Chinese Automakers Set to Overtake Japan in Global Sales in 2025

A lead of 8 million vehicles disappears in three years

Chinese automakers are projected to sell about 27 million vehicles worldwide in 2025, overtaking Japanese manufacturers for the first time and ending more than two decades of Japanese leadership. Forecasts based on automaker disclosures and S&P Global Mobility data put Japanese sales at just under 25 million vehicles.

As of December 30, those figures remain projections for the year. They point to a reversal that has taken only three years: Japanese manufacturers led their Chinese competitors by roughly 8 million vehicles in 2022. Japan has held the leading position since the early 2000s, with sales reaching a peak of nearly 30 million in 2018.

China became the world's largest vehicle exporter in 2023. The expected sales milestone in 2025 extends that rise from cars shipped abroad to the worldwide sales of its manufacturers, supported by a huge domestic market and an expanding presence overseas.

Two changes are driving the shift at the same time. Chinese buyers are moving rapidly toward electric vehicles and plug-in hybrids, helping domestic manufacturers build scale and reduce costs. Outside China, many of the same manufacturers are winning customers with gasoline vehicles, especially in countries where charging networks remain limited.

Japanese manufacturers face pressure across both markets. Their continued focus on conventional hybrids has left them trailing Chinese competitors in the move toward full electrification and intelligent connectivity, including software and connected services inside vehicles.

China's home market supplies the foundation

China's domestic market accounts for roughly 70% of total sales by Chinese automakers. That gives manufacturers a large customer base, revenue to support development and a place to refine vehicles before taking them overseas.

Government promotion of new energy vehicles, including vehicles powered entirely by batteries and plug-in hybrids, has helped those technologies reach nearly 60% of passenger car sales in China. A plug-in hybrid combines an engine with a battery that can be charged from an external power supply.

Chinese output of new energy vehicles is approaching 15 million units in 2025. Manufacturing at that volume allows companies to spread the fixed costs of factories, engineering and development across more vehicles. The resulting economies of scale help lower costs for batteries, software and production.

Lower costs give Chinese manufacturers room to compete on price while maintaining margins. That puts pressure on manufacturers in Japan, Europe and the United States, which must compete with vehicles developed and produced through China's large industrial network.

Cui Dongshu, secretary-general of the China Passenger Car Association, has described the change as structural rather than temporary. He identified China's established industrial chain and clear technological pathways as central reasons domestic brands have steadily gained market share.

China's pursuit of both battery electric vehicles and plug-in hybrids gives manufacturers more than one way to reach buyers. Its domestic market also serves as a testing ground for technology and business models, helping companies prepare for expansion abroad.

Why gasoline vehicles dominate the export push

Gasoline vehicles remain central to China's overseas expansion, even as electric vehicles reshape its home market. Consultancy Automobility calculates that vehicles powered by fossil fuels have accounted for 76% of Chinese auto exports since 2020.

Annual vehicle shipments have risen from about 1 million to a likely total of more than 6.5 million in 2025. Western governments have focused much of their response on subsidized Chinese electric vehicles, introducing tariffs to protect domestic manufacturers. Much of China's export growth, however, involves gasoline vehicles that have lost favor with buyers at home.

Beijing's support for scores of electric vehicle manufacturers helped fuel intense price competition. Alongside the shift in demand, that left assembly lines capable of producing as many as 20 million gasoline vehicles annually sitting idle.

Automobility chief executive Bill Russo said that excess capacity is now being directed toward the rest of the world. Manufacturers are seeking customers overseas for vehicles that have become harder to sell in China.

Foreign automakers including Volkswagen, General Motors and Nissan have suffered as government policies and competition transformed the Chinese market. The pressure now extends beyond China, as local manufacturers take their products into countries where those foreign companies have long operated.

State companies turn outward as partnerships weaken

SAIC, BAIC, Dongfeng and Changan are among the large state owned manufacturers driving the export push. Historically, these companies depended on joint ventures with foreign automakers for profits and engineering expertise. Those partnerships now face falling sales in China.

