In the bustling metropolis of Shanghai, leading automobile manufacturers are unveiling their newest models tailored for both the Chinese and global markets at the Shanghai Auto Show this week. This showcase comes at a time when the global automotive landscape is being shaped by geopolitical tensions, with manufacturers keeping a keen eye on any developments in U.S. President Donald Trump’s trade policies.
This year’s auto show, situated in the expansive industrial sectors of Shanghai, marks a crucial period for the industry. China’s ambitious quest to develop a world-class automotive industry over the last thirty years has resulted in local companies dominating approximately two-thirds of the domestic market and increasing their presence in global exports.
However, challenges lurk as heightened tariffs from the U.S. and retaliatory duties from the European Union on Chinese electric vehicles complicate international sales efforts. As Great Wall Motors Chairman Wei Jianjun remarked, “Geopolitics are very complex and the situation remains uncertain,” highlighting the company’s commitment to exploring international investment opportunities.
The auto show, which features media and trade days before opening to the public, will run until May 2. It comes at a time when the adoption of electric vehicles (EVs) is accelerating, buoyed by government incentives prompting drivers to upgrade their cars. Last year saw a significant 40% rise in sales of battery-powered and hybrid vehicles.
According to the China Association of Automobile Manufacturers, the world’s largest market sold a staggering 31.4 million vehicles in total, including buses and trucks, reflecting a 4.5% increase over the prior year. Although EV sales are soaring, sales of traditional gasoline and diesel vehicles have been declining, although they still made up just over half of all new car sales.
Chinese electric vehicle manufacturer BYD surged past Tesla to become the world’s largest maker of EVs by sales last year. With revenues topping $100 billion, BYD announced an ultra-fast EV charging system capable of fully charging vehicles in as little as five to eight minutes, comparable to refueling a traditional gas car. This company plans to establish more than 4,000 of these rapid charging stations throughout China.
The competitive landscape in China is intense, with foreign auto giants such as Volkswagen, General Motors, BMW, and Ford initially forming joint ventures with state-owned enterprises in the 1980s and ’90s. This collaboration has helped build the infrastructure and expertise necessary for global competition while fostering the growth of domestic companies like BYD, Geely, and Great Wall Motors.
With home market growth stymied by fierce competition, these companies are rapidly expanding into Southeast Asia and other emerging markets with affordable sedans, SUVs, and pickups. The Shanghai auto show is seeing a “survival of the fittest” atmosphere, according to Zhou Lijun, director of Yiche Research Institute.
Strategic partnerships continue as bifurcation occurs within the Chinese market. BYD, for instance, partnered with Daimler—now the Mercedes-Benz Group—to introduce the Denza premium brand. Simultaneously, BYD is challenging high-end brands like Toyota with its luxury Yangwang line, commanding prices as high as 2 million yuan (~$280,000).
Opening markets to foreign competition has expanded options for Chinese consumers but also increased pressure on legacy automakers like GM, Ford, Toyota, and VW who are battling to maintain their foothold in China amidst this competition. Oliver Zipse, chairman of BMW Group, emphasized the enduring allure of the Chinese market, describing it as worth contesting even amidst challenges.
The shadow of President Trump’s substantial tariffs, as high as 145%, looms over both Chinese and foreign manufacturers, coupled with a 25% U.S. tariff on imported cars and parts. Nissan’s China head, Stephen Ma, hinted at the trade friction by referencing plans for new battery and hybrid vehicles for export, excluding “one country.” The emergence of stringent tariffs in the U.S. and Europe is prompting Chinese automakers to consider relocating production to be closer to Western consumers.
Faced with a shifting global trade landscape, Chinese automakers are adapting quickly to meet demand. In contrast to traditional brands, emerging EV manufacturers in China benefit from not having extensive legacy operations to overhaul. Stefan Sielaff from the Zeekr Group remarked on the flexibility of newer companies to rapidly respond to market trends and consumer demands, achieving significant milestones in record time. As China navigates these changes, it is poised on the brink of a significant technological transformation in the automotive world.