The changing face of the global car export industry

Imports and Exports | | MIC Customs Solutions |

How has the global car export sector changed over the last few years and which nations have been the big winners?

Earlier this month, it was reported that the EU is set to impose new tariffs on imports of electric vehicles from China, in response to a huge increase in shipments that threaten to undercut the bloc's own manufacturers.

This is the latest development in a trend that has seen a significant shift in the global car sector over the last few years, with the focus moving away from traditional manufacturing centers towards emerging players. So what does this mean for the sector as a whole, and in particular international firms looking to move cars and components around the world?

The growth of Chinese auto manufacturing

The growth of China as a global powerhouse in auto manufacturing has been stark recently. In 2023, local industry group the China Passenger Car Association reported that the country's sector was likely to overtake Japan as the world's biggest exporter of vehicles. It estimated that China's total auto exports were set to hit 5.26 million units for the whole of last year for a total value of around $102 billion, compared with about 4.3 million units for Japan.

This is a huge rise from an extremely low base at the start of the century. According to data from the World Trade Organization (WTO), China accounted for just 0.3 percent of global auto product exports in 2000 (including both complete vehicles and parts). However, this had risen to eight per cent by 2022, making it by far the fastest-growing auto exporter of the 21st century.

There are several reasons behind this, including generous government support in the form of subsidies - which is one of the issues the EU is looking to address with new tariffs. The way the country's industry is organized is also a factor. Logistics company DP World notes, for example, that almost all Chinese manufacturers are multipurpose, with the ability to make both completed vehicles and individual components for export, which means nearly all car parts can be manufactured at scale somewhere in the country.

Opportunities for regional growth

However, China is not the only location where automotive exports are booming. The last few years have seen a notable shift to emerging territories, with the likes of Mexico, Thailand and Turkey all seeing significant growth in global market share.

DP World suggests one reason for this is a desire to diversify supply chains and look for manufacturing sources closer to home, in order to minimize the risk of disruption caused by issues such as political instability. Recent threats such as attacks on shipping in the Red Sea - a key trade route for parts moving from Asia to Europe - may exacerbate this.

At the same time, WTO data shows several nations have seen notable declines in automotive exports between 2000 and 2022, including Canada (-7.2 percent), Japan (-6.4 percent), the US (-2.6 percent) and the UK (-1.8 percent).

The impact of trade agreements and nearshoring

In the cases of Canada and the US, one major reason for a decline in exports may be the impact of the US-Mexico-Canada (USMCA) free trade agreement (FTA), which has been in force since 2020 and contains several provisions specifically related to the automotive sector.

For example, it includes rules of origin requirements and import quotas that encourage the use of components sourced from North America, which have particularly benefited Mexico's automotive sector. Manufacturers from around the world have opened and expanded facilities in the country to take advantage of this and the easy access into the US the FTA offers.

USMCA's automotive provisions also reflect a growing trend towards 'nearshoring', or focusing trade priorities on nations that are physically close to the end market, as well as those that are more politically aligned. With major markets like the EU and the US looking to tackle the threat of imports from China, this may become an even larger trend in the coming years.