Current Trends in Chinese EV Production
- 22 hours ago
- 10 min read
Written by Christian Naida (Research Leader), Parker Woodwyk, Manav Vengilatt, Dharahasini Nallamalli
EXECUTIVE SUMMARY:
Chinese EVs have rapidly been gaining market share recently due their combination of low price and good feature set.
China has been stimulating EV demand domestically through a combination of environmental policies subsidies and low or no interest rate loans for major EV manufactures like BYD and SAIC.
Chinese EVs have been exported around the world to places like Europe and Asia and have been very popular in emerging markets like Africa.
Introduction
China has quickly become the world leader in the Electric Vehicle (EV) industry. By aggressively incentivizing their own companies, China created a system that now produces over 60% of the EVs worldwide (CEPA). This production has turned China into a global hotspot, supplying EVs to mature and emerging countries alike. Internationally and domestically, sustainability efforts have set the stage for rapid expansion of the EV industry. This transition has been accelerated by Chinese manufacturers’ ability to produce EV vehicles at significantly lower costs than competitors. Now as saturation in the Chinese EV market increases, Chinese companies are taking advantage of current trends to expand internationally.
Exports of Chinese EVs
Chinese EVs have become very popular all over the world due to their combination of low-cost good features and heavy emphasis on technology. They are expected to consist of around 15% of the global market by 2035. The biggest consumers of these EVs are a mix of more developed countries like Australia and the United Kingdom but also due to their lower cost we have also seen countries like Thailand purchase EVs in large amounts due to their lower cost compared to most western made cars.
Since there has been a glut of oversupply in the market from Chinese automakers these car makers have slashed prices and engaged in price wars with other EV companies creating low profit margins which has caused many of these Chinese automakers to face issues with financial stability. These companies also have access though very cheap debt through independent government-backed banks which offer very low interest loans.
The graph above shows how low their borrowing costs are compared to a typical B-rated corporation. A company rated "B" by agencies like S&P or Moody's, indicating speculative-grade credit that commands a significant risk premium compared to a higher rate company. This allows them to expand their operations effectively at zero cost, as well as lower their prices due to a very low cost of capital. These ultra-low interest rates were the cause of a European Union report that investigated these rates and ultimately lead to up to 25% tariff on certain Chinese automakers and battery makers. The USA has also imposed a 100% tariff on any Chinese EV coming into the United States which has effectively blocked any of those automakers from entering the US market. These tariffs will likely stick around until the Chinese auto industry is less heavily subsidized and these tariffs could spread to other Asian countries were these EVs are popular due to their low prices.
Chinese Electric Vehicle Regulations
China’s regulations and policies regarding EVs have become integral to the rapid growth of electric vehicle use. From the 2001 140-million-dollar EV research project created by the Chinese Ministry of Science and Technology, to the dual credit system in 2018- a regulatory policy directed at passenger vehicle manufacturers to mandate they meet targets for New Energy Vehicle (NEV) production and Corporate Average Fuel Consumption (CAFC)- China has been consistent in its promotion of EVs and transitioning manufacturers and consumers into more environmentally friendly transportation methods. In comparison to other countries which also prioritize EV promotion, China has a passed significantly more EV policies and regulations signifying its unparalleled integration of EV vehicles.
However, recent policies have begun to shift away from promoting EV production to further regulate how they’re produced. China has not included EVs in its strategic industries 5-year-plan for 2026-2030 contrasting EVs inclusion in prior plans. China has begun to address oversupply of EVs and the industry maturing by focusing on EV safety monitoring. There are many new policies aim to stop overproduction of EVs especially focusing on substandard models: Export Controls, which began January this year, in order to control oversea sellers; Mandatory Efficiency Rules, which require stricter energy consumption standards for EVs; and Subsidies Phase-Out in order to eventually remove local purchase tax exemptions by 2027. While these policies will impact the growth of Chinese EVs in the future, China has demonstrated a shift from quantity to quality through the transition in the focus of their regulations.
