Twenty years that transformed China’s auto industry

When I first came to China more than two decades ago, the relationship between Chinese and foreign automakers was quite straightforward: foreign automakers brought the technology, brands and management know-how, while China provided market access, manufacturing scale and increasingly capable local suppliers.

That relationship has fundamentally changed. The key inflection point came when the basis of automotive competition shifted away from the internal-combustion engine and mechanical engineering toward batteries, power electronics, software, connectivity and now AI. Chinese companies were much less constrained by legacy investments and organizational structures, so they moved aggressively into these new domains.

The most important advantage China has developed is speed. China became the world’s most intensely competitive automotive market. Companies learned to develop products faster, integrate technology faster and respond to consumers faster. A traditional five-year vehicle-development cycle simply cannot compete with companies operating on much shorter innovation cycles.

China has therefore moved from being the world’s automotive manufacturing workshop to becoming an innovation laboratory for the global industry. Increasingly, foreign automakers are coming to China not simply to sell cars, but to access technology, suppliers and development capabilities.

That is a remarkable reversal of the knowledge flow I saw when I arrived more than two decades ago. China created something much more powerful than inexpensive manufacturing. It created a highly integrated innovation ecosystem.

You have the world’s largest automotive market sitting alongside world-class capabilities in batteries, electronics, semiconductors, software, telecommunications and digital services. You also have extremely demanding consumers who expect cars to behave increasingly like intelligent devices. And then you have extraordinary competitive intensity. Companies are forced to innovate because standing still for even a year can leave you behind.

BYD demonstrates the advantage of deep vertical integration, particularly in batteries and power electronics. Geely has built a broad technology and brand ecosystem and has become very effective at combining Chinese innovation speed with global assets. Chery spent decades developing overseas markets and has built particularly strong capabilities in international distribution and product adaptation.

What connects them is the ability to iterate extraordinarily quickly—identify a consumer requirement, engineer a solution, industrialize it and bring it to market. That is increasingly China’s real competitive advantage: not simply cost, but speed, scale and ecosystem integration.

From Going Global 1.0 to 2.0

China’s domestic market is brutally competitive. Price competition has compressed margins, product cycles have shortened dramatically, and there is clearly more manufacturing capacity than the domestic market can sustainably absorb. Overseas markets have therefore become increasingly important to capacity utilization and profitability.

But I would not reduce China’s globalization story to exporting excess capacity. The leading Chinese companies were going global anyway. They have reached the technological capability and scale where China alone is no longer an adequate definition of their addressable market.

This is where I think we need to distinguish between Going Global 1.0 and Going Global 2.0.
The first phase was predominantly about exports—Made in China and sold to the world. That allowed Chinese companies to test markets, establish distribution, build brands and leverage their enormous domestic manufacturing scale.

But export success was never the destination. Going Global 2.0 is the transition from exporting products to localizing industrial capabilities. Chinese companies are beginning to manufacture overseas, build local supply chains, develop local engineering capabilities, hire local talent and form deeper partnerships within the markets where they compete.

I describe that transition as moving from “Made in China” toward “Made by China, for the world.”

Domestic economic pressure is pushing these companies outward. But technological competitiveness and global ambition are pulling them outward at the same time.
This is particularly visible in Europe. The European discussion often starts with subsidies, price and tariffs. Those issues matter, but they can obscure what has happened to the products themselves.

Chinese automakers have become highly competitive in batteries, vehicle electronics, digital experience, software integration and speed of product renewal. They are increasingly competing on technology and value, not simply price.

The export data illustrates the momentum. In the first half of 2026, Chery exported more than 262,000 passenger vehicles to Europe, SAIC more than 211,000 and BYD more than 170,000. Geely and Leapmotor also recorded very rapid growth.

They are also becoming more sophisticated in how they approach markets. Europe isn’t one market, and neither is the rest of the world. Successful Chinese companies are adapting products, powertrains, brands and distribution strategies to local requirements.

And tariffs do not eliminate the underlying competitive capability. They change the economics and therefore change corporate behavior.

I often say: when you build a dam in a river, the water seeks another path. That is exactly what is happening now. Trade barriers are accelerating the transition from exporting to localization.

Manufacturing is the entry point

For companies that achieve sufficient scale, overseas production is both feasible and inevitable. We are already seeing multiple models emerge. Some companies will build greenfield factories. Others will acquire or repurpose existing plants. Some will establish joint ventures. Others will use contract manufacturing or strategic partnerships.

This is already moving from theory to practice. Chinese automakers are increasingly evaluating existing European manufacturing assets, while companies including Chery, Geely, Leapmotor and BYD are pursuing various forms of localization.

Chery and Ebro in Spain provide perhaps the clearest example. Rather than simply exporting Chinese-made cars into Europe, Chery partnered with Ebro to reactivate the former Nissan plant in Barcelona. Production began in 2024, and by late 2025 the operation employed more than 800 former Nissan workers. The operation is now moving beyond basic assembly by adding welding and painting and increasing local sourcing. That is industrial integration rather than simply trade.

Leapmotor and Stellantis represent a different model. Stellantis invested in Leapmotor and established Leapmotor International as a 51:49 joint venture, with rights to sell and manufacture Leapmotor vehicles outside Greater China. By 2025, it had built a European network of more than 850 sales and service points and shipped more than 40,000 vehicles in Europe. Here you have a Chinese technology company leveraging the manufacturing, distribution and market infrastructure of an established Western automaker.

