There is an increase in competition in China in the automobile sector. In order to beat this, Chinese companies like BYD are reportedly opting to invest heavily in European plants. It is expected that the capacity of full-process manufacturing is to significantly grow by 2026. This comes after the Chinese automobile makers are seeking out new markets to counter overcapacity and tariffs at home. This comes, despite the concern from Beijing.
As per a report by BloombergNEF, carmakers in China could easily double their overseas full-process manufacturing to defeat the harsh import tariffs and also meet the ever growing demand in the emerging markets.
Chinese carmakers have traditionally always preferred manufacturing the key parts of car in China and then shipping the parts overseas for the assembly (exports and knockdown assembly). However, investments in full-process manufacturing are rapidly booming according to report. This is primarily due to tariff imposed in major markets like the United States, the European Union and Turkey.
The full-processing manufacturing consists of four primary steps of auto production. These include Stamping, Welding, Painting, and Final Assembly. It should be noted that it is highly capital intensive but can be said to have high production capacity when compared to knock-down assembly.
It is reported that Chinese carmakers have commissioned and built full-process manufacturing plants across nine countries. The annual production capacity expected to be that of 1.2 million vehicles as of 2023. As reported by BNEF, by 2026 the annual production capacity is projected to be doubled to 2.7 million units in over twelve countries, if Chinese manufacturer’s commitments are delivered on time.
Many Chinese companies have announced new or expansion projects for their plants to facilitate expansion in the foreign markets. They are also expanding in Southeast and Central Asia, Latin America and Middle East with both local and production projects.
