China’s ZEV Industry Invests More Abroad Than at Home for First Time

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Chinese ZEV manufacturers are addressing overcapacity, price erosion, and thin profit margins at home by expanding overseas.

News Analysis

China’s zero-emission vehicle (ZEV) industry is accelerating its overseas investment push amid overcapacity at home, thin profit margins, and growing regulations in its largest overseas market, Europe.

According to data compiled from China Cross Border Monitor (CBM) and Global Clean Investment Monitor (GCIM), in 2024, Chinese ZEV firms invested more funds abroad than at home to expand their operations—the first such shift.

These overseas investment projects are usually replicas of domestic projects, but they are smaller in scale and concentrated in battery production, with BYD leading this trend, followed by CATL and Geely.

ZEV production remains at home, but there are signs that overseas production may follow suit. On Jan. 31, 2024, BYD announced plans to construct a new energy vehicle (NEV)—China’s term for ZEVs—production facility in Szeged, Hungary. A couple of months later, it unveiled a $1 billion project to build a plant in Manisa, Turkey, with a capacity for 150,000 battery and plug-in hybrid vehicles.

The rush of Chinese ZEV makers to expand overseas investments follows the country’s soaring vehicle exports, which reached 3.083 million vehicles in the first half of this year alone, a 10.4 percent jump from the same period in 2024, according to the China Association of Manufacturers.

For China, ZEV exports are part of a broader strategy to revive its export engine at a time when its economic growth has slowed dramatically, from double digits before the 2008-9 crisis, to about 6.5 percent on the eve of the COVID-19 pandemic, to around 5 percent today.

For ZEV manufacturers, exports offer a way to deal with a range of problems at home: overcapacity, price destruction, and thin profit margins.

Shanghai-based NIO Inc.’s profit margins are a case in point. Its gross profit margin has dropped from around 19 percent at the end of 2020 to around 10 percent in the first quarter of this year. Its operating and net profit margins have fared far worse, staying in negative territory throughout that time frame.

By Panos Mourdoukoutas

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