China’s Combustion-Engine Car Export Boom in Developing Countries

While Western markets focus on the threat posed by Chinese electric vehicles, a different challenge is reshaping the global automotive industry: the “boom” in China’s exports of combustion-engine cars to developing countries.

A Reuters investigation found that several Chinese carmakers, unable to sell their petrol vehicles in the domestic market because of the rapid growth of electric mobility, are flooding developing countries and markets with fossil-fuelled cars. In most cases, these vehicles are priced below foreign rivals. The countries most affected include those in Eastern Europe, Latin America and Africa.

From 2020 to 2025, petrol vehicles - excluding plug-in hybrids - accounted for around 76% of China’s automotive exports, with annual shipments rising from approximately 1 million to more than 6.5 million this year, according to Chinese consultancy Automobility.

Excess capacity driving China’s combustion-engine car exports

This surge is not accidental. Over recent decades, China has developed state-owned and private factories capable of building up to 20 million petrol cars annually, often through joint ventures with foreign brands. As the domestic electric-vehicle market has “boomed”, backed by generous government subsidies, many of these conventional production lines have become largely idle.

“This excess capacity is being redirected to the rest of the world,” said Bill Russo, chief executive of Automobility. State-owned companies including SAIC, BAIC, Dongfeng and Changan are using exports to maintain output and profits. Meanwhile, their overseas partners, including Volkswagen, General Motors and Nissan, are experiencing sharp sales declines.

“The fact that we are state-owned is key,” said Jelte Vernooij, Dongfeng’s manager in Europe, identifying Chinese government backing as the main reason Chinese brands can survive even as the domestic petrol-car market declines.

Effects on emerging markets

China’s expansion is placing pressure on established global brands. In countries such as Uruguay and Chile, Chinese petrol cars already substantially outnumber electric models, reinforcing the strategy of using domestic overcapacity. Mexico is now the biggest destination for Chinese exports, although it recently raised import tariffs on Chinese cars from 20% to 50%.

According to Nic Thomas, Changan’s European marketing director, choosing fossil-fuel vehicles for export is a pragmatic move: “We can tailor our offering to each market. These are the easiest cars to sell in markets where electric-vehicle infrastructure is still limited.”

Outlook for the coming years

Consultancy AlixPartners forecasts that Chinese manufacturers’ annual sales beyond their home market will grow to around four million vehicles by 2030, gaining significant shares in South America, the Middle East, Africa and South-East Asia.

Chinese companies are expected to control 30% of the global automotive industry within five years. “This growth will come at the expense of everyone else,” warned Stephen Dyer, AlixPartners’ co-lead in China.