In 2025, China's automobile exports reached 7.098 million units—a milestone figure. At the same time, however, another "7 million" is rapidly taking shape overseas: production capacity.
According to the Gasgoo Automotive Research Institute database, the designed overseas production capacity of Chinese automakers increased from approximately 3.44 million units in 2023 to 3.96 million in 2024 and 5.26 million in 2025, and is expected to approach 6.85 million units in 2026.
In just three years, that capacity has nearly doubled.
In other words, while we are still talking about China's auto exports surpassing 7 million units, Chinese automakers are already on track this year to establish nearly the same scale of production capacity overseas.
China already has the world's largest and one of its most efficient automotive manufacturing systems, capable of exporting more than 7 million vehicles a year. So why are Chinese automakers still investing heavily to rebuild nearly 7 million units of production capacity overseas?
The answer goes far beyond avoiding tariffs.
Over the past few years, as I have studied the globalization of China's automotive industry, one point has become increasingly clear to me: growth in export volumes is not the same as genuine globalization. Exports answer the question of "how to take products overseas. "Building factories abroad begins to answer a much deeper question: "how to take industrial capabilities overseas."
This may well be the watershed that China's automotive industry is now crossing on its path toward true globalization.
Why Is Overseas Manufacturing Becoming a Necessity?
For years, there was a straightforward logic behind the global expansion of China's automotive industry: China offered highly efficient manufacturing, a complete supply chain, and strong cost competitiveness. Economically, the most sensible approach was therefore to build vehicles in China and sell them around the world.
That model worked extremely well for a long time. But as Chinese domestic brands steadily gained market share at home and vehicle exports surged from several hundred thousand units to more than 7 million, the equation began to change.
The first major change has taken place in the domestic market.
The intensity of competition in China's auto market over the past three or four years hardly needs further explanation. Overall sales are still growing, and NEV penetration continues to rise. Geely's 2025 financial results provide a telling example. Its average vehicle selling price fell from RMB 111,600 in 2024 to RMB 102,800 in 2025—a decline of nearly RMB 9,000 in just one year. Yet the vehicles launched in 2025 were significantly more advanced in performance and features than those introduced a year earlier.
This points to a very practical reality: selling more vehicles in China does not necessarily translate into proportionally higher revenue or profits.
Against this backdrop, the meaning of overseas markets is beginning to change.
Take BYD as an example. In 2025, BYD reported an overall gross margin of 16.66% in China, down 3.52 percentage points year on year, while its overseas gross margin rose 1.88 percentage points to 19.46%. The divergence between these two trends is worth noting.
Perhaps the most enviable example is Chery, one of China's earliest and most successful automotive exporters. In 2025, Chery Automobile generated approximately RMB 300.29 billion in revenue, up 11.3% year on year, while net profit reached approximately RMB 19.51 billion, an increase of 36.1%. In the first half of 2026, Chery Group sold 1.3575 million vehicles, of which 943,800 were exported—equivalent to roughly 70% of its total sales during the period.
When such a large share of an automaker's sales comes from overseas markets, "overseas" can no longer be treated as merely a supplementary market alongside the domestic business. It begins to shape where the company invests, where it builds supply chains, where it locates R&D, and even how it structures and allocates its organization.
But there is also a third force. If an automaker sells only a few thousand vehicles a year in a given market, exporting from China is clearly the most economical option. But once annual sales in that market rise to 50,000, 100,000, or even several hundred thousand units, the company must recalculate the economics of tariffs, logistics, exchange rates, rules of origin, and local industrial policies.
More importantly, there is a fundamental difference in political and economic standing between a foreign brand that exports 100,000 vehicles into a country each year and an automaker that manufactures locally, employs local workers, sources components locally, and pays taxes there.
Exports create trade relationships. Local manufacturing begins to create shared industrial interests.
Competition at home is pushing Chinese automakers outward. Overseas markets are pulling them in. At the same time, global trade and industrial policies are requiring companies to embed themselves more deeply in local economies.
This is also a central argument repeatedly discussed in Going Global: corporate globalization is not a one-time act of "going abroad." It is a process in which market engagement continuously deepens, assets gradually become heavier, and capabilities are progressively transferred overseas.
Where Are Chinese Automakers Building Overseas Capacity?
If you look only at media coverage, you might assume that Europe is where Chinese automakers are concentrating most heavily on overseas manufacturing. In reality, that is not the case.
