China Is Exporting Tons of Cars to the World

tendata blogTrade Trends News

ten data blog08-09-2023

china export cars,china export vehicles,china exports

At a time when many of its exports are stumbling and consumers are spending less at home, China is supplying the world with tons of cars.

Overseas demand for cheap Chinese-made cars, mainly gasoline-powered models, is so great that Chinese consumers are now shunning them in favor of electric vehicles, so much so that the biggest obstacle to selling more cars overseas is a lack of specialized ships to transport them.

Since the outbreak of the war in Ukraine, Chinese automakers have jumped to dominance in Russia by transporting cars by train. They have also captured significant market share in Southeast Asia, Australia, South America and Mexico. With lingering Trump-era tariffs hampering sales to the U.S., Chinese automakers are gearing up for a big push into Europe once they have enough ships.

Shipbuilders along the Yangtze River are building a fleet of car carriers to serve as giant floating parking lots that can hold 5,000 or more vehicles at a time.

The Jinling shipyard in Yizheng town near Nanjing is "busy around the clock, with night shifts every day," said Feng Wanyou, a ship welder, during his lunch break.

Overall exports of Chinese goods, from furniture to consumer electronics, fell 5.5 percent in the first eight months of the year, data released Thursday showed. But China's auto industry has quadrupled its exports in just three years, overtaking Japan as the world leader this year. This year, car exports jumped 86 percent through July.

As real estate prices have fallen, Chinese households' interest in spending on new cars and almost all other goods has waned. Consumer confidence shows little sign of returning, even after nearly three years of a strict "zero new crown" policy was lifted.

When Chinese families do buy cars, they are increasingly choosing electric vehicles made by local manufacturers who are global leaders in electric vehicle production. The result has been a massive supply of gasoline-powered models that Chinese consumers no longer want, but which are still sold abroad.

Chinese automakers face unused capacity to produce about 15 million gasoline-powered cars a year. They have responded by sending more than 4 million vehicles to foreign markets this year at bargain prices.

"Why are they pushing exports? Because they have to - what are you going to do, close a plant?" Bill Russo, former chief executive of Chrysler China and now chief executive of Shanghai-based consulting firm Automotive, said.

Globally, Chinese automakers are grabbing market share. Steel and electronics used in cars are cheaper in China, giving automakers here an edge. Local governments in China are also offering the companies virtually free land, near-zero-interest loans and other subsidies.

After years of quality gains and technological improvements, Chinese cars, even those with outdated internal combustion engines, are making a noticeable presence at industry events such as this week's Munich Motor Show.

In Australia, Chinese automakers have outsold South Korean rivals and are catching up with Japanese competitors. China has also rapidly expanded its exports to Mexico and the U.K., and has begun to increase exports to Belgium and Spain, which have important car unloading ports and serve as gateways to other European Union countries.

A lack of ships has hindered more Chinese exports.

"They're building cars much faster than they're building ships," said Michael Dunne, former president of GM Indonesia.

That is beginning to change.

Chinese carmakers such as BYD and Chery, and the European and Singaporean shipping companies that transport their cars, have placed nearly all of their pending orders for 170 car carriers worldwide. Daniel Nash, head of vehicle carriers at London-based shipping data firm VesselsValue, said that before the boom in Chinese auto exports, only four cars were ordered each year.

Shipyards along the Yangtze River, with thousands of workers, ring from dawn until late at night. On Friday, at the Jinling Shipyard, workers had almost completed two ships carrying cars for Singapore's East Pacific Shipping.

Welder Lee Cha said he worked 12-hour shifts, taking a two-hour break for lunch and bicycling home for lunch. Floodlights illuminate the shipyard at night so the team can complete particularly pressing tasks, such as installing electrical systems.

The motivation to build more ships is obvious. The cost for automakers to charter a car carrier has soared to $105,000 a day, from $16,000 two years ago, Nash said. BYD is spending nearly $100 million each to build six of the largest car carriers ever. Most of the ships are scheduled to be completed within the next three years.

Europe is becoming a major target for most Chinese automakers. They are using brands such as Volvo and MG, which they acquired years ago, to win greater recognition in Europe.

State-owned Shanghai Automotive Industry Corp. bought Britain's famed MG brand in 2007, and the company exports cheap cars not only from China to Britain but also to Australia. MG has re-emerged in Australia this year as one of the country's best-selling car brands.

GM's joint venture with SAIC has begun shipping the Chevrolet Aveo minicar to Mexico, which went on sale in June starting at $16,300.

One big market is conspicuously missing from the main destinations for Chinese auto exports: the United States. Few Chinese cars go there now, and few are expected to go there soon.

When the Trump administration imposed tariffs on imports from China in 2018 and 2019, the first batch included 25 percent tariffs on gasoline-powered and electric cars, as well as gasoline engines and electric car batteries. Those tariffs not only remain in place, but were imposed under legislation that gives the U.S. Trade Representative (now Kathleen Day) broad discretion to raise tariffs when needed.

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