[China Shock, Korean Industry on the Brink | Automobiles] ③ China Expands Production Bases from Emerging Markets to Europe, with Parts Makers Joining the "Human-Wave" Push

BYD Expands Beyond India and Thailand to Hungary and North America
Chery Begins Local Production in Spain
Weak Domestic Demand Drives Expansion of Overseas Production
Cutting Tariffs and Logistics Costs Nearly Halves Prices

Battery and Par

China, once known as the "world's factory," is now penetrating automobile markets by building factories around the globe. Moving beyond mass production in China and low-cost exports, it is expanding its production base to Southeast Asia, Brazil and Europe. The strategy is to overcome tariff barriers by building local factories and acquiring existing production facilities, while also establishing overseas supply chains through the accompanying expansion of battery and parts suppliers.

The overseas expansion of China's auto industry threatens the positions of both South Korean automakers and parts suppliers. If Chinese companies lower prices through local production, South Korean automakers will face greater price competition in key export markets. As Chinese parts suppliers that have expanded overseas alongside automakers broaden their customer base to include global automakers, competition for supply contracts is also expected to intensify for South Korean parts suppliers.

According to the Korea Automotive Technology Institute, 15 or more Chinese automobile and parts manufacturers announced overseas projects between October 2025 and early 2026. As of February 2026, planned investments totaled around 70 billion yuan.

Expanding Production Bases Around the World, From Emerging Markets to Europe

Chinese companies are expanding their production bases from emerging markets such as Thailand, Brazil and Indonesia to Europe. BYD is increasing local production in Thailand and Brazil, among other countries, and has also been pursuing construction of a factory in Hungary. Chery has begun production in Spain, while Geely and XPeng are also seeking to secure production facilities in Europe.

Tightening trade regulations are driving the expansion of overseas production. In 2024, the European Union (EU) imposed additional countervailing duties on electric vehicles made in China. Thailand is tightening local production requirements for imported vehicles in connection with its EV subsidy program, while Brazil has also been gradually raising tariffs on EV imports, with rates set to reach 35% in 2026. It has become difficult to maintain price competitiveness simply by exporting vehicles made in China.

Local production helps reduce tariff burdens and logistics costs and meet local sourcing requirements. According to data from the Korea Automotive Technology Institute, the price of the BYD Atto 3 Standard sold in Thailand fell from 1.1 million baht in 2022 to around 630,000 baht after local production began. In Indonesia, the price of the MG4 EV, previously imported as a fully assembled vehicle, dropped from 690 million rupiah to 430 million rupiah after production shifted locally. If Chinese companies also lower production costs overseas, South Korean automakers selling vehicles in the same markets may face greater pressure to compete on price.

Weak domestic demand is also driving efforts to target overseas markets. According to the China Association of Automobile Manufacturers (CAAM), domestic vehicle sales in China totaled 13,162,000 in the first eight months of 2026, down 21.8% from the same period a year earlier.

Exports, by contrast, have emerged as a source of growth. According to the China Passenger Car Association (CPCA), China's automobile exports totaled 7.45 million over the same period, up 51% from a year earlier. Exports of new energy vehicles rose 70% to 3.46 million. Total exports in August reached 1.05 million, 37% more than in the same month last year. The CPCA forecast that overseas sales by China's auto industry would exceed 12 million this year, up about 44% from 8.3 million last year.

Battery and Parts Suppliers Expand Overseas Too, Building Supply Chains Near Europe

Following automakers, suppliers of batteries and components such as automotive electronics and chassis systems are also securing production facilities near major markets. Morocco, in particular, is emerging as a new base for Chinese parts suppliers. The country is close to Europe, offers access to free trade agreements (FTAs), and has advantages in land and labor costs as well as taxation.

When vehicle production facilities and parts supply chains move overseas together, Chinese companies can supply locally produced vehicles while also expanding business with global customers. This is likely to intensify competition for supply contracts between South Korean parts suppliers and Chinese companies seeking business with global automakers.

The rise of Chinese companies has also been notable in global parts supplier rankings. Seventeen Chinese companies appeared in the 2026 ranking of the world's 100 largest automotive suppliers published by U.S. automotive publication Automotive News, up two from 15 in 2025. China ranked second, behind Japan with 23 companies, and ahead of the United States with 16 and Germany with 15. The ranking was based on original equipment (OE) sales to automakers.

CATL, the world's largest battery maker, ranked third, with OE sales of $44.058 billion in 2025, up about 25% from the previous year. Yanfeng, a Chinese automotive interiors supplier, ranked 15th. Chinese companies across a range of fields, from batteries to interiors and automotive electronics, made it into the top 100.

In a report, Yoon Seonho, a principal researcher in the Technology Policy Office at the Korea Automotive Technology Institute, wrote: "Given the growth in vehicle production and exports in China, as well as the expansion of overseas production by Chinese automakers, the position of Chinese companies in the global parts industry is expected to continue strengthening over the next several years."

This content was produced with the assistance of AI translation services.