The Booming Overseas Market, Can It Offset the Deficit in the Domestic Market?

On July 20, at the largest foreign trade port of the Yangtze River -- Taicang Port, a ro-ro ship loaded with over a thousand domestically produced cars sounded its horn and set sail for overseas markets.

Such scenes occurred 192 times here in the first half of the year, with an average of 7 ro-ro ships leaving the port weekly and 2.5 cars exported per minute. According to Taicang Customs data, from January to June 2026, nearly 650,000 vehicles were exported from the Taicang port to 166 countries and regions worldwide, setting a historic record. This is equivalent to 1 out of every 8 cars exported from China departing from Taicang Port.

The busyness of Taicang Port is just a microcosm. According to China Association of Automobile Manufacturers data, total vehicle exports reached 5.096 million units in the first half of the year, a year-on-year increase of 65.3%, marking the first time the half-year export volume broke the 5 million unit threshold. June's single-month exports reached 1.037 million units, a year-on-year increase of 75.1%, also breaking the 1 million unit threshold for the first time. Customs General Administration data shows automotive export value reached $91.8 billion in the first half of the year, a year-on-year increase of 54%.

However, at the same time, cumulative domestic car sales dropped significantly by 21.1% year-on-year to 9.921 million units. Converted, this means an average of 12,000 fewer cars sold per day compared to last year.

Amidst this contrast of cold and heat, the Chinese auto industry stands at a crossroads never seen before.

Sales Deceleration: 600 New Models in Half a Year, 10,000 Fewer Sales Per Day

Domestic sales in the first half fell by 20%, with the fuel-powered vehicle market hit hardest. Traditional fuel passenger car domestic sales in the first half were 3.694 million units, a year-on-year decrease of 1.732 million units, down 31.9%; June's single-month traditional fuel passenger car domestic sales were nearly "halved" year-on-year, down 49.9%.

More alarming than the sales decline is the collapse of profits. Now in the fourth year of price wars, corporate profits have been compressed to the limit. CAAM data shows the average profit margin in the vehicle manufacturing sector fell to 1.5% in the first half, the lowest in nearly a decade. Calculated on this basis, for a new car priced at 200,000 yuan, the vehicle manufacturer's net profit is only 3,000 yuan. Some manufacturers are even operating at a loss, facing the dilemma of losing money on every unit sold.

The cold chill on the demand side sharply contrasts with the heatwave on the supply side. According to industry statistics, approximately 630 new car models were launched domestically in the first half, averaging more than 3 per day. BYD Executive Vice President He Zhiqi explicitly stated on social media on July 14 that it is "completely crazy." He shared internal statistics charts showing that the Chinese market launched a cumulative total of 542 new car models from January to May.

Investment costs often exceed 1 billion with development cycles over 2 years, yet market enthusiasm lasts no more than 3 months after launch. New model lifecycles have compressed from "annual basis" to "monthly basis", with joint ventures and independent brands, new forces and traditional giants clashing in every sub-market.

Under the inverted supply and demand, listed car companies collectively flashed red on their semi-annual reports. From the beginning of the year to date, the A-share automotive complete vehicle sector accumulated a drop of 27.87%, evaporating nearly 900 billion yuan in half a year; the HK stock new energy vehicle sector accumulated a drop of 23.78%; in the first half of 2026, none of the 16 mainstream car manufacturers exceeded a 50% sales target completion rate.

On July 15, the CAAM joined forces with 18 mainstream car manufacturers to release the first set of domestic vehicle cost calculation rule standards, attempting to draw a bottom line for disorderly competition. However, the collective anxiety of "iterate or perish" continues to spread, with no company daring to hit the brakes first, as the party that slows down first will likely be the first to endure the pain of accelerating sales decline.

It can be said that the competition in the Chinese auto market has fully transitioned from a "ranking race in the growth era" to a "survival race in the stock era".

Surge Overseas: Significant "Temperature Difference" in Global Markets After 5 Million Units

In sharp contrast to the chill in the domestic market, overseas markets are surging forward with the momentum of burning oil.

Consulting firm AlixPartners predicts that China's automotive export volume will increase to nearly 10 million units in 2026, a significant rise from 7.1 million units in 2025, marking the highest annual export record for a single country in human history. Among them, new energy vehicles have become the biggest engine for export growth. In the first half of this year alone, new energy vehicle exports reached 2.355 million units, a year-on-year increase of 1.2 times, meaning that for every two Chinese cars exported, one is a new energy vehicle.

Some say: Under the pressure of the domestic market, going overseas has become a practical choice for more and more car companies; car exports are turning into a gamble with no way back. However, on the other side of these impressive numbers, high walls are being built in global regional markets.

The United States has already closed its market to Chinese cars, with Europe following closely, building high walls with regulatory tools. After the EU anti-subsidy tariff on Chinese pure EVs plus a 10% base tariff, the total can reach up to 45.3%. The "Minimum Price Commitment" mechanism agreed upon in January 2026 has caused Chinese car companies to lose the cost-performance card; they must prove premium capability in software, design, and service. In March 2026, the EU submitted the "Industrial Accelerator Act," adding layers of clauses such as foreign equity share not exceeding 49%, mandatory technology transfer, and prioritizing "EU Origin" in public procurement. Anti-subsidy tariffs will also expand from pure EVs to plug-in hybrids. Experts judge that Europe will become the next overseas market to close to Chinese cars after the United States.

Southeast Asia follows a different logic, with the path of "sell cars first, build factories later" blocked by policy. Thailand's EV3.5 policy clearly requires a link between imported complete vehicles and local production capacity ratios; for every 1 imported vehicle, 2 must be produced locally; starting July 2026, Malaysia requires the CIF price of imported electric vehicles not to be lower than 330,000 yuan; Indonesia requires a localization rate of at least 40% in 2026.

South America is also erecting barriers. Since July 1, 2026, Brazil has uniformly raised tariffs on all imported electric vehicles to 35%, canceling the special low tax rates previously enjoyed by SKD and CKD semi-knocked-down assembly kits. Argentina levies a 35% tariff on imported complete vehicles while implementing foreign exchange controls.

As tariff barriers, data compliance, and localization production thresholds continue to rise, the path of Chinese car companies going overseas is filled with uncertainty.

When the old domestic path of "exchanging price for volume" reaches its end, the new overseas path of "exchanging space for time" is filled with thorns. Chinese car companies are facing a set of multiple-choice questions with no standard answers: How to stabilize the basic domestic sales market? How to make overseas growth sustainable? Can the booming overseas market truly offset the deficit in the domestic market?

On August 21, the "2026 Automotive Pioneer Thinking Salon", guided by the Automotive Branch of the China Council for the Promotion of International Trade and organized by the Chengdu International Auto Show Organizing Committee and Auto Observer, has broadly invited industry experts to provide in-depth interpretation and sharing. Stay tuned.