For the first time in history, Chinese electric car companies are set to invest more abroad than at home in 2024, even as overseas projects face higher costs, delays and risks, Bloomberg reported.
According to a study published on Monday by research firm Rhodium Group, Chinese companies invested about $16 billion abroad last year along the electric car supply chain, mainly for battery production, more than the $15 billion they invested domestically. These figures highlight a “historic shift” after several years in which they directed about 80% of their investments domestically, Rhodium Group analysts said, according to Agerpres.
Chinese companies are being forced to expand globally as overcapacity and local price wars have squeezed profit margins along the supply chain. They also want to avoid high tariffs in Europe and the United States by locating production facilities there, and to meet foreign customers’ demands for more localized production.
“The fact that overseas investment is now outpacing domestic investment reflects how saturated the Chinese market is and the appeal of expanding overseas for higher profits,” said Rhodium chief analyst Armand Meyer.
About three-quarters of the overseas investment has been by Chinese battery makers, a testament to the industry’s high capital consumption. Major battery makers such as Contemporary Amperex Technology Co. Ltd., Envision Group and Gotion High-Tech Co. have decided to follow their existing customers, such as Tesla Inc. and BMW AG, overseas, due to high transportation costs and demands for more localized supply.
CATL, the largest maker of electric car batteries, said in June it would make overseas expansion its “number one priority” as fierce competition in the Chinese auto market threatens the health of the industry.
BYD, China’s largest electric car maker, has plants in Brazil and Thailand and plans to build additional facilities in Turkey and Indonesia. Chery Automobile Co. has also pledged to invest $1 billion to build a plant to assemble electric cars in Turkey.
Analysts say overseas projects tend to be more expensive, take longer to build and face greater political and regulatory risks. Only 25% of overseas electric vehicle production projects announced so far have been completed, compared with 45% for domestic investments, the report by analysts at Rhodium Group said.
However, the international expansion of Chinese electric vehicle manufacturers and their suppliers will face future developments such as uneven global demand for battery-powered vehicles and negative reactions in markets such as the European Union. At the same time, Chinese companies must also comply with concerns from officials in Beijing about technology transfer and job losses, which could lead to stricter controls on overseas investment.