China is now the largest automobile producer in the world, and has surpassed traditional auto powerhouses such as Germany and Japan.
Massive government investments, an exploding domestic market and the relentless focus on innovations have all contributed to this remarkable growth.
China is home to the largest domestic auto market in the world, nearly equaling the combined size of the American and European markets.
The automakers responded to this demand by increasing production. They were supported in their efforts by modern automation, as well as a robust support from the government.
As the Chinese economy shrank and the consumer’s spending fell, the domestic sales could not keep up with China’s exploding production.
China currently has enough infrastructure to double its demand for cars.
In order to manage the surplus of vehicles, Chinese automakers are increasingly turning their attention towards international markets and exporting cars at an unprecedented level.
China dominates EV exports: Electrifying world
China is the leader of the EV revolution.
The country is expected to export 1.7 millions electric vehicles in 2022 — almost 50% more than Germany. Germany was the world’s second largest EV manufacturer.
BYD, NIO and other brands are gaining popularity around the world for their cutting-edge EVs.
Compact models that meet consumer needs and comply with environmental laws are the most popular in Europe.
The affordability of Chinese electric vehicles is a key factor in Southeast Asia.
Plug-in hybrids are also gaining popularity in areas without extensive charging infrastructure. These vehicles combine gasoline engines and electric motors.
China’s dominant position in EVs has been achieved through a strategic long-term approach.
The Chinese government invested heavily over the last 15 years in developing EV technology. This has helped to reduce reliance on oil imports and encouraged domestic innovation.
From 2003 to 2013, the then Premier Wen Jiabao gave EVs a high priority.
Wan Gang was appointed as minister of Science and Technology, a position he held previously at Audi. He received vast resources from the government to help China become a leader in EV technology.
The efforts paid off. Half of Chinese auto buyers today choose battery-electric or plug in hybrid cars.
These purchases have been incentivized by generous government subsidies until recently. The auto industry has also benefitted from tax incentives, low-interest loan programs, and affordable energy and land.
It is not surprising that the government has provided a large amount of support.
In response to China’s dominance in the EV industry, the European Union introduced new anti-subsidy duties.
Gasoline car surplus: Managing it
While electric vehicles (EVs) are the focus of headlines, gasoline powered cars still make up a large part of China’s auto exports.
The demand for gasoline vehicles has dropped as Chinese consumers switch to EVs. This is forcing manufacturers to sell their excess inventory abroad.
After the Ukraine crisis, Western automakers left Russia. Sales of these cars have soared.
Affordability has also attracted countries with lower and middle incomes in Latin America, the Middle East and Africa to Chinese gasoline vehicles.
China has a capacity of 40 million vehicles per year, which is more than double the demand for domestically produced ICE cars.
Some assembly plants have closed, but others are still operating by selling cars at a steep discount.
The Chinese automakers have been able to keep up production and prevent factory closings even though the market is shifting towards electric mobility.
Tariffs, global opposition and China: can it be stopped?
China’s aggressive move into the global auto markets is not going unchallenged.
Tariffs have been implemented by governments around the world, including the United States, the European Union, and many others, to protect domestic industries.
Tariffs come in many forms. The United States imposes a flat rate on Chinese imports, while the European Union charges duties according to the estimated subsidies Chinese carmakers receive.
India and Brazil, among others, have introduced measures designed to protect local producers from Chinese competitors.
Analysts believe, despite these obstacles, that they may not suffice to stop China’s dominance.
Chinese manufacturers have major cost advantages in particular the electric vehicle segment.
According to a study conducted by UBS, BYD’s EVs are 30% cheaper than similar models made by Western automakers.
China has a strong advantage in the EV batteries supply chain.
Maintaining dominance on global markets is the next step.
China’s unique ability to dominate global auto industry is due to its combination of government assistance, innovation and strategic investments.
China will not be deterred by geopolitical and tariff tensions.
China is a leader in the field of electric vehicles, thanks to its early investment and continued support.
Chinese automakers are adaptable, as evidenced by their ability to sell excess gasoline powered cars on international markets.
China will shape the future of the auto industry with its dual strategy. It is pushing the limits of electric vehicle technology, while also leveraging existing capacities to keep a strong position in the traditional markets.
Automakers around the globe will have to deal with an aggressive competitor who shows no sign of slowing.
As new information becomes available, this post may change.
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