Beijing [China], August 16: China's car industry is on a tear overseas, storming markets from Europe to Southeast Asia and heaping pressure on long-established automakers like Toyota Motor 7203.T and Volkswagen.
But it is a different story at home, where car sales have been in steady decline since late last year, as weak consumer demand and years of intense price competition have left the world's biggest auto market glutted with excess capacity.
While major Chinese car companies like BYD, Geely and Chery have long aspired to become global heavyweights, the industry's rapid expansion is now driven as much by economic necessity as by ambition, analysts and industry insiders say. Faced with lackluster domestic demand, China's automakers have an increasingly powerful incentive to accelerate a push overseas that was already well under way. That will only add to the squeeze on European and Japanese rivals already struggling to compete with China's technologically advanced, low-cost electricvehicles.
"Chinese automakers have excess manufacturing capacity, highly competitive supply chains, increasingly sophisticated products and a strong economic incentive to find growth outside China," said Bill Russo, CEO of Shanghai-based advisory firm Automobility. Going global "is becoming a strategic necessity" for leading Chinese carmakers, he added.
Car sales in China fell by a fifth to 1.47 million vehicles in July from a year earlier, marking the 10th straight month of decline, data from the China Passenger Car Association showed on Tuesday. Exports, meanwhile, surged 88 percent to 923,000 vehicles.
Although the data includes non-Chinese brands produced in China, the trend of double-digit falls at home and double-digit export growth holds up among domestic automakers. Cui Dongshu, the head of the passenger car association, attributed the latest weakness to elevated fuel prices that hurt demand for gasoline-powered vehicles and persistent softness in the entry-level sedan segment.
More broadly, the car industry reflects the dynamics now playing out in the world's second-largest economy. Booming factories and exports are propping up growth, while a weak property market and ailing consumer spending are curbing domestic demand. Chinese policymakers are struggling with an economy that produces more than it can sell at home. For automakers, overseas markets offer an increasingly important outlet.
In the first half of this year, China's domestic car sales fell by 2.3 million vehicles from a year earlier, a 20 percent drop. That's equivalent to all of the domestic new car registrations in Japan, the world's fourth-largest auto market, during the same period. Meanwhile, China's car exports jumped 71 percent during the first half. HSBC analyst Yuqian Ding said domestic car demand was likely to stabilize and potentially begin recovering from late August through September as the new model cycle picks up momentum. Still, a V-shaped recovery appears unlikely, she said.
BYD, for example, has offset a 35 percent slump in domestic sales during the first seven months of the year with overseas sales surging 79 percent year-on-year. Brazil and Britain have emerged as its largest single-country markets outside China in 2026.
China's growing overseas presence poses a particular challenge for Japan. Since 2023, China has been the world's largest vehicle exporter, a title long held by its Asian rival. "Japan's rise as an automotive exporter was built around manufacturing efficiency, quality and fuel economy," Russo said.
China's edge today is broader, he added, encompassing "electrification, batteries, software, intelligent features, supply-chain scale and very rapid product development.
Source: Qatar Tribune