China’s automotive sector has grown by leaps and bounds, anchored in robust technological innovation and sustained government backing. Through active state participation in capital and strategic funding, Chinese brands have not been forced to chase profits alone. This environment, paired with rapid advances in batteries and electric vehicles, has propelled the country to a level where it now competes with Europe and North America on scale and capability. As Renault’s strategy chief and Spain’s Renault president, Josep María Recasens, notes, the focus is clearly on technology, and China has forged ahead in that regard. Their R&D ecosystem is mature and well-integrated, and software prowess across makers is widely recognized. Renault’s Luca de Meo has observed that Europe lags behind in this area by a generation. A quick example is BYD, a Chinese maker whose innovations span consumer electronics and mobility solutions; it is widely cited that Shenzhen remains a hub of future-oriented tech. This landscape underscores China’s emergence as a global tech power center.
Beyond leading electrification and value-chain control, Chinese automakers enjoy a notable advantage from policy support. With many companies tied to state capital, the pressure to merely turn a profit is less intense, allowing more room for long-term investment and experimentation. A senior executive from a Western carmaker notes the clear implications: under such conditions, European brands face a tougher competitive landscape where immediate profitability is less of a constraint for Chinese peers. As long as losses stay within a manageable range, the state market dynamics remain favorable. The practical result is a durable presence in global markets, with China staking a longer foothold in international auto trade.
Zhang Guibing, president of Chery International, explained to reporters that Europe is an important testing ground. The aim is to introduce products to European buyers to demonstrate quality and suitability, with Spain highlighted as a strategic starting point. The emphasis is on understanding European demand and ensuring markets will benefit rather than suffer a rushed entry. This approach reflects a measured, incremental strategy rather than a knee-jerk expansion.
Europe’s cautious response
European manufacturers, led by France’s automotive sector, have successfully prompted the European Commission to probe whether Chinese brands receive government support that could distort fair competition. Yet the impact of such inquiries is likely limited, given Europe’s parallel efforts to bolster its own industries through rescue schemes and incentives. Luca de Meo, chairman of Renault and spokesperson for ACEA, emphasizes the preference for a level playing field where rules are applied consistently across borders.
Meanwhile, China views the scrutiny as a routine part of global trade friction. Zhang Guibing of Chery International notes that protectionist instincts are natural in Europe but not decisive. Since 2001, Chinese exporters have navigated tariffs and regulatory hurdles, adapting their approach to sustain growth. The prevailing trend indicates that tariffs alone do not halt the momentum of high-volume production and export capacity.
Expanding horizons
China’s automotive expansion unfolded rapidly, supported by government policy and rising middle-class demand. From roughly two million vehicles in 1999, production and sales surged to around 28 million vehicles in recent years, with the domestic market expanding from under six million units in 2005 to nearly 29 million in 2017. Post-pandemic shifts and the acceleration of electrification kept the market dynamic, while the shift away from internal combustion engines opened opportunities abroad. This has nudged many brands toward Europe and other continents, seeking to establish a broader footprint.
New Chinese manufacturers are reporting significant sales and ambitious turnover targets. BYD, for instance, has outlined plans for substantial revenue and growth in vehicle volumes, signaling a clear push to international markets. Alongside outright exports of finished vehicles, many makers favor a model that reduces costs through localized production and international CKD operations—assembling kits in foreign plants rather than shipping fully built units. This strategy minimizes tariffs and leverages local supplier networks to support market access. The CKD approach has become a familiar path for Chinese brands expanding overseas.
Strategic CKD deployment
Chery, among others, has deployed CKD centers across the globe to reach new buyers while controlling production costs. The network spans regions including the Americas, the Middle East, Africa, and Europe, with future expansion planned in several key markets. In Europe, particular attention is directed toward establishing a physical presence in strategic hubs such as Barcelona, reflecting a broader push to embed Chinese brands in Western distribution channels. As the industry grows, names such as FAW, Dongfeng, SAIC, GAC, BAIC, Changan, Chery, JAC, Geely, BYD, Great Wall, Seres, Nio, Xpeng, Lep Motor, Hozon, Li Auto, Baidu, Lynk&Co, Polestar, Omoda, Jaecoo, and Aiways are recognized as the leaders of a new era in automotive manufacturing.