The electric vehicle (EV) industry, formerly one of China’s most inward-focused industrial sectors, is now leading a push overseas, carrying the government’s hopes of forging an offshore economic empire to sidestep cutthroat competition at home.
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Last year, for the first time, Chinese EV companies invested more overseas than they did at home, despite higher costs, delays and risks abroad, according to a report published by Rhodium Group on Monday.
That marked a historic shift after years of directing around 80 per cent of investment to the domestic market, the research group said.
The shift was made despite a hostile external climate, with the European Union and the United States tightening restrictions and stepping up scrutiny of China’s “going global” strategy. However, Chinese companies are contending with sagging demand and excess capacity at home, with an enervating price war eroding profit margins and leaving them little choice but to look abroad in search of growth.
Overseas investment lagged far behind domestic spending before 2022, as policy support propelled China’s annual EV supply chain investment to an average of US$92 billion in 2021 and 2022, the report said. The gap then began to close, and by 2024, foreign investment had edged past domestic outlays, which had fallen to just US$15 billion.
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At home, factories assembling EVs were operating at just 49 per cent capacity in 2023 and battery factories at 36.5 per cent, the report said.
EV manufacturers are also navigating a cooling global market, with EV sales down by a third last year. Growing regulatory pushback in foreign markets has also thrown up more barriers that are driving Chinese companies to establish factories overseas.