China’s automotive industry hit a striking imbalance in 2025: exports climbed to record highs, cementing the country’s position as the world’s largest car exporter, while domestic demand weakened, exposing pressure points in the world’s biggest auto market.
According to industry data cited by China Association of Automobile Manufacturers (CAAM) and reported by multiple international outlets including Reuters, Bloomberg and Yahoo Finance, Chinese carmakers exported more than 5.5 million vehicles in 2025, a new annual record and a year-on-year increase of over 20%. Passenger vehicles accounted for the bulk of the growth, with electric vehicles (EVs) and plug-in hybrids leading the charge.
Export boom powered by EV dominance
China’s export surge has been driven largely by its dominance in new energy vehicles (NEVs). Automakers such as BYD, SAIC Motor, Chery, Geely and Great Wall Motor expanded aggressively into Europe, Southeast Asia, Latin America, the Middle East and Africa, where price competitiveness and improving quality gave Chinese brands an edge.
EV exports grew particularly fast despite mounting trade barriers. Even as the European Union imposed provisional tariffs on Chinese-made electric vehicles in 2025, exporters redirected shipments to emerging markets and strengthened local assembly partnerships abroad to cushion the impact.
Industry analysts say China’s integrated EV supply chain, from batteries and semiconductors to software, has allowed manufacturers to cut costs faster than global rivals, sustaining export momentum even in a tougher trade environment.
Domestic market loses momentum
At home, however, the picture was less upbeat. Domestic vehicle sales growth slowed sharply in 2025, weighed down by weaker consumer confidence, a prolonged property-sector slump and cautious household spending.
While total vehicle sales still edged higher, growth fell to low single digits, a sharp contrast to the export boom. Price wars intensified across the market as automakers competed for shrinking demand, eroding margins and forcing consolidation among smaller players.
EV sales continued to outperform internal combustion engine vehicles domestically, but even that segment showed signs of saturation in major cities, with incentives becoming less effective at stimulating fresh demand.
Price wars and overcapacity concerns
The imbalance between exports and domestic sales has revived concerns about overcapacity in China’s auto sector. With hundreds of manufacturers competing, authorities have signalled tighter oversight, urging companies to avoid destructive price competition and focus on technological innovation.
Several analysts warn that relying too heavily on exports carries risks, particularly as trade restrictions, geopolitical tensions and local-content rules tighten across key markets.
Strategic pivot underway
In response, Chinese automakers are accelerating plans to localise production overseas, invest in brand-building rather than pure price competition, and expand into higher-end segments. At the same time, Beijing has pledged targeted support to stabilise domestic consumption, including EV trade-in programmes and rural vehicle subsidies.
Despite the slowdown at home, industry watchers agree that China’s automotive sector remains structurally strong, but 2025 marked a clear turning point, highlighting the need to rebalance growth between domestic demand and global ambition.
