China’s carmakers are taking their global expansion into overdrive

China’s carmakers are rapidly turning their dominance at home into a global manufacturing push, threatening established rivals even as they move production closer to foreign markets. The expansion echoes the strategy pioneered by Ford more than a century ago, but Chinese manufacturers are bringing advantages that may prove difficult for competitors to overcome, according to The Economist.

China produces around a quarter of the world’s cars, and its manufacturers are increasingly looking abroad as fierce competition squeezes the domestic market, which is forecast to shrink by 10% this year. In five years, foreign brands’ share of China’s market has roughly halved, while vehicle exports have risen seven-fold. Chinese brands account for around four-fifths of those exports.

Exports could reach 10m vehicles in 2026, more than 40% above last year’s level, according to consultancy AlixPartners. Chinese carmakers are also expanding production overseas, with assembly operations or plans in countries including Indonesia, Kazakhstan, South Africa, Egypt, Brazil and Mexico.

Europe, however, is emerging as their biggest prize.

Despite tariffs imposed by the European Union in 2024, Chinese manufacturers captured 11% of sales in western Europe in the second quarter of this year, overtaking Japanese rivals, according to Schmidt Automotive Research. The EU is considering further measures through its proposed Industrial Accelerator Act, which could link purchase subsidies and tax breaks for corporate fleets to vehicles meeting local-content requirements.

The prospect of tougher rules is prompting Chinese companies to accelerate their European plans. BYD, the largest Chinese carmaker, is close to opening a plant in Hungary with eventual capacity of 300,000 vehicles a year. It has also paused a planned factory in Türkiye while searching for an existing site in Spain or France, where production could begin more quickly and cheaply.

Chinese companies are also looking to use underutilised European factories. AlixPartners estimates that European plants have spare capacity for around 2.5m vehicles annually. Chery has agreed to borrow part of Nissan’s Sunderland factory in Britain, while Geely will build electric vehicles at a Ford plant in Valencia.

Such arrangements may accelerate market entry, but analysts expect Chinese carmakers to establish their own production facilities. SAIC has confirmed plans for a new factory in Spain, while Xpeng is reportedly seeking a permanent European base.

Local production may add costs, but it is unlikely to eliminate China’s core advantages, The Economist notes. Chinese manufacturers benefit from leaner corporate structures, streamlined production and extensive vertical integration. Chinese vehicles typically contain around 1,000-2,000 parts, compared with 3,000-10,000 for European competitors.

They are also leaders in software-defined vehicles, while their development cycles are far shorter. New Chinese models typically take around two years to develop, compared with at least twice as long for foreign competitors—a phenomenon known as “China speed”.

Some advantages will travel with production. Research and development is expected to remain in China, while manufacturing techniques developed there can be replicated overseas.

By 2030, AlixPartners estimates Chinese carmakers could have overseas production capacity of 3.4m vehicles, up from 1.2m last year, while other estimates reach 6m. Mobility Global expects Chinese brands to manufacture up to 1m vehicles in Europe by 2030.

By Sabina Mammadli