China dethrones Japan as world’s largest car exporter

Semafor Signals

Insights from Izvestia, Caixin, and The South China Morning Post

The News

China has overthrown Japan as the world’s largest car exporter, another sign of the staggering rise of the country’s auto market.

The country sent more than 3.8 million vehicles overseas in 2023, according to the China Passenger Car Association, a 62% increase from the previous year, while Japanese automakers exported 3.5 million cars during the same time period, customs data shows. Both sets of data exclude figures for second-hand cars.

The surge in demand has largely been fueled by Russia, as Japanese and European automakers fled the country amid the war in Ukraine. But while the overall outlook for Chinese car manufacturers appears optimistic, analysts are already warning they may face a rocky 2024 as fierce competition threatens to wipe out weaker players.


Semafor Signals: Global insights on today’s biggest stories.

Russia brands Chinese cars as “barely inferior” to alternative manufacturers

Sources: Wall Street Jounral, Gazeta.Ru, Izvestia

Worldwide export bans to Russia have allowed Chinese automakers to meet the country’s gap in demand for cars, particularly for gas-powered vehicles, according to The Wall Street Journal. Moscow has acknowledged the influx of Chinese automakers and is actively promoting them as suitable and more affordable replacements for Japanese and European models. “The quality of Chinese cars is improving,” Russian President Vladamir Putin said in October. Some reviewers, like the Russian newspaper Izvestia, reported that Chinese cars are “barely inferior” to global competitors, but noted several weak spots, including corrosive bodies that can’t withstand the Russian winter, as well as the “chaotic and unpredictable” system of ordering spare parts from China.

Chinese automakers fear lower profits due to growing price wars

Source: Caixin

Vehicle prices in China fell 8.4% in 2023, according to analysts interviewed by the Chinese finance news site Caixin, who predicted domestic sales would slow in 2024 as exports continue to drive gains. A government-initiative to mass produce electric vehicles, as well as a price war triggered by new discounts on Tesla models in China, has led analysts to conclude that 2024 “will decide who are the winners, who are the losers, who will survive and who will die” in China’s automarket, Caxin reported. Experts also told the publication that the export market will likely plateau by next year, as Europe imposes more restrictions on Chinese vehicles and Russian demand cools down. The companies likely to survive — like BYD and Nio — are proactively investing overseas by building factories in Europe, one analyst told Caixin.

Will phone makers become the next big producers of electric vehicles?

Sources: South China Morning Post, Bloomberg

Some investors are more interested in what smartphone makers like Huawei and Xiaomi bring to the EV race. Both companies unveiled electric sedans last year meant to compete with Tesla’s software-heavy models. Auto market watchers said the tech giants’ expertise in software gives them an advantage in the Chinese market because consumers’ wants are “not like a decade ago.” Buyers are now more interested in “intelligent” features like autonomous driving and augmented reality. It would not be the first time outside tech giants takeover the car industry: BYD started out as a smartphone battery producer. Analysts said the success or failure of Huawei and Xiaomi could revolutionize the next generation of smart vehicles, and potentially push Apple to finally produce its own much-rumored EV.