Chinese automakers will double their overseas capacity to reduce tariffs
There is an increase in competition in China in the automotive sector. To beat this, Chinese companies such as BYD are reportedly choosing to invest heavily in European factories. Full production capacity is expected to grow significantly by 2026. This comes as Chinese automakers have been looking for new markets to combat overcapacity and tariffs at home. This comes despite concerns from Beijing.
According to a report from BloombergNEFAutomakers in China could easily double their entire overseas production to beat the strict import tariffs and also meet ever-growing demand in emerging markets.
Chinese automakers have traditionally preferred to manufacture key auto parts in China and then ship the parts abroad for assembly (export and knockdown assembly). However, according to the report, investments in full-process manufacturing are growing rapidly. This is mainly due to tariffs imposed in key markets such as the United States, the European Union and Turkey.
The entire production consists of four primary steps of car production. These include stamping, welding, painting and final assembly. It should be noted that it is very capital intensive, but it can be said that it has high production capacity compared to knock-down assembly.
Chinese automakers have reportedly commissioned and built full-scale production plants in nine countries. Annual production capacity is expected to reach 1.2 million vehicles from 2023. As reported by BNEF, annual production capacity is expected to double to 2.7 million units in more than a dozen countries by 2026 if the Chinese manufacturer’s commitments are fulfilled on time.
Many Chinese companies have announced new or expansion projects for their factories to facilitate expansion in foreign markets. They are also expanding in Southeast and Central Asia, Latin America and the Middle East with both local and manufacturing projects.
