Commentary: China’s Carmakers Need a New Global Playbook for a Fractured World

China’s automotive industry is currently facing significant challenges due to deglobalization, mounting geopolitical tensions, and a multitude of tariff and non-tariff barriers. Governments in key markets are increasingly limiting vehicle imports and pressuring Chinese manufacturers to invest and build production facilities locally. Despite these obstacles, the global market for new-energy vehicles (NEVs) is experiencing rapid growth, presenting substantial opportunities for Chinese manufacturers [para. 1][para. 2].

Looking at historical precedent, Chinese carmakers can learn from the experiences of Japanese and South Korean automakers, who faced similar trials during their global expansions but ultimately achieved success through persistence and strategic adaptation. The future for China’s car exports, though complicated, remains full of potential if the industry takes a confident and strategic approach [para. 3].

According to the China Association of Automobile Manufacturers, China exported nearly six million vehicles in the past year, while customs data, which also accounts for used and low-speed vehicles, places the figure at over 6.4 million. This marks China’s second consecutive year as the world’s largest auto exporter. While traditional gasoline vehicles still make up the bulk of exports, NEV exports neared 1.3 million units. The majority of overall exports go to Belt and Road Initiative countries, but most electric vehicles are sold to developed nations, with leading export destinations in 2024 including Russia, Mexico, the UAE, Belgium, and Saudi Arabia [para. 4][para. 5].

China’s growing exports have triggered a wave of protective trade measures in many markets. Nevertheless, the industry’s growth prospects remain robust. The recommended industry strategy includes focusing on three fronts: further expansion in major overseas markets, localizing production, and capitalizing on the global EV transition [para. 6].

Targeting large markets is especially important. The total global vehicle market, excluding China, is over 60 million units annually, led by the U.S. (16 million), the EU (12 million), and substantial markets in India, ASEAN, Brazil, Mexico, Russia, and more. In 2024, top-tier markets accounted for over 58 million vehicles sold, and these should be the primary focus for Chinese exports. The EU, while crucial, presents regulatory hurdles such as anti-subsidy investigations, prompting many Chinese automakers to plan or build factories within the bloc. The U.K., ASEAN, and Russia also feature prominently, despite recent headwinds and declining exports to Russia [para. 7][para. 8][para. 9][para. 10][para. 11].

Historical trends from Japan and South Korea show that after reaching export peaks, local overseas production becomes the dominant business model. Japanese automakers, for example, produced 17.5 million vehicles abroad in 2023, well above domestic production; South Korea followed a similar trajectory. Currently, Chinese companies produce less than 10% of their foreign sales abroad, compared to over 60% for German and Japanese firms and over 40% for Korean automakers, highlighting a clear need for greater overseas production investment. This shift not only meets local standards and supports after-sales service but also boosts exports of high-value components—China already accounts for over 10% of the global auto parts trade, exceeding $150 billion last year [para. 12][para. 13][para. 14][para. 15][para. 16].

Electrification is another major trend. Global NEV sales exceeded 19 million last year (over 20% market share), with projections from the International Energy Agency pointing to more than 35% penetration by 2030. China’s robust supply chain and competitive products put it in a strong position to lead this transition. BloombergNEF forecasts NEV sales rising from 17.6 million in 2024 to 39 million by 2030, and despite some policy shifts from leaders like President Trump in the U.S., the momentum toward electrification is undeniable [para. 17][para. 18].

Success for Chinese automakers requires a focus on large markets, localization, and leveraging their EV leadership with a long-term strategic approach. Emulating the gradual, quality-focused expansion of established foreign competitors, Chinese brands can become trusted global players through sustained commitment and investment [para. 19].