Chinese carmakers could more than double their overseas manufacturing capacity to offset import tariffs and meet growing demand in emerging markets, according to BloombergNEF.
Exports and “knockdown” assembly – where key car parts are manufactured in China and then sent abroad to be assembled – have traditionally been the preferred approach for Chinese manufacturers to tap foreign markets. But as jurisdictions such as the United States, the European Union and Turkey impose tariffs, Chinese investment in full-service manufacturing is growing.
“As the electric vehicle market in China becomes saturated, increased domestic competition and excess capacity are pushing Chinese EV brands abroad in search of new growth markets,” the BNEF report points out.
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In 2023, Chinese automakers had already built and put into operation factories, capable of carrying out the complete manufacturing process, in nine countries, with an annual production capacity of 1.2 million vehicles. By 2026, this figure is expected to more than double – to 2.7 million units, in more than a dozen countries – if the company’s announcements are delivered on time, BNEF said.
The complete manufacturing process involves the four main stages of automobile production: stamping, welding, painting and final assembly. It is a capital intensive process but has high production capacity compared to demountable assembly.
BYD, China’s best-selling automobile brand, together with state-owned manufacturers Chery Automobile, Changan, GAC Auto and SAIC Motor, had announced ten new or expansion projects for their overseas factories by the end of August this year. Popular locations include Thailand, Indonesia and Brazil.
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Chinese automakers are also expanding to other countries in Southeast Asia, Central Asia, Latin America and the Middle East with export and local production projects.
BYD and Volvo, which is controlled by Chinese automaker Zhejiang Geely Holding Group, are driving capacity expansion in Europe. BYD is building a factory in Hungary and has announced plans for another in Türkiye, which would grant it access to the European Union market. Poland, which has agreements with Chinese battery suppliers, is proving popular with Chinese electric vehicle manufacturers. And Spain and Italy are also seeking investment. Geely, Dongfeng Motor and Xpeng are looking for local partners to build a factory in the region.
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In comparison, the growth of knock-down assembly abroad is slower. Total installed capacity for such factories being developed by Chinese manufacturers and their foreign partners is expected to increase to 2.8 million units by 2026, from 2.2 million vehicles in 2023.
The increase in automobile investments abroad raises concerns in Beijing. In July, the Chinese Ministry of Commerce told automakers that they should protect electric vehicle technological knowledge and prioritize exports of the “knock-down” model, as well as be careful when investing in countries with geopolitical risks, such as Turkey and India.