SAIC-GM illustrates the scale of the decline. Its annual sales in China fell from more than 1.4 million vehicles in 2020 to 435,000 in 2024. Over the same period, SAIC's annual exports rose from nearly 400,000 to more than 1 million.

Exports give these manufacturers a way to offset weakness in their domestic partnerships. They are also bringing them into closer competition with their foreign partners in markets that those partners once dominated.

Dongfeng exported nearly 250,000 vehicles in 2024. Those sales became critical as its China partnerships with Honda and Nissan entered a downward spiral. Jelte Vernooij, Dongfeng's Central Europe manager, said the company's ambition to become like Toyota meant pursuing every market opportunity.

The milestones behind the wider shift stretch across several years:

• 2018: Japanese automakers reached a sales peak of nearly 30 million vehicles.
• 2020: China's annual vehicle exports stood at about 1 million, while SAIC-GM sold more than 1.4 million vehicles in China.
• 2022: Japanese manufacturers still led Chinese automakers in worldwide sales by roughly 8 million vehicles.
• 2023: China became the world's largest vehicle exporter.
• 2024: SAIC-GM's China sales fell to 435,000, while SAIC exported more than 1 million vehicles.
• 2025: Chinese manufacturers are projected to sell about 27 million vehicles worldwide, ahead of Japan's total of just under 25 million.

Affordable cars find buyers beyond the wealthiest markets

Chinese manufacturers are adjusting their vehicles to local conditions. In markets where charging infrastructure is scarce, gasoline cars are easier to sell than vehicles that depend on regular charging.

Nic Thomas, Changan's European marketing director, said the company fine tunes its range for each market. That approach allows manufacturers to pursue customers across countries with different incomes, transport needs and charging networks.

Felipe Munoz, an auto analyst at JATO Dynamics, said established automakers had been caught sleeping. While global manufacturers concentrated engineering and marketing resources on the wealthiest markets, Chinese companies introduced affordable vehicles across the developing world.

Those Chinese exports often have better safety features and software than the older models offered by established competitors. Munoz identified emerging markets, rather than Europe or the United States, as the main arena of competition.

Eastern Europe, Latin America and Africa show how widely that contest is spreading. In Poland, 33 Chinese brands have launched sales since 2023. In Chile, Chinese manufacturers have captured almost one-third of the market, mainly through vehicles with internal combustion engines.

South Africa offers a particularly sharp comparison. Chinese automakers held nearly 16% of its car market in the first half of 2025, up from 10% a year earlier. They sold nearly 30,000 gasoline vehicles, compared with just 11 electric vehicles.

Those figures show why manufacturers continue to invest in gasoline exports while expanding electric vehicle production. Their home market and overseas markets are buying different mixes of vehicles, giving companies reasons to maintain both.

Mexico becomes a major market and a trade pressure point

Mexico has become China's largest vehicle export destination. Chinese automakers are expected to finish 2025 with sales exceeding 200,000 vehicles and a market share of 14%, gaining ground at the expense of brands including Fiat, Ford and Chevrolet.

The expansion has caused concern in the United States, where trade barriers effectively exclude vehicles from Chinese brands. Mexico's position has prompted fears that it could become an indirect route into the American market.

Mexico raised tariffs on Chinese cars from 20% to 50% in September. The move aimed to protect jobs and ease concerns in Washington as Chinese manufacturers increased their share of Mexican sales.

For Chinese companies, Mexico combines strong sales opportunities with growing political pressure. Their expansion is taking place in a market where governments are weighing vehicle prices and consumer choice against employment and domestic manufacturing.

Russia, South Africa and Europe tighten the terms

Russia has also moved to raise the cost of imports after rapid gains by Chinese manufacturers. Chinese brands increased their market share from 21% in 2022 to 64% in 2024. Russia subsequently doubled fees on Chinese imports to $7,500.

South Africa has encouraged Chinese automakers to build factories locally while threatening tariffs to restrict cheap imports. Its response reflects an effort to attract manufacturing investment while protecting its existing production base.

