China’s Auto Exports Enter a New Phase with Fresh Challenges Ahead

Export of new energy vehicles

After surpassing Japan in the first quarter of this year to become the world’s largest automobile exporter, China’s automobile exports continued to show strong growth in the first half of the year. The latest statistics reveal that in terms of absolute numbers, China’s automobile exports have now exceeded Japan’s, making it the world’s largest automobile exporter. Thanks to the rapid growth in the export of new energy vehicles, China’s overall automobile export volume has seen significant improvement, marking a new phase in the overseas strategies of Chinese automotive companies. However, several industry experts interviewed emphasized that this new phase comes with new requirements and challenges. Chinese automakers should not only celebrate their achievements but also recognize the gaps and work with greater determination to expand overseas markets.

Continued Leadership in Automobile Exports

China auto export site

According to statistics from the China Association of Automobile Manufacturers, China exported 2.34 million vehicles in the first half of this year, a year-on-year increase of 76.9%. Data from the Japan Automobile Manufacturers Association showed that Japan exported 2.02 million vehicles in the same period, with a 17% year-on-year increase. In the first half of the year, China’s automobile exports surpassed Japan’s, making it the world’s largest automobile exporter. With the current growth trend, China’s automobile exports are expected to reach a new milestone, surpassing last year’s 3 million vehicles and reaching 4 million vehicles.

The latest data from the General Administration of Customs shows that from January to July, China’s total imports and exports reached 23.55 trillion yuan, a year-on-year increase of 0.4%. Exports amounted to 13.47 trillion yuan, up 1.5% year-on-year, while imports amounted to 10.08 trillion yuan, down 1.1% year-on-year. Overall, the current foreign trade situation remains challenging. However, despite this, China’s automobile exports have defied the odds, particularly in the field of new energy vehicles and power batteries, playing a vital role in stabilizing China’s foreign trade development. Data shows that in the first half of this year, China’s exports of new energy vehicles increased to 2.6 times that of the same period in 2022, accounting for 25% of the overall export volume.

New energy vehicle batteries

Under the strong push of the export of new energy vehicles, various industries in the upstream and downstream of the battery, including power batteries and charging piles, have also achieved impressive results overseas. According to data from the China Automotive Power Battery Industry Innovation Alliance, China’s power battery companies exported a total of 67.1 GWh of batteries from January to July, while energy storage batteries reached 7.3 GWh. The China Machinery Industry Federation revealed that in the first half of the year, China’s lithium battery exports increased by 58.1% year-on-year.

Continuous Optimization of Overseas Development Structure

“While China has made significant progress in terms of absolute automobile export numbers, our automobile industry still needs to continuously optimize its structure and enhance the localization of overseas markets during the process of expanding internationally,” said several industry experts, emphasizing the need for a rational perspective on achieving the “world’s top export volume” in the first half of the year. They believe that China’s competitiveness in the overseas automotive market still requires continuous improvement.

Firstly, despite achieving the top export volume in terms of absolute numbers, Chinese automobile manufacturers need to strengthen their localization efforts in overseas markets, especially when compared to the localizations of German and Japanese automakers. If we consider the achievements of various countries’ automakers after accounting for their local market layouts globally, Chinese automakers still have a significant gap to bridge. Secondly, the rapid growth in China’s automobile exports in the first half of the year has many unstable and coincidental factors. For example, due to factors such as the Russia-Ukraine conflict, many overseas automakers have stopped their expansion into the Russian market, creating opportunities for Chinese automakers. Data shows that in the first half of this year, China exported 370,000 vehicles to Russia, accounting for approximately 15.8% of the total export volume. “Chinese brand vehicles in the Russian market have reached a market share of 60% to 70%,” revealed Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers. However, whether Chinese automotive brands can maintain their current growth in the Russian market still faces significant uncertainties.

“Other countries’ automotive brands have established significant product (brand) labels during their international market expansion, such as Japanese cars known for fuel efficiency and German cars known for safety,” emphasized Chen Shihua. While Chinese automotive products currently excel in terms of smart technology, smart technology is not yet a defining label for Chinese automobiles. “Turning smart technology into a label for Chinese automotive products that can help them better penetrate international markets is an aspect that Chinese automotive products need to continuously improve,” Chen Shihua said.

Furthermore, in the rapid development of China’s automobile exports, there is an imminent need to enhance supporting system capabilities. Especially for some Chinese automotive products exported through the used car channels, there is still no established after-sales service network overseas, which poses a certain concern for the overseas development of Chinese automotive brands. It is crucial for various parties, including enterprises, to continuously improve this aspect to ensure the ongoing enhancement of the competitiveness and brand strength of Chinese automotive brands overseas.

Some experts have pointed out that ten years ago, China’s automobile exports also exceeded one million vehicles, but this trend did not continue. From 2013 to 2016, China’s automobile export volume declined continuously. Due to reasons such as the homogeneous and cutthroat competition of Chinese automotive brands overseas and the lack of a robust after-sales service network, Chinese brands even left an impression of “low quality, low price” on overseas consumers. “Learning from past lessons, China’s automobile exports need continuous improvement in branding and after-sales service to maintain the current export advantage,” emphasized the expert.

Localization Development: A Long and Challenging Road

Pictures of car exit scenes

On August 15th, the Thailand Board of Investment (BOI) announced that Changan Automobile had submitted an investment promotion application to invest 8.8 billion Thai baht (approximately 250 million USD) in building an electric and hybrid vehicle production factory in Thailand. The first phase of production will have an annual capacity of up to 100,000 vehicles to meet the growing demand for electric vehicles in Thailand, the ASEAN region, and other export markets. Additionally, Changan Automobile plans to establish an important research and development center for key components in Thailand. This move follows the plans of several other Chinese automakers, including Great Wall, BYD, SAIC, NIO, and GAC, to build factories in Thailand. Moreover, Chinese automotive brands are rapidly expanding their overseas manufacturing plans. SAIC, for example, is even considering locating its Chinese brand automobile factory in Europe, a market traditionally dominated by established international automotive companies, ushering in fierce competition for market share.

Before expanding overseas production of new energy vehicles, several Chinese automakers, including Great Wall, Geely, and SAIC, have already built automobile factories in various global locations such as Russia, Brazil, and Malaysia. The pace of expansion for Chinese automotive brands in overseas markets has already been set. However, the key to success lies in further enhancing the competitiveness of Chinese automotive brands in local markets. This places high demands on China’s automotive industry’s global supply chain management capabilities and serves as a rigorous test of various aspects, including overseas development strategies, research and development capabilities, and marketing capabilities

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