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

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Aug 20, 2025 - 09:53 Updated: Aug 20, 2025 - 09:51
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China’s ZEV Industry Invests More Abroad Than at Home for First Time
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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.
XPeng’s margins have displayed a similar pattern. Its gross profit margin has dropped from around 30 percent at the end of 2021 to around 15 percent in the first quarter of 2025, while the operating and net margins have remained underwater over the same period.
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The company’s sales doubled in its latest quarter, though it may take another year or two to break even.
The picture is much the same for BYD’s gross and operating margins. However, the company’s net margin has seen some improvement, as it is by far the largest recipient of government subsidies, which in 2022 alone amounted to 1.6 billion euros.
BYD is a leading NEV producer in China, holding a dominant 34.1 percent share of the country’s NEV market in 2024—well ahead of competitors such as Geely (7.9 percent) and Tesla (6 percent).

Overcapacity, price wars, and thin profit margins will make it hard for most of the industry players to survive in the long run, with a new annual Global Automotive Outlook by global consulting firm AlixPartners predicting that only a handful of firms will survive by 2030.

The report forecasts that only 15 out of China’s 129 currently operating ZEV brands will become financially viable and survive by 2030.

A Rough Path

While ZEV’s export push, primarily supported by Beijing’s generous subsidies, may alleviate some of the problems they face at home, it may not be sustainable, prompting overseas governments to take countermeasures to level the competitive field.
For instance, on Oct. 30, 2024, the EU announced that it would levy tariffs on Chinese EV makers, ranging from 17 percent to 35 percent, depending on the vehicle type. These tariffs are an addition to the existing 10 percent import duties on vehicles entering the EU.

As has been the case with Japanese vehicle makers back in the 1980s, a primary way to counter rising tariffs is to relocate production to overseas markets, and the recent rise in Chinese ZEV overseas investments highlights this path.

However, this strategy carries significant risks for both China and ZEV manufacturers. For the Chinese economy, overseas investments will lead to the hollowing out of its industries, leading to slower rather than higher GDP growth, and fewer jobs for Chinese workers.

The United States faced the problem several decades before China. However, unlike China, the United States had already transitioned from a manufacturing economy to a service economy, which created plenty of jobs to make up for the losses of manufacturing jobs.

For ZEV manufacturers, hollowing out carries the risk of giving away any technological advantage they may have to home country manufacturers, as was the case with U.S. manufacturers in the 1950s and 1960s, who ultimately transferred critical technologies to Japan.

Meanwhile, BJ Birtwell, CEO and founder of Electrify Expo, a leading organizer of EV-focused consumer events, sees a rough path for Chinese ZEV makers to win overseas markets, especially the United States, as it takes much more than technology or price to compete effectively in these markets.

“If Chinese EV brands want to make a play here in the U.S., the real battle won’t be price or tech ... It’s going to be trust,” Birtwell told The Epoch Times.

“Americans need to be convinced that the company will be here for the long run with service, parts, and support. That trust is hard-earned, and even legacy automakers still fumble it.”

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