According to the Gasgoo Automotive Research Institute database, by 2026 Chinese automakers have planned annual production capacity of approximately 1.41 million vehicles in ASEAN, 1.06 million in Russia and Belarus, around 850,000 in South America, and only about 380,000 in Europe.
Image source: Gasgoo, enabled by AI
Why, then, does Europe attract the most attention while accounting for far less planned capacity than several other regions?
Because building a factory is ultimately a long-term business calculation.
In Going Global, we categorize overseas markets into different types. Once a company moves into the manufacturing stage, this market segmentation becomes even more important. Not every market worth selling cars in is worth building a factory in. And not every country worth building a factory in is meant to serve only its domestic market.
Thailand is a typical example.
In 2025, Thailand's domestic vehicle market was around 600,000 units, with BEVs accounting for roughly 20% of sales. Yet the country produced approximately 1.45 million vehicles. Chinese automakers including BYD, Changan, and GAC have already established manufacturing capacity there. BYD's Rayong plant has annual capacity of 150,000 vehicles, while Changan's first-phase plant is designed for 100,000 units annually and is already being expanded.
What these companies are targeting is not simply how many NEVs can be sold in Thailand each year. They are looking at the automotive manufacturing base built up over decades, the established supplier ecosystem, supportive industrial policies, and Thailand's ability to serve as a regional manufacturing hub for ASEAN.
Brazil presents a completely different case.
BYD chose to build a new factory from the ground up. Great Wall Motor acquired and converted a former Mercedes-Benz plant. Geely, meanwhile, entered Brazil's existing manufacturing system through a partnership with Renault.
Why did three Chinese automakers choose three different routes into the same country?
Because "Is Brazil worth entering?" and "What is the right way to enter Brazil?" are fundamentally two different questions.
The first depends on market size, tariffs, industrial policy, the maturity of the local supply chain, and the country's ability to serve surrounding markets. The second depends on the automaker itself—its existing sales base, capital strength, stage of market entry, and tolerance for risk.
Europe requires yet another calculation.
The European market carries extremely high strategic and brand value, but it also comes with significantly higher labor, energy, environmental, regulatory, and supply-chain localization costs. Every Chinese automaker entering Europe ultimately has to answer the same difficult question: Can it operate under Europe's cost structure over the long term—and still make money?
And if Volkswagen itself struggles to achieve certain things within its home-market cost structure, why should we assume Chinese automakers automatically can?
So if we redraw the map of Chinese automakers' overseas manufacturing capacity, the most important questions are not simply where factories are being built, but why:
Is the market large enough?
How wide is the cost gap between importing vehicles and producing them locally?
Can the local supply chain support the operation?
Are manufacturing costs economically sustainable?
And most importantly, is the company truly prepared for long-term investment and deep local commitment?
How Should Overseas Manufacturing Capacity Be Built?
In the past, when we talked about building factories overseas, it was easy to think of the process simply as buying land, constructing a plant, and installing production lines. Today, however, Chinese automakers are gaining overseas manufacturing capacity through a much wider range of approaches.
BYD chose a greenfield model in Thailand, building a complete manufacturing facility from the ground up. Great Wall Motor acquired and converted Daimler's former plant in Brazil. XPENG chose to have Magna produce two battery-electric models in Graz, Austria. Geely, meanwhile, entered Renault's existing manufacturing and commercial system through its investment in Renault do Brasil.
Image source: Gasgoo, enabled by AI
The XPENG–Magna model is a typical example of asset-light market entry.
For a brand whose European sales are still being tested, buying land, building a factory, and hiring thousands of employees from day one would mean taking on huge fixed costs before market demand has been proven. By using Magna's existing manufacturing system, XPENG gives up a degree of control in exchange for speed and flexibility. The cost is certainly not insignificant, but once the market is validated, the company can move more quickly toward deeper localization, including potentially building its own plant.
BYD represents a much more asset-heavy approach, closely linked to its scale and vertically integrated supply-chain model. Building everything itself—from land and facilities to the manufacturing system—requires more capital and usually takes more time, but it also provides much greater control over quality, manufacturing, costs, and the supply chain.
Great Wall Motor sits somewhere in between. In Brazil, it adopted a brownfield strategy by making use of existing automotive manufacturing assets. This allows faster market entry than building from scratch, while still preserving a relatively high degree of manufacturing control.
The Geely–Renault partnership points to another possibility: globalization does not necessarily mean owning every capability yourself. Companies can also access and leverage existing global assets through capital partnerships and strategic cooperation.
So asset-light and asset-heavy models should not be viewed as more or less advanced. What really determines the right choice is which stage of globalization a company has reached, and how much confidence it has in the market.