Geely and Renault go deeper still. Their relationship isn’t simply about selling Geely cars in Renault markets. They combined major parts of their powertrain operations into HORSE Powertrain, a global company spanning manufacturing and R&D assets across multiple continents. Aramco subsequently took a 10% stake, leaving Renault and the Geely interests with 45% each. That begins to blur the distinction between Chinese and European automotive technology altogether.

And we can now see that model extending beyond Europe. Renault and Geely in Brazil are combining Renault’s manufacturing footprint and dealer network with Geely’s products and technology. Their expanded cooperation includes local production and additional investment through 2027.

These examples show that there won’t be one Chinese globalization model. There will be greenfield investment, brownfield factory revitalization, joint ventures, contract manufacturing, technology partnerships and equity alliances.

Manufacturing, however, is only the first step. Over time, localization means local suppliers, local engineering, local talent, local management and products increasingly designed around regional requirements. Manufacturing is the entry point. Industrial integration is the destination.

Flip the script

For decades, foreign companies entered China because they wanted access to China’s enormous market. China did not simply open the doors and allow foreign companies to capture the market entirely through imports. It used market access strategically.

Foreign automakers manufactured locally, developed local suppliers, hired and trained Chinese employees, established engineering capabilities and, historically, often operated through joint ventures with Chinese companies. Over time, those investments helped build China’s industrial capabilities.

Other countries should study that experience very carefully. Rather than asking only, “How do we keep Chinese companies out?”, policymakers should be asking: “If Chinese companies want access to our market, how do we use their investment to strengthen our own industrial ecosystem?”

That could mean encouraging local manufacturing, local employment, supplier development, engineering investment, partnerships and appropriate technology transfer—within transparent and rules-based frameworks.

There is an important distinction between protecting an industrial ecosystem and protecting incumbent companies from competition. The former can be legitimate industrial policy. The latter risks insulating companies from precisely the competitive pressure that forces them to innovate.

Barcelona is a good illustration. A Nissan factory that stopped producing vehicles in 2021 has been reactivated through the Ebro-Chery partnership, putting hundreds of former Nissan employees back into automotive production and progressively adding more manufacturing processes locally.

That is a very different proposition from simply importing a vehicle from China. The same logic can apply to suppliers, batteries, electronics, software and engineering. Market access can be used to attract capital, create employment, rejuvenate underutilized industrial assets and bring new technologies into the local ecosystem.

That does not mean countries should reproduce China’s policies mechanically. Europe, the United States and other markets have their own legal systems, competition rules and national-security considerations. But they can learn from the strategic principle: market access is an economic asset, and policymakers can use it to build domestic capability rather than merely trying to preserve existing market shares.

Tariffs may buy incumbents time. They do not create competitiveness.

The next battle is intelligence

At the same time, competition within China itself is likely to produce substantial consolidation, although it won’t necessarily look like traditional Western-style M&A.
China has more automotive brands and manufacturing capacity than can sustainably generate attractive returns. At the same time, the technological threshold for remaining competitive keeps rising.

It is no longer sufficient to build a good EV. Companies increasingly have to fund batteries, advanced driver assistance, AI, software-defined architectures, intelligent cockpits and increasingly sophisticated computing platforms.

Scale therefore matters. Some companies will disappear. Some brands will be absorbed into larger groups. Others may survive as technology providers or manufacturing partners rather than independent full-line automakers. We will also see consolidation within some of the large state-owned groups.

But there is an important paradox here: consolidation does not mean Chinese competition becomes weaker. It is the process through which stronger competitors emerge. The survivors will generally be companies that have scale, differentiated technology, strong brands, ecosystem advantages or some combination of these.

And the next competitive frontier is intelligence. Electrification is increasingly becoming the foundation rather than the differentiator. Batteries will continue to improve, but the next major battle is over what the vehicle can perceive, understand, learn and do.

That means AI, advanced driver assistance, intelligent cockpits, centralized computing, software-defined architectures and integration with broader digital ecosystems.

We’re moving from an industry historically organized around horsepower and mechanical performance toward one increasingly differentiated by computing power, software and user experience.

AI accelerates that transition again because the vehicle is becoming an intelligent physical device—essentially a robot on wheels.

This is another reason China matters. It has developed an unusually dense ecosystem at the intersection of automotive, consumer electronics, software, AI and advanced manufacturing.
The next competitive advantage therefore won’t come from any single component. It will come from the ability to integrate technologies into an experience faster than competitors can.

A more Chinese, more regionalized industry

Over the next decade, the automotive industry will likely become simultaneously more Chinese and more regionalized.

Chinese companies are going to become permanent participants in the global automotive industry. But I don’t think the future is simply BYD, Geely or Chery replacing Volkswagen, Toyota or GM. What is changing is the structure of globalization itself.

Geopolitics, tariffs, industrial policy, technology controls and data regulations are creating stronger regional boundaries. Companies will increasingly need localized manufacturing, localized supply chains, localized data management and, in some cases, localized technology architectures.

Ultimately, most major markets will have to determine some framework under which competitive Chinese companies can participate. The more productive question is therefore what conditions accompany that participation.

That’s why I believe Going Global 2.0 could ultimately become a two-way industrial bargain rather than a zero-sum trade conflict.

China spent decades absorbing capital, technology and know-how from companies that wanted access to the Chinese market. Now that China has become a source of automotive technology, capital and industrial capability itself, other countries have an opportunity to reverse that flow.

Flip the script: don’t just defend your market from Chinese competition. Use Chinese competition and investment to make your own industry stronger. That, to me, is one of the defining strategic questions for the next decade of the global automotive industry.