The USA reached a victory in WWII by turning the production of cars into production of military planes, ships and tanks. There is no chances of this happening again. Deindustrialization closed this possibility. Obstacles to reindustrialization include shortages of skilled labor and the cost and time required for massive coordinated investments. In a today’s robotic war you need a massive production capacity to win. We have none. Rest of the world buying Chinese cars leaves the West in the dust.
"China's auto companies are still struggling in Europe.
But in the global South, they have long been very successful."
The Brazilian president and the foreign auto boss raise their hands together, beaming with joy. The two men celebrate the start of production at the new car factory. Lula da Silva is pleased about the investment and the jobs, while the auto boss hopes for good business.
In the past, such images reliably depicted the heads of German car companies. But the hand Lula raised a few days ago was that of Mu Feng, head of the Great Wall Motors Group, one of China's dozens of auto companies. GWM will produce two SUVs and a pickup truck in the factory the company bought from the Daimler Group four years ago.
Images like these are common these days.
In Europe, especially in Germany, a car-loving country, it may seem as if the Chinese auto industry is struggling with its expansion. In fact, it is in full swing. It's just not happening so much in the West, but in all the regions and countries that are often disparagingly summarized as "Rest of the World" in German manufacturers' financial statements.
The list of China's most important export markets clearly demonstrates this: The largest number of cars, almost 300,000 vehicles, went to Mexico in the first half of the year. The United Arab Emirates, Russia, and Brazil follow. Only two European countries, Belgium and the United Kingdom, are in the top ten compiled by the Shanghai-based consulting firm Automobility.
In some places, they have long been the top dogs. In Chile, Peru, Egypt, and Kazakhstan, Chinese manufacturers already achieved a market share of around 30 percent or more last year, according to data from automotive analysts Jato Dynamics. European manufacturers play a small role in all of these countries. But in Israel, too, the market share of Chinese manufacturers recently shot up to more than a fifth. In Singapore, BYD has replaced Toyota as the best-selling brand.
The countries in which Chinese companies have been successful so far are not large car markets in and of themselves. But together they add up and account for a quarter of the global market, with a clear growth trend. Last year, China overtook its competitor Japan to become the world's largest car exporter. In the first seven months of this year, China delivered 3.7 million cars worldwide, an increase of around 13 percent, according to Automobility. This alone is more than Germany exported last year.
Experts expect this trend to continue. By the end of the decade, the Chinese market share in South America will skyrocket from eight to 15 percent, according to the consulting firm Alix Partners. In the Middle East and Africa, they are expected to grow from ten to 18 percent, and in Southeast Asia from three to 17 percent.
In many of these countries, companies benefit from geopolitics. With the New Silk Road, Xi Jinping's global infrastructure initiative, China has tied many countries to itself and built the necessary ports, roads, and railways so, that the Chinese auto industry can now take advantage of this. The extent to which the local government is open to Chinese companies and investments is one of the factors used to select markets, Brian Gu, co-president of the Chinese automaker Xpeng, told journalists in Hong Kong a few months ago.
"It's a geopolitical game," says Felipe Munoz of Jato Dynamics. "The Chinese are changing the market dynamics, and the established automakers don't have the right vehicles to counter it."
It's not that Chinese manufacturers aren't interested in Europe. "Europe is the most important electric car market for us outside of China," said Gu. But they also know that Europe is difficult to crack, not only because of geopolitics, but also because of the country's unique rules and long automotive traditions. When they talk about their core markets, they include Europe, but Southeast Asia, Latin America, and the Middle East play an equally important role. "Europe is like a top university," Zhu Huarong, CEO of the state-owned automaker Changan, told journalists in Hong Kong a few weeks ago. Of course, we try to get into the best university. "But if we fail, we'll just go to the second-best."
Japanese companies like Toyota, which have a strong presence in emerging markets, are particularly hard hit, as are companies like the European-American multi-brand group Stellantis and the Volkswagen Group. "There was a time when even Western manufacturers assumed that the global South was for them a growth driver," says Fabian Piontek of Alix Partners. "But these hopes have been dashed in many markets."
For Mercedes and BMW, the Chinese expansion drive is a minor problem for now. However, Chinese companies almost always have premium brands in their product range. And manufacturers like Xpeng and Li Auto are already competing for the same customers in the People's Republic. The Hongqi brand, known in China as the manufacturer of President Xi's state car, announced its global expansion some time ago – with the aim of transforming itself from "oriental luxury" to the "new luxury of the world."
One of the misperceptions in Europe is likely that Chinese exports are primarily electric cars. In fact, Germany exports a higher percentage of electrified cars than China. Only around 35.5 percent of the vehicles shipped from the Middle Kingdom were electrified, although the trend is rising. China groups electric cars and hybrid vehicles under the term New Energy Vehicle (NEV). In Germany, this figure was 1.2 percent, according to the Statistical Office. According to the Federal Office, the figure was recently around 48 percent in China.
This is due to the fact that electric cars are very popular in China, and more than half of newly sold vehicles are now electrified. Combustion-engine cars, which the Chinese increasingly demand less, are being exported instead. Exports thus serve as an outlet for utilizing the many old combustion-engine factories. Foreign business helps the Chinese escape the highly competitive domestic market. Thus, the price war from China is spilling over into the rest of the world.
It is certainly more complicated to cultivate many small markets. But it also increases independence. The fact that Russia has severely restricted the import of Chinese cars, for example, has led to a one-third drop in deliveries. However, it has had little impact on the export balance, because exports to Latin America and the Arab world are rising sharply instead. Even Mexico only accounts for eight percent of Chinese car exports.
Chinese companies, however, are not just exporting; they are increasingly building factories. Trade media in the People's Republic report a total of 88 Chinese car factories abroad that have already been built or where construction has begun. Dozens more have been announced. In Thailand alone, half a dozen Chinese brands plan to produce locally, including market leaders BYD, Chery, JAC, and Great Wall. They employ the same phrases that German car managers in China often use. They like to talk about "in China, for China." Changan has long since turned the tables: Zhu speaks of "in Europe, for Europe." [1]
1. Chinas Autos für den Rest der Welt. Frankfurter Allgemeine Zeitung; Frankfurt. 21 Aug 2025: 22. Von Christian Müßgens, Hamburg, und Gustav Theile, Shanghai
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