Europe presents a different challenge. The European Union has imposed additional import tariffs on electric vehicles made in China. Chinese manufacturers have responded by increasing the share of plug-in hybrids in their exports, because those vehicles are outside the same additional duties.

Sales of Chinese vehicles in Europe are expected to reach around 2.3 million in 2025. Manufacturers are adapting the types of vehicles they sell as trade rules change, using the range of technologies developed for their domestic market.

Mexico's tariffs, Russia's fees, South Africa's pressure for local factories and Europe's electric vehicle duties show the variety of responses facing Chinese companies. Expansion increasingly requires decisions about where to produce vehicles as well as which models to sell.

Established automakers respond with confidence and cooperation

Global manufacturers acknowledge the competitive threat, although their responses differ. Alexander Seitz, Volkswagen's South America chief, expressed confidence, saying he did not fear Chinese companies and respected them as competitors welcome to enter the market.

Volkswagen is also looking to export vehicles built in China to more overseas destinations. That would allow the company to use the cost advantages available from production there as it competes internationally.

General Motors and Hyundai announced in August that they would jointly develop cars for South America to reduce costs. Cooperation offers them a way to share development work as Chinese manufacturers put more pressure on prices.

Stellantis chief executive Antonio Filosa said his company would concentrate on vehicles produced locally and suited to local tastes in markets including the Middle East and Africa. That approach puts manufacturing location and customer preferences at the center of its defense of market share.

These responses reflect different ways to compete with China's scale: using Chinese production, sharing vehicle development or building locally for particular customers. Established manufacturers are confronting rivals that can compete through price, equipment and a broad choice of power systems.

The contest extends beyond the 2025 sales ranking

Consultancy AlixPartners forecasts that annual sales outside China by Chinese automakers will grow by 4 million vehicles by 2030. It expects those companies to secure large shares of markets in South America, the Middle East, Africa and Southeast Asia.

Including expected growth within China, Chinese manufacturers are projected to control 30% of the global auto industry in five years. Stephen Dyer of AlixPartners said that growth would come at the expense of all other competitors.

The forecast extends the pattern visible in 2025: domestic scale supports overseas expansion, while overseas sales provide an outlet for factories and products facing tougher competition at home. Electric vehicles and gasoline vehicles play different roles within that expansion.

The shift also reaches the companies supplying automakers. As China strengthens its position, investor attention is likely to move toward parts of the supply chain with the strongest demand and ability to command prices, including batteries, materials and power electronics.

Power electronics manage the flow and conversion of electricity within a vehicle. Alongside batteries and materials, they form part of the industrial base supporting the transition in vehicle technology.

Competition is becoming a race over production scale, data and manufacturing speed. Standards for batteries, charging and software inside vehicles are emerging as another major contest, extending the importance of market leadership beyond the number of cars sold.

The projected 2025 ranking brings those changes together. China's manufacturers are approaching first place through a combination of electric vehicle growth at home, gasoline exports abroad and the ability to adjust products to different markets. Japanese and other established automakers are responding as that competition spreads across regions and technologies.

The Bottom Line

• Chinese automakers are projected to sell about 27 million vehicles globally in 2025, ahead of Japanese manufacturers at just under 25 million.
• Japan led China by roughly 8 million vehicles in 2022 and has held first place since the early 2000s.
• China's domestic market accounts for roughly 70% of Chinese automakers' sales, while new energy vehicles represent nearly 60% of passenger car sales there.
• Vehicles powered by fossil fuels have accounted for 76% of Chinese auto exports since 2020. Total annual exports are likely to exceed 6.5 million in 2025.
• SAIC, BAIC, Dongfeng and Changan are pursuing exports as their domestic partnerships with foreign manufacturers face pressure.
• Chinese brands are gaining customers across Latin America, Africa and Eastern Europe, often with affordable gasoline vehicles.
• Mexico and Russia have raised import costs, Europe has added duties on electric vehicles made in China, and South Africa is pressing for local production.
• AlixPartners projects 4 million additional annual sales outside China by 2030 and a 30% global industry share for Chinese manufacturers, including growth at home.