China is now the world’s top car dealer… no checkered sport coat or wacky waving inflatable arm flailing tubemen required.
Driving the news: China is officially the world’s top car exporter, shipping out a record ~5.26 million China-made automobiles last year and beating runner-up Japan by ~1 million cars.
Two factors have driven China’s sudden ascent:
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Electric vehicle expertise: China’s unmatched savvy in EV production, coupled with generous subsidies, has allowed domestic producers to expand beyond Chinese borders. Top company BYD surpassed Tesla as the world’s EV sales leader last year.
- Russian consumers: China also sold more gas-powered vehicles to Russia than ever. When Western brands abandoned Russia after it invaded Ukraine, Chinese car makers like Chery stepped in and took advantage of a wide-open market.
Why it matters: Western nations used to dealing with friendlier auto trade partners are worried that new Chinese cars, in particular EVs, will encroach on their markets, creating competition and security concerns. In protecting against this, an auto trade war could erupt.
- One is already simmering in Europe. The EU launched a probe that could result in new taxes on Chinese EV imports if it determines that rich subsidies have allowed Chinese automakers to flood Europe with cheap EVs, creating an unfair advantage.
- China recently retaliated by launching its own probe into imported brandy (of all things). This is viewed as a direct attack against France, the top supplier of cognac brandy, whose automakers also happened to push hard for the EU probe.
Zoom out: Rival nations also want to match Chinese production levels, pouring billions into creating domestic battery supply chains and devising ways to speed up development. Like Stellantis’ new “virtual cockpit,” which could cut test times down from months to days.—QH