China will overtake Japan to become the world’s largest automobile exporter

European, American, Japanese and South Korean auto groups are losing decades of market dominance to China. China will become the world’s largest automobile exporter this year, surpassing Japan.

Overproduction in China and the imbalance between supply and demand within the country began to drive the country’s companies toward foreign markets.

Chinese manufacturers, including electric vehicle market leader BYD, now outsell foreign automakers and are targeting overseas markets for growth.

EXCESS CAPACITY WAS DIRECTED TO EXPORT

Bill Russo, former president of American Chrysler in China and founder of the consulting firm Automobility, said there is a “tremendous excess capacity” in the number of vehicles produced in factories across the country. “We have a surplus of 25 million unused units,” Russo said.

Additionally, Automobility data shows that sales volumes in China have declined after peaking in 2017, in line with slowing middle class growth and the country’s economic weakness.

The problem of overcapacity affects both local companies such as Chery, SAIC, BYD, Geely and Changan, as well as a growing number of foreign groups. Companies such as Tesla, Ford, Nissan and Hyundai are among those repositioning their Chinese factories towards export markets.

ASSUME LEADERSHIP IN THE GLOBAL MARKET

On the other hand, years of supportive industrial policy and private sector investments have also increased China’s competitiveness in the automotive sector. According to Moody’s data, China’s annual vehicle exports, which surpassed South Korea in 2021 and Germany in 2022, are on track to surpass Japan this year.

As of the end of July 2023, 2.8 million vehicles were exported from China in the first seven months, an increase of 74 percent compared to the previous year. 1.8 million of them were gasoline-powered vehicles. Analysts expect China to maintain its top spot in the coming years.

According to estimates by consulting firm AlixPartners, overseas sales of cars produced by Chinese companies will reach 9 million by the end of 2030, and their global market share, which is currently 16 percent, will increase to 30 percent.