Due to the transformation of EV use in China, China’s infrastructure and urban centers have changed drastically due to increase in EVs. Shenzhen is the best example of how prevalent infrastructure planning has been impacted by centralizing EVs as main methods of transportation. As the “electric car capital of the world” nearly 85% of new car sales in Shenzhen are electric and all public transportation is also electric. This prevalence of EVs has led to the development of over 1,000 charging stations to be placed all over the city by the year 2030. Shanghai is also a prevalent example of an urban center with over 50% of the city’s new car sales being electric vehicles. The focus on EVs in these urban centers has led to efforts to reduce wait times through targets to install over 100,000 ultra-fast chargers by 2027 and incorporating battery-swapping networks to reduce wait times to under 5 minutes.
Scale of Domestic Demand
China is not just the world’s largest producer of electric vehicles; it is also the largest consumer. In 2024, domestic NEV retail sales reached approximately 11 million units, a 42% increase from 7.75 million in 2023. By the end of 2025, domestic sales alone accounted for 13.88 million units. NEV penetration, the share of new car sales that are electric, crossed 50% for the first time in late 2025, meaning more than half of all new cars sold in China are now electric. Globally, China accounted for 57% of all battery electric vehicle registrations in the first quarter of 2025.
An important shift is happening within domestic demand. In 2024, battery electric vehicles made up about 58% of NEV sales, with plug-in hybrids at 42%. PHEVs have been closing the gap quickly, as consumers with limited charging access or longer commutes prefer the flexibility of a gas engine alongside electric capability. This signals that full electrification still faces practical barriers even in the world’s most EV-friendly market.
Drivers of Domestic Demand
Government subsidies played a major role in early adoption, but have been gradually phased out, with purchase tax exemptions set to be fully removed by 2027. The regulation section of this paper covers these policies in greater detail. What has replaced subsidies as the primary driver is price. Chinese EVs are now cost-competitive with, and often cheaper than, traditional gas-powered cars. BYD’s Seagull was cut to just $7,800 after aggressive price reductions in mid-2025. The BYD Dolphin starts at around $13,800. At these price points, consumers are choosing EVs not on environmental grounds but because they are simply the cheaper option with lower operating costs.
Charging infrastructure has also removed a key barrier. By the end of 2025, China had over 19.3 million total charging points, including 4.6 million public chargers, the largest network in the world. The ratio sits at roughly two chargers for every five EVs on the road, and the government has committed to installing over 100,000 ultra-fast public chargers by 2027.
Who’s Buying and What They’re Buying
EV adoption varies significantly by geography. Tier 1 cities like Beijing, Shanghai, and Shenzhen have penetration rates exceeding 60%, driven by vehicle registration restrictions that exempt NEVs and dense charging networks. In Shenzhen, nearly 85% of new car sales are electric, and all public transportation is fully electrified. Demand is no longer confined to these major cities; Tier 2 and Tier 3 cities are seeing growing adoption as charging infrastructure expands and ultra-affordable models like the BYD Seagull make EVs accessible to lower-income consumers.
BYD dominates the domestic landscape. In 2024, BYD captured 34.1% of China’s NEV market with 3.72 million retail sales. By 2025, its share dipped to 27.2% as competitors like Geely (12.2% share, up 81% year-over-year) and Changan (6.2%) surged. Tesla held 6.0% in 2024, dropping to 4.9% in 2025 as domestic brands intensified competition. The top six players control more than 64% of total sales.
Domestic Saturation and the Export Push
Despite impressive growth, there are clear signs the domestic market is reaching a saturation point. Growth rates have slowed; domestic sales grew about 20% in 2025 compared to 42% in 2024. Industry-wide profit margins dropped from 4.3% in 2024 to 3.9% in early 2025 as manufacturers engaged in destructive price competition. In May 2025, BYD slashed prices across its lineup, cutting the Seagull by 20% and the Seal sedan by 34%. Both CAAM and the Ministry of Industry and Information Technology issued warnings against “disorderly price wars.” With over 3.5 million unsold vehicles in inventory across the industry, overcapacity has become a structural issue.
