China will surpass Japan by the end of the year according to Moody’s Analytics. This news came crashing after China took over Germany and secured the top spot of becoming the top car exporter in the world.
China’s exporting history and their growth story
Exports of electric cars and plug-in hybrids, known collectively as new energy vehicles (NEVs), grew 24.3% to 1.29 million last year.
Just a few years ago, Chinese carmakers struggled to make inroads in foreign markets, exporting fewer than 375,000 cars in 2015. In contrast, Germany and Japan shipped roughly the same number in just a single month.
However, a significant shift occurred around 2020 when China shifted into high gear.
By 2021, they had exported nearly 1.6 million cars, and this number escalated to an impressive 2.7 million in 2022. and massive hit in the year 2024 with 4.8 million units.
The momentum shows no signs of slowing down, with the first half of 2023 seeing nearly 2 million cars shipped, exceeding 10,000 units per day.
How was China able to secure the first position?
This growth can have numerous reasons and we’ll discuss each in depth as we go ahead.
Western Consumer Appetite for Chinese Cars
Initially, China’s nascent auto industry primarily targeted less affluent countries, but the tide is changing. Western consumers are increasingly embracing Chinese-made vehicles due to the cost-effective models.
In the first half of 2023, exports to Australia tripled, reaching over 100,000 cars, while sales to Spain surged 17-fold to nearly 70,000 vehicles. Notably, a significant portion of these cars carry Western brands, including those from Tesla, MG, and Volvo, now under Chinese ownership.
State-sponsored support to the EV Industry
While the country may have lagged in mastering internal combustion engines, the advent of battery-powered vehicles provided the perfect opportunity.
Battery-powered vehicles are mechanically simpler and easier to produce, and China seized this opportunity. Considerable state investment in EV technology, estimated at $100 billion between 2009 and 2019, catapulted China to the forefront.
Presently, EVs account for a substantial 20% of car sales in China and a remarkable 33% of exports, dwarfing the figures in Japan and Germany, where electric cars represent a mere 4% and 20% of exports, respectively.
Large reserves of Lithium and expertise in Semiconductors
China is the third-largest country to have Lithium Reserves amounting to 2,000,000 metric tons accounting for 14% of global production. This makes the building of electric vehicles easy and cheap as Lithium is located at the heart of EVs.
Another reason could be the success of China in building a 7nm semiconductor chip. The smaller the size of the cheap, the more efficient it is to work with and can be installed in typical areas.
Russia-Ukraine war and sanctions on Moscow
The conflict between Russia and Ukraine in 2022 disrupted the automotive landscape, with most Western carmakers halting their Russian operations.
Chinese automakers seized this market void, resulting in a six-fold increase in Chinese car exports to Russia in the first half of 2023, amounting to nearly 300,000 cars valued at $4.5 billion.
In July, Chinese cars accounted for nearly 80% of Russian imports. This surge highlights the rapid expansion of China’s export footprint.
Before the sanctions were imposed, there used to be approximately 60 automakers operating in Russia.
However, in the current landscape, only 14 of them have managed to survive. Interestingly, except for the local brands such as Lada, GAZ, and UAZ, the remaining automakers all hail from China.
These Chinese manufacturers have seized the lion’s share of the expected 760,000 vehicle sales in 2023, a significant drop from the pre-war levels of 1.5 million units. In 2022, Russian-bound Chinese vehicle exports represented 5% of the total, a number expected to increase in the coming years.
The level of dominance is so pronounced that even Russian car brands are resorting to selling rebranded Chinese vehicles.
China’s EV Dominance and Market Expansion
China’s influence in the electric vehicle sector is undeniable. It now produces more than half of the world’s lithium supply, with industry giants like Tesla and BMW setting up production facilities in China.
While foreign brands are making inroads, local manufacturers like Chery and SAIC still dominate the market.
China’s rapid adoption of new automotive technologies and innovations sets it apart on the global stage.
Competitive Advantages Driving China’s Success
China’s ascent to the top of the car export chart is underpinned by several competitive advantages.
These include surging demand for electric vehicles, competitive production costs, and China’s proficiency in lithium-ion battery cell production.
The country’s production of over half of the world’s lithium supply, coupled with its low labour costs and extensive refining capacity, has propelled its carmakers to the forefront of EV production.
Future for Chinese Auto Exports
The upward trajectory of Chinese auto exports shows no signs of slowing down.
Consulting firm AlixPartners estimates that foreign sales of Chinese-branded cars could reach a staggering 9 million vehicles by 2030, doubling Japan’s exports in 2022.
While these brands are relatively unknown in the West, their affordability, with Chinese-made vehicles costing approximately 40% less than their German counterparts, has resonated with emerging markets like Brazil.
Why is China behind in the USA market?
Because of China’s extensive expansion efforts and its conflicts of interest with the United States in Africa and the Middle East, China is now a new focus of concern for the USA, seen as a potential threat to its sovereignty.
Consequently, the USA has introduced sanctions that affect Chinese car manufacturers’ exports to the United States. Furthermore, recent actions by the Chinese government regarding Tesla’s sales have raised doubts about other Chinese brands in the eyes of the American public.
Top Leading Car Makers in China
- SAIC
- Chery
- Changan
- Dongfeng
- Geely
- Great Wall Motor
- JAC
- BAIC
- CNHTC
China’s Biggest importer of Cars
In 2022, Mexico emerged as the most significant vehicle export market for China, accounting for more than 8% of the total share.
This increase in market share can be largely attributed to the popularity of GM’s vehicles, which are manufactured in Chinese factories.s
The trajectory of China’s auto export industry is nothing short of remarkable.
As Chinese carmakers continue to enhance their design, engineering, and manufacturing capabilities, they are poised to challenge the dominance of well-established Western competitors.
With a strong focus on EVs, competitive pricing, and expanding global markets, China’s automotive industry is accelerating into a promising future.
Writer’s Remark
China’s remarkable rise in car exports is a testament to the country’s unwavering commitment to automotive innovation and global market expansion.
As they steer toward surpassing Japan as the world’s leading car exporter, their journey serves as an inspiring example of how industry disruptions can lead to incredible opportunities and shifts in the competitive landscape.
China’s ascendancy underscores the ever-changing dynamics of the global automotive industry and the boundless potential for future growth.