Chinese automakers expand overseas production as export barriers mount, spreading supply chains worldwide

Chinese automakers are accelerating the buildout of overseas production bases to circumvent trade barriers. Their strategy goes beyond setting up car factories — battery makers and key parts suppliers are moving abroad alongside them, establishing local supply chains in target markets. Experts warn that China could extend this influence beyond automobiles into future industries such as robotics, and that a long-term response strategy is needed.

A report released Wednesday by the Korea Automotive Research Institute, titled "Trends in the Expansion of Chinese Automakers' and Parts Suppliers' Overseas Production Bases," found that Chinese automakers are shifting their center of gravity toward local overseas production. As Chinese companies ramped up exports to offset sluggish domestic demand, major economies responded by tightening trade regulations — including tariffs, subsidies and rules-of-origin requirements.

According to the China Passenger Car Association, Chinese passenger car exports surged from about 1.33 million units in 2021 to about 5.74 million units in 2025, more than quadrupling in four years. In the first five months of this year, exports reached about 3.37 million units, up 66.8 percent from the same period last year. Meanwhile, growth in domestic sales has slowed, deepening the industry's reliance on overseas markets.

Major economies are tightening policies both to curb Chinese-made vehicles and to encourage local production. The EU has imposed countervailing duties on Chinese electric vehicles and is pursuing minimum price commitments, while also considering measures under its Industrial Acceleration Act to favor EU-made products in public procurement and subsidy programs.

Brazil is gradually raising tariffs on electric and hybrid vehicles to 35 percent while offering tax incentives to companies that produce locally. Thailand has also made a certain level of domestic production a mandatory condition for receiving electric vehicle subsidies.

Chinese companies are responding by strengthening local production strategies through acquisitions and the establishment of new production bases. Since last October, more than 15 Chinese automakers and parts suppliers have announced more than 15 overseas projects, with total investment reaching 70 billion yuan ($10.3 billion).

Overseas production hubs are also shifting rapidly from emerging markets such as Thailand and Brazil toward Europe, particularly Hungary and Spain. BYD, for example, has established or is building production bases in Thailand, Brazil, Hungary, Indonesia and Turkey, and has recently been pursuing acquisitions of idle factories owned by European automakers such as Stellantis.

Geely is seeking to acquire the body assembly line at Ford's factory in Spain, while Chery plans to acquire Nissan's factory in South Africa and build a new plant in Vietnam. Xpeng is also in negotiations to acquire a Volkswagen factory in Europe, signaling that competition to expand local production is intensifying.

Battery makers and parts suppliers — including brake, lidar and tire manufacturers — are moving abroad alongside the automakers. Morocco in particular is emerging as a key production hub for Chinese battery and parts companies, drawing them with its geographic proximity to the EU, free trade agreements and low production costs.

Local production is also sharpening price competitiveness. In Thailand, the price of BYD's Atto 3 fell from about 1.1 million baht ($34,600) to about 630,000 baht after local production began. In Brazil, prices for BYD's main models were cut by 10 to 14 percent. In Indonesia, the price of the MG4 EV dropped from about 690 million rupiah to about 430 million rupiah.

The Korea Automotive Research Institute said it expects this trend to reshape the competitive landscape not just in the auto industry but in future industries as well. Because automobiles share technology and supply chains with industries such as robotics, the institute said strategic monitoring of Chinese companies' expanding overseas production footprint is necessary from the perspective of future industrial competitiveness.

The institute also recommended that South Korea comprehensively analyze the overseas production structures, technology levels and financial support mechanisms of Chinese firms — and develop strategies for both competition and cooperation — given that China is pursuing a strategy of transplanting integrated supply chains covering batteries, parts and finished vehicles to overseas markets.