This overcapacity is what is pushing manufacturers overseas. China exported 2.62 million NEVs in 2025, a 100% increase from the year before. As Chart 2 shows, the United Kingdom led overseas demand at 129,069 units, followed by Mexico and Germany. This transition from domestic saturation to aggressive global expansion is the defining trend of the Chinese EV industry today, and it sets the stage for the export dynamics discussed in the following sections.
European Expansion
Europe is a strategic target for Chinese EV companies to gain market share. Driven by domestic overproduction, Europe is a perfect spot for Chinese companies looking to bypass US tariffs. As of 2025, there are 6 million Chinese EVs on the roads in the EU, capturing a 5.8% market share, which is nearly double from 2024 (S&PGlobal). Projections indicate that this market share will continue to increase over the next decade, reaching 15.5% - 28 million vehicles in operation (VIO) - in 2035 (S&PGlobal). To lessen the effect of EU tariffs, Chinese companies are utilizing a localized manufacturing strategy. By 2035, 44% of EU-sold Chinese EVs are expected to be produced locally within the EU or Turkey (S&PGlobal).
It should also be noted that though Chinese companies have begun to grab market share in Europe, the German vehicle industry hasn’t let up control of the region (ACEA). Since 2021, German vehicle manufacturers have increased their dominance, producing 18% in 2021 to 21% of cars sold in the EU in 2025 (ACEA). So far, the increase of EV imports from China isn’t hindering German manufacturing at all; however, it's something to keep an eye on as continued European expansion from China ramps up.
Emerging Markets
With China’s aggressive international expansion, the global markets have hit a pivot point. In 2025, Chinese exports of EVs hit a record high of 7.1 million units – a 21% increase from the past year (S&PGlobal). China has established an immediate technological advantage in this market due to its battery production capabilities. This advantage is deepened by China’s control of over 80% of the global battery supply chain (IEA). Specifically, Chinese EV companies were quick to define themselves within the Southeast Asia-Pacific (APAC) region (IEA). As of 2025, in this region, there were 1.5 million Chinese VIO, and projections have a jump to 12 million VIO in 2035 (S&PGlobal). The rise of middle-class citizens in these countries has driven a demand for “affordable luxury” when it comes to personal vehicles. China aims to capture this demand over the next decade.
Technology Trends
The future of electric vehicle technology depends heavily on the regulations put in place by various governments. In Europe, the EU 2035 ICE ban was modified in December 2025 to allow certain hybrid vehicles. Chinese companies have begun to diversify into hybrid and plug-in hybrid vehicles. By 2035, projections indicate that there will be 6.5 million Chinese HEVs and PHEVs on the roads in Europe – a large increase from the 420,000 in 2025 (S&PGlobal). To keep their cars street legal, the Chinese companies are standardizing their cars within the Euro NACP standards, further showing their commitment to the region.
EVs are being more frequently equipped with Advanced Driver-Assistance Systems (ADAS) to provide more luxury to consumers. Chinese OEMs recognize that these features are no longer add-ons for premium vehicles and are beginning to be expected with the next generation of EVs. The companies have begun to standardize radar and camera-based systems within the entry-level EV models to provide the luxury consumers are looking for.
Another consideration is the transition within aftermarket service. Traditionally, mechanics worked on ICE vehicles, but with many EV systems being digital, there is a high barrier to entry for independent businesses, as they must invest in software and ADAS calibration tools to remain viable. There are several diagnostic brands that have already begun to enter this new service space. If the rise of EVs continues as projected, this will become a larger industry.
Conclusion
Chinese EVs have burst onto the market with great prices and competitive technology quickly grabbing market share from more traditional auto manufactures. These EVs have been especially popular in emerging markets due to their cheap prices and good features for the money, and many of these markets do not have any tariffs on these EVs. Domestically China has stimulated demand for EVs using a combination of regulations like the CAFC which tax companies that emit carbon emission and make them buy carbon credits to offset their emissions. They have also offered several tax credits and various benefits for companies that do choose to purchase EVs aiming to reduce the price to purchase an EV today. They have also offered very low-interest rate loans to these automakers in China to further reduce their costs as well as allow them to expand very quickly and at very little cost comparatively to a company located in a different country.
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