China’s Auto Exports Estimated to Slow in 2025

BEIJING (Reuters) – China’s auto exports are expected to significantly decline this year after maintaining the top export position in 2024, with no growth projected for electric vehicle exports, according to an auto association official on Thursday.

With car exports increasing by 25% to 4.8 million units, the China Passenger Car Association (CPCA) data suggests China will remain the world’s largest auto exporter, surpassing Japan for the second consecutive year in 2024, despite the European Union’s new tariffs on China-made electric vehicles introduced in late October.

Japan’s auto exports decreased by 4.3% to 3.82 million vehicles from January to November 2024, as reported by the Japan Automobile Manufacturers Association.

However, export growth is expected to cool to 10% this year, compounded by a reduction in shipments to Russia and tariff pressures in Europe, stated Cui Dongshu, secretary general of CPCA, noting that electric vehicle (EV) exports are forecasted to face “zero growth.”

Exports of electric cars and plug-in hybrids, collectively termed new energy vehicles (NEVs), grew 24.3% to 1.29 million units last year.

A prolonged subsidy investigation against Chinese-made EVs has affected exports to Europe, with an initial 10% growth failing to meet the 36% surge seen in 2023.

According to CPCA, the leading markets for China-made cars in the first 11 months of 2024 were Russia, Mexico, and the United Arab Emirates, while exports to Thailand, Australia, and Britain declined.

Although EU tariffs may limit short-term sales of Chinese EVs, establishing production facilities, like those of BYD (SZ:002594) in Hungary, could help Chinese automakers capture long-term market share in Europe, according to Charles Lester, a research analyst at Rho Motion.

Local Market Dynamics

In China’s domestic market, the largest in the world, car sales continued their growth trajectory in 2024. Sales for EVs and plug-in hybrids reached an all-time high amid intense price competition and government-supported trade-ins for greener vehicles.

This outstanding growth in China, amidst a stagnating global EV landscape, is favorable for domestic leaders such as BYD, Geely, and Xiaomi (OTC:XIACF), and it has prompted an industry shakeout in a highly competitive space.

Tesla (NASDAQ:TSLA) also benefited, as its China sales hit record levels in 2024, contrary to an overall decline in the U.S. EV giant’s global sales.

However, foreign automakers like General Motors (NYSE:GM), Toyota (NYSE:TM), and Volkswagen (ETR:VOWG_p) continue to lose market share to Chinese competitors, with many struggling to effectively use their production capacity in China.

Passenger vehicle sales rose by 5.3% to 23.1 million units in 2024, continuing the growth trend seen in 2023, according to CPCA data.

NEV sales surged 40.7%, making up 47.2% of total car sales last year, edging closer to the 50% milestone, fueled by a government program similar to the U.S. “cash-for-clunkers” initiative in 2009.

Last year, over 6.6 million cars purchased benefitted from government subsidies, providing up to $2,800 for NEV purchases and $2,000 for fuel-efficient combustion engine vehicles. More than 60% of these subsidized purchases were NEVs, as per official data.

On Wednesday, Beijing announced an extension of auto trade-in subsidies into 2025 as part of a broader consumer trade-in initiative aimed at reviving economic growth.

Analyst Bin Wang from Deutsche Bank (ETR:DBKGn) projected that this vehicle trade-in subsidy program could boost full-year 2025 demand by 3.0 million units.

Overall, car sales are anticipated to grow by 2% this year, while NEV sales are expected to increase by 20%, representing 57% of China’s total car sales, according to CPCA forecasts.

This indicates that sales growth of EVs and plug-in hybrid cars could be the weakest since 2021, despite expectations for sustained government subsidies at peak levels this year.

While sales continue to grow, China’s auto industry has witnessed deteriorating profitability. Profit margins for sales were at 4.4% during the first 11 months of 2024, compared to 5% in 2023 and 6.2% in 2020, according to the association.

Suppliers and dealers have also faced challenges from a persistent price war, necessitating reductions in component prices and deeper discounts.