China Now the World’s Biggest Manufacturer of Automobiles

What Happened?

China has taken a decisive lead in automobile manufacturing to become the world’s leading maker of cars.

The number of cars shipped abroad from China reached 4.7 million last year, triple the amount three years earlier, according to Citigroup. 

China’s lead in car manufacturing includes both conventional combustion engines and electric vehicles. Seventy-five percent of China’s car exports were combustion engine vehicles despite their continued growth as a maker of electric vehicles. 

Why it Matters

What is driving the increase in China’s exports of automobiles? 

At least part of the answer is China’s own domestic market for cars, which has remained flat for the past several years despite a continued push to increase manufacturing and production. 

That combination has led to a surplus of cars, and China’s car manufacturers have turned to exports to make up the difference.

Where are China’s car exports going? 

Most of their exports aren’t going to North America or to Europe, but rather to what economists call the global south. The term global south refers primarily to Africa, Asia, and Latin American, locations where large populations live south of the equator. 

These areas have surging populations and rapidly industrializing societies, which together have created a strong demand for cars. As more people in the global south move from agricultural to industrial work and from the countryside to major cities, the need for transportation will continue to grow.

Exporting more cars and other goods to the global south also means China can evade tariffs and other forms of economic sanctions imposed by Europe and the United States. Because those only work on goods shipped to the U.S. or Europe. 

Global south nations have been only too happy to import cheap Chinese made cars to meet their growing consumer demands. Many global south countries have weak or small domestic car production capacities. Few of those have the political clout to lobby their governments for protection from cheap Chinese cars flooding their markets. 

But the single largest importer of Chinese cars is now Russia. When U.S. and European carmakers pulled out of Russia after its invasion of Ukraine, the share of Chinese brands surged, from 9% in 2021 to 61% in 2023, according to Rhodium Group. 

Increasing trade between Russia and China is a big reason why U.S. economic sanctions have not had the impact on Russia American leaders had hoped. In fact, U.S. sanctions on Russia have been good for China’s economy, as Russian consumers have turned towards goods made in China and away from goods made in the U.S. or Europe.

How it Affects You

If current trends hold, China will likely continue to be a world leader in car manufacturing through 2030. 

According to Pedro Pacheco of the consultancy Gartner, “China aspires to overthrow automobile giants like Toyota and Volkswagen as the pinnacle of the automotive industry.”