Chinese EV Companies Shift Focus Abroad Amid Domestic Overcapacity and Tariffs

Chinese EV companies invested $16 billion overseas in 2022, mostly in battery production, exceeding the $15 billion spent domestically. This marks a shift from directing 80% of investment domestically in previous years. Overseas projects face higher costs, delays, and risks due to factors such as uneven global demand and pushback in markets like the EU. Despite these challenges, companies are expanding abroad to skirt tariffs, bow to pressure from foreign customers, and seek higher returns.

Chinese electric vehicle (EV) companies have shifted their investment strategy, with a significant increase in overseas spending in 2022. According to a report by the Rhodium Group, Chinese EV companies invested approximately $16 billion abroad, primarily in battery production, surpassing the $15 billion spent domestically. This marks a historic shift from the previous trend of directing around 80% of investment domestically [1].

The report highlights several key drivers behind this change. Overcapacity and a long-running price war in the Chinese market have squeezed margins across the supply chain, prompting companies to expand globally. Additionally, Chinese firms are seeking to skirt punishing tariffs in Europe and the US by building production facilities there and responding to pressure from foreign customers for more localized production [1].

Major battery makers like Contemporary Amperex Technology Co. Ltd. (CATL), Envision Group, and Gotion High-Tech Co. have followed existing clients like Tesla Inc. and BMW AG abroad, driven by high transport costs and requests for localized supply [1]. CATL, the world's largest EV battery maker, has prioritized overseas expansion as intense competition in China's domestic auto market threatens the industry's health [1].

However, overseas projects tend to be more expensive, take longer to build, and face higher regulatory and political risks. Only 25% of EV manufacturing projects announced abroad have been completed, compared to a 45% completion rate at home [1]. For instance, BYD Co., China's top-selling automaker, indefinitely shelved plans to build a major plant in Mexico due to geopolitical tensions and uncertainty stemming from US President Donald Trump's trade policies [1].

Despite these challenges, Chinese firms are expanding abroad to seek higher returns and manage the dynamics of uneven global demand for battery cars. They also need to contend with pushback in markets such as the EU and manage Beijing's increasing concern over technology transfer, job losses, and industrial hollowing out that could lead to tighter controls on outbound investment [1].

Meanwhile, Nio, a prominent Chinese EV maker, is on track to achieve profitability in the fourth quarter of 2022. The company's founder and CEO, William Li, attributed this progress to years of heavy investment in research, infrastructure, and product development. Nio is targeting monthly deliveries of 25,000 units for its main brand and an additional 25,000 for its Onvo sub-brand. The company has also pledged tighter cost discipline and is doubling down on infrastructure, such as its battery-swapping network, though it remains behind schedule on its 2025 goal of up to 2,000 stations [2].

References:
[1] https://www.bloomberg.com/news/articles/2025-08-18/china-ev-sector-invests-more-abroad-than-at-home-for-first-time
[2] https://finance.yahoo.com/news/nio-ceo-says-ev-maker-125814585.html