International automakers are going through powerful critiques as U.S., European and Japanese manufacturers lose floor to Chinese language rivals and take the lead not solely in electrical automobiles but in addition in batteries, design and software program.
The BBC visited manufacturing facility websites in Beijing and Hefei on the sidelines of AutoChina 2026, the world’s greatest automobile present, and noticed an astonishing stage of automation and velocity of software program improvement, confirming that overseas manufacturers that after dominated the Chinese language market are struggling to catch up.
“We now have no probability in opposition to this,” Honda CEO Toshihiro Sanbe instructed Japanese media after visiting a extremely automated manufacturing facility in Shanghai.
Ford CEO Jim Farley additionally warned that Western automakers are “combating for his or her lives” as Chinese language rivals develop globally.
After a long time of investing in joint ventures with Chinese language companions to make automobiles, overseas automakers at the moment are altering the character of their partnerships to stay aggressive.
“The largest mistake developed nations are making is believing that the transition is simply about electrical automobiles,” mentioned Invoice Russo, a Shanghai-based auto analyst. “The query is who will lead the subsequent era of mobility expertise.”
smartphone on wheels
China’s superiority goes past the car itself.
It accounts for essentially the most exports amongst greater than 315 product classes, up from 163 classes in 2016, based on a Rhodium Group report. Many of those are associated to the electrical automobile (EV) provide chain, together with batteries, elements, and manufacturing equipment.
The Worldwide Power Company estimates that it’s not less than 30% cheaper to provide small electrical SUVs in China than in developed nations, thanks largely to decrease battery prices and a extra subtle provide chain.
This benefit was constructed on years of state help. Rhodium estimates that China has poured tens of billions of {dollars} into EV and battery manufacturing in the previous few years alone.
These subsidies have been closely criticized within the EU and the US as market distorting, and have helped corporations develop quickly and decrease costs.
Competitors inside China can be accelerating innovation. Tech giants like Xiaomi, Huawei, and Alibaba at the moment are manufacturing EVs, bringing shopper expertise to the auto trade.
“They don’t seem to be racing within the West anymore,” Russo mentioned. “They’re competing with one another.”
These corporations are giving Chinese language automakers an added benefit as automobiles more and more depend on software program for every thing from driver help to leisure programs.
The change is most seen at Xiaomi’s EV manufacturing facility on the outskirts of Beijing, the place one automobile rolls off the manufacturing line roughly each 76 seconds.
Xiaomi simply launched its first EV in 2024, however it’s already one of many best-selling manufacturers in China. The technique is to attach automobiles with telephones, apps, and sensible dwelling gadgets to create a single system.
At Nio’s Hefei manufacturing facility, a few of the manufacturing strains are virtually totally automated.
BYD has developed an ultra-fast charging system that may add 400 km (249 miles) of vary in about 5 minutes, concerning the time it takes to refuel a automobile.
XPeng founder and CEO He Xiaopeng instructed the BBC that the corporate is prioritizing humanoid robots and flying automobiles, together with electrical automobiles.
“Within the subsequent 10 years, each automobile firm will develop into a robotic firm,” he mentioned.
Rethinking China
International automakers already depend on China to provide world markets. Tesla exports the Mannequin 3 manufactured in Shanghai to Europe, and BMW’s Chinese language-made electrical Mini can be bought abroad.
Nonetheless, many individuals are struggling inside China.
The share of overseas manufacturers in China’s automobile market has fallen from 64% in 2020 to 32% this 12 months, based on consultancy Automobility.
The decline is hurting the earnings of Basic Motors Co. and German producers that after relied closely on China for earnings.
Luxurious manufacturers are additionally below strain. Huawei’s Maextro S800 luxurious sedan has develop into China’s best-selling automobile at over $100,000 (£74,145), surpassing imported automobiles such because the Porsche Panamera and BMW 7 Sequence, which as soon as dominated the Chinese language market, mixed.
For many years, overseas automakers introduced expertise and types, whereas native companions offered factories and markets.
Now, that relationship is altering.
Stellantis has simply signed a €1 billion ($1.16 billion, £863 million) take care of state-backed Dongfeng to provide Peugeot and Jeep fashions in China and promote them domestically and internationally.
Stellantis additionally mentioned it plans to deliver Dongfeng’s electrical model Voya to Europe and is contemplating producing Chinese language-designed automobiles at its French manufacturing facility.
Volkswagen is paying $700 million for entry to XPeng’s software program structure and self-driving system to develop its next-generation electrical automobile, however the firm admits the expertise can’t be developed rapidly sufficient domestically.
XPeng’s He says the connection is a two-way road. “We belief one another as a result of we research one another, and we assist one another.”
Toyota, Hyundai, Ford, and Nissan are additionally increasing their analysis operations in China and exploring producing Chinese language-designed automobiles at abroad crops. In different phrases, we aren’t simply manufacturing merchandise, but in addition using native human sources and data for improvement.
Nonetheless, not all methods work.
Audi was compelled to supply steep reductions to its E5 mannequin, which it designed particularly for China, after demand for it was weaker than anticipated.
GM has written down billions of {dollars} from its China operations and reported gross sales fell greater than 21% within the first three months of this 12 months.
Japanese producers have been gradual to transition to completely electrical automobiles, making them weak not solely in China but in addition in Southeast Asia, the place Chinese language manufacturers are quickly rising market share.
In early 2026, Volkswagen briefly regained the title of China’s best-selling automobile model, however which may be because of the weakening of home rivals because of the finish of the Chinese language authorities’s EV subsidies.
China’s home market can be experiencing widespread cooling. Progress is slowing after years of growth, whereas overcapacity and fierce worth competitors are squeezing earnings throughout the trade.
That is a part of the explanation Chinese language producers are increasing abroad. Regardless of tariffs of as much as 45% within the EU, manufacturers similar to BYD, Chery and SAIC are increasing into Europe and rising markets.
Chery’s Jaecoo 7 has develop into one of many UK’s best-selling new fashions inside 14 months of its launch. However tariffs exceeding 100% have successfully shut Chinese language manufacturers out of the U.S. market.
Specialists have warned that as automobile manufacturing, battery expertise and software program improvement shifts to China, manufacturing hubs in Southeast Asia and Europe may very well be hit, impacting jobs and native economies.
Advisor James Pearson says tariffs do not essentially defend them: “In case you shut them out of 1 market, they will simply discover one other.”
Invoice Russo says the trade’s middle of gravity is already shifting.
He mentioned there are alternatives for corporations prepared to cooperate, however corporations trying to cease China’s rise threat being left behind.
