China’s electric vehicle (EV) industry has made a historic shift, investing more in overseas factories than domestic ones for the first time.
According to CNBC News, Chinese electric car companies are increasing investments in overseas factories as they ramp up competition against Tesla and other global automakers.
For the first time since records go back to 2014, the Chinese electric car supply chain invested more outside the country than at home last year, according to a report published Monday by a U.S.-based consulting firm, Rhodium Group.
The bulk of announced overseas investment, or 74 per cent, was in battery factories, the report said. But it noted investment in assembly plants abroad was also growing rapidly.
The spending plans come as Chinese automakers face intense competition at home and higher tariffs on exports.
Boosting investments abroad can help Chinese businesses win foreign governments’ support for market expansion.
“Growing regulatory pushback in host markets like the EU is raising barriers to entry and will push more Chinese companies to establish local manufacturing operations,” the Rhodium report said.
Rhodium data noted that the Chinese electric car industry’s domestic investment in manufacturing tumbled sharply to $15 billion in 2024 from $41 billion in 2023, after peaking at over $90 billion in 2022 in announced projects. The report said, while overseas investment has remained far lower, it narrowly surpassed domestic levels in 2024 for the first time.
A Rhodium study released late July stated that the automotive sector was the second-most active sector for Chinese outbound investment in the second quarter this year.
“We recorded higher than usual activity by EV parts manufacturers, with eight transactions exceeding $100 million. The largest among them was led by GEM, a Chinese battery materials manufacturer, which committed $293 million to expand its ternary precursors facility in Indonesia,” the July report said.
Several overseas factory projects announced in recent years have also begun operations. CNBC said, “Great Wall Motor announced over the weekend it opened its first factory in Brazil on Friday local time. The company is also reportedly considering another regional factory and will decide by the middle of next year.
“BYD also started production at its first Brazil factory in July, despite getting fined earlier in the year over labour practices. The Chinese electric car giant has sold more than 545,000 cars overseas this year as of July, exceeding the total of more than 417,000 vehicles for the whole of 2024”
Rhodium noted that just 25 per cent of all announced overseas manufacturing plans by the Chinese electric car industry have been completed, far below the 45 per cent rate for those at home.
“Chinese firms will also have to manage Beijing’s increasing concern over technology leakage, job losses, and industrial hollowing-out, which may result in tighter controls on outbound investment in strategic sectors,” the report said.
