaling issues, like air pollution, climate change, and oil supply. China is moving into new energy vehicles, including but not limited to electric cars. The Chinese automotive industry is on the brink of globalisation. For example, the Geely Group now owns Volvo Cars, Lotus, London Black Cabs and the largest stake in Daimler.

Meanwhile, digitisation already shows some early signs, with Tencent owning 5% of Tesla as a prominent example. Over the next decades, we will see a battle for the new order of mobility, with China as a major player, shaping the future. Don’t forget that China already manufactures almost all Apple products, as well as other smartphones.

The strength in hardware development and manufacturing, for which Shenzhen stands as almost an icon, is another advantage for a future of digital cars and automotive digitisation. The car is, and always was, the ultimate mobile gadget. And it probably will remain. There are already promising large electric vehicle manufacturers like BYD, but also start-ups like NIO, backed by Tencent and Baidu.

Digital and automotive markets are going to merge, with digital going automotive and automotive getting increasingly digital. And China is well positioned to take advantage of this megatrend.

Photo by Anton Strogonoff on Unsplash