Chinese car sales are booming almost everywhere – just not at home

Chinese car sales have been on the rise globally, except within China itself, where demand has been steadily declining. Major Chinese automakers such as BYD, Geely, and Chery have been expanding their reach to markets in Europe and Southeast Asia, posing a significant challenge to established brands like Toyota and Volkswagen. According to Bill Russo, chief executive of Shanghai-based advisory firm Automobility, domestic production is becoming a strategic necessity for leading Chinese carmakers due to excess capacity, highly competitive supply chains, and a strong economic incentive to grow outside China.

However, the domestic market has been struggling. Car sales in China fell by 20% in July compared to the previous year, marking the 10th consecutive month of decline, according to data from the China Passenger Car Association. The decline was attributed to elevated fuel prices hurting demand for gasoline-powered vehicles and persistent weakness in the entry-level sedan segment. Despite this, China's car exports surged by 88%, reaching 923,000 vehicles, largely due to the export of non-Chinese brands produced in China.

China's automotive industry is experiencing a boom fueled by booming factories and exports, while domestic demand is being curbed by factors such as a weak property market and ailing consumer spending. Chinese policymakers are grappling with the challenge of an economy that produces more than it can sell at home. Overseas markets are offering an increasingly important outlet for Chinese automakers.

For example, BYD's overseas sales surged by 79% year-on-year, with Brazil and Britain emerging as key markets for the company in 2026. Japan, meanwhile, has been grappling with the growing presence of Chinese automakers in overseas markets. Japanese automakers held around 12% of Europe's passenger vehicle market share in the first quarter of 2026, up from just 3% four years earlier, according to Counterpoint Research.

Chinese automakers expanded their share from 3% to 16%, largely at the expense of European, South Korean, and US rivals.

The pressure from Chinese players is particularly notable in the EV market. Chinese brands account for nearly 25% of Europe's EV shipments, while Japanese automakers make up just under 5%. Counterpoint Research predicts that Chinese brands will capture more than 20% of Europe's overall passenger vehicle market and 29% of its EV market by 2030, driven by China's broader edge in areas such as electrification, batteries, software, intelligent features, and supply-chain scale.