Chery is particularly worth studying in this regard.
Chery began exporting vehicles as early as 2001. As overseas sales grew, it spent many years entering markets through KD and CKD operations before gradually increasing local manufacturing and sourcing. This was a highly rational approach to risk management: the more certain the market became, the deeper the investment.
Today, Chery is working with EBRO to reactivate existing vehicle manufacturing capacity in Barcelona, Spain, while further extending its European operations, supply-chain coordination, R&D, and other capabilities locally. The underlying logic remains the same: let asset commitment increase with market certainty, and let the depth of localization rise with the scale of the business.
Image source: Gasgoo, enabled by AI
This closely reflects the globalization stages discussed in *Going Global*. A company may begin with a trade-driven model, then move into deeper channel development. Once sufficient sales scale has been established, it begins local manufacturing. The next step is to bring R&D, procurement, supply-chain capabilities, and talent into the local market, and eventually move toward ecosystem co-building.
Building an overseas factory is therefore not an isolated action. It is one of the clearest signals that a company is moving beyond trade and distribution toward local manufacturing, localized capabilities, and ultimately deeper integration into the local industrial ecosystem.
Chery has taken more than two decades to move through this process. BYD's passenger-vehicle business has accelerated sharply over the past three years. XPENG, at this stage, may still be using a lighter model to validate the European market.
These companies may ultimately move toward similar destinations, but that does not mean they need to take the same path.
Capacity Depth: From Overseas Plants to a Global Manufacturing System
According to the Gasgoo Automotive Research Institute database, of the nearly 6.85 million units of planned overseas production capacity, approximately 6.04 million units are based on varying degrees of KD production, while only around 810,000 units can be considered fully localized. That is roughly an 88% to 12% split.
If an automaker is already selling more than 100,000—or even several hundred thousand—vehicles in a local market, but still ships most core components from China, while product definition, procurement, R&D, supply-chain management, and key decisions all remain in China, then the overseas operation is still essentially an extension of the Chinese production system.
By contrast, when a company begins bringing its suppliers overseas while also developing local suppliers, establishing local R&D capabilities, involving local teams in product decision-making, and ultimately building its own industrial ecosystem, the "overseas factory" starts to evolve into a genuine global manufacturing system.
Image source: Gasgoo, enabled by AI
This is why, among the six capabilities outlined in Going Global, overseas manufacturing tests far more than manufacturing capability alone. It simultaneously places demands on market insight, product definition, supply-chain management, organizational and talent capabilities, compliance and governance, and global coordination.
The factory itself is only the physical carrier. What is really being transferred overseas is the company's entire capability system.
Powertrain Diversification: Adapting New Overseas Capacity to Local Markets
The production capacity that Chinese automakers are now moving overseas is fundamentally different, in terms of product and technology foundations, from the globalization wave launched by Japanese automakers in the 1980s.
BYD's Thailand plant focuses primarily on new energy vehicles. Changan's Thailand facility includes both battery assembly and engine assembly capabilities. Great Wall Motor's Brazil plant can support multiple powertrain types, including HEVs, PHEVs, and diesel vehicles. Chery, meanwhile, is introducing hybrid models first in Spain.
This does not reflect uncertainty over technology pathways. Rather, it reflects the real complexity of global markets.
China may be able to transition rapidly toward new energy vehicles, but the world will not complete its energy transition on the same day or through the same technological route. Europe, Southeast Asia, Brazil, and the Middle East differ significantly in their energy structures, charging infrastructure, consumer preferences, and regulatory environments.
Image source: Gasgoo, enabled by AI
What Chinese automakers are exporting overseas today, therefore, is not simply a replica of the "China factory" model. They are exporting a broader capability system—one that combines local product adaptation with flexible manufacturing.
This is also one of the key reasons why Chinese vehicle brands have continued to expand overseas sales even amid increasingly complex trade conditions and geopolitical tensions.
China's complete-vehicle exports in 2026 could very likely exceed 10 million units, setting a new historical record.
That would further demonstrate that vehicles made in China have already achieved strong global product competitiveness. At the same time, the continued expansion of overseas production capacity shows that Chinese automakers are beginning to take not only their manufacturing capabilities, but also their supply-chain capabilities and even their broader operating systems, into global markets.
The next test will be the depth of localization and the quality of overseas operations.
Moving from simply "going out" to truly "going in" is precisely what Going Global means by the progression from trade-driven expansion, to deeper channel development, to local manufacturing, and ultimately to capability localization and ecosystem co-building.
