Automakers keep foot on the pedal in China

Global macroeconomic uncertainty led by rapidly shifting trade policy has infiltrated every corner of the globe in 2025, and the automotive sector is no exception. And while a softening in tone between China and the United States has somewhat shifted the narrative, it will take a while for many participants to return to top gear.

But there were few signs of diminishing confidence in the sector’s prospects at the 21^st Shanghai International Automobile Industry Exhibition in April, when tariff concerns were at their peak. That confidence points to an exciting future for a market that still has room to grow.

By April, US tariffs on the automotive sector had yet to make a significant impact on the Chinese market, nor on original equipment manufacturers (OEMs) in the industry. Indeed, the US market makes up just 2 per cent of total Chinese automotive exports.

OEMs in China had been aware of the US tariff risks for some time before ‘Liberation Day’, and had been actively targeting alternative markets including Europe, South America, the Asia Pacific, the Middle East and Africa.

These businesses are making concerted efforts to better understand each of their export markets in order to design and manufacture vehicles attractive to local consumers. And Australian consumers are well within their sights.

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Australia is seen as a promising export target for Chinese automakers, given the economy’s close geographic and trade ties, as well as high levels of vehicle ownership. Chinese brands have accounted for roughly 16 per cent of all Australian vehicle sales in the year to April, according to VFacts, up from almost zero just a few years ago.

The Australian auto market has changed a lot over the past 75 years and continues to do so. Carmakers from the US, Europe, Japan and Korea have all had success in the market, and now China is racing ahead.

The next two to five years will be a critical period for the industry. Global trade shifts will create movement in sales between OEMs, and there will be winners and losers. Consumer expectations are high and there are risks for manufacturers who don't meet those expectations.

The Australian automarket has so far been largely immune to the trade wars, although as supply chains shift, competition could rise alongside imports. The supply shock seen during the pandemic period saw shifts in the market in favour of Chinese brands. It’s yet to be seen if that will be the case again in 2025.

For consumers, any increase in supply could mean lower prices, more extras and discounted finance, as existing players compete for market share. Whatever happens, it will be interesting to watch.

The show

Electric vehicles, or EVs, are still the star of the show. And the sector is in the spotlight amid an escalation in pricing competition from China’s BYD.

The Shanghai auto show, held at China’s National Exhibition and Convention Centre, saw a wide range of new EV and hybrid cars put on display alongside traditional vehicles. In attendance we saw the equivalent of around seven to eight football fields full of cars, including new models and technology.

^{A BYD/Denza [left] and VW model at the Shanghai International Automobile Industry Exhibition – PIC: Michael Kay}

China is a clear leader in the production and consumption of EVs, one of the fastest-growing spaces in the industry. More than 50 per cent of all new vehicles sold in China itself are EVs.

The recent market consolidation seen in the EV space was visible in Shanghai, with a lower number of brands visible than in previous years. Also on display were Nissan and GWM hybrid utility vehicles, which are expected to hit the Australian market soon.

Australia is proving a competitive market for EVs, particularly those produced in China. Recent data showed sales of Tesla vehicles fell 76 per cent in April, year on year, as BYD gained ground on its US-based rival.

This competitive landscape is likely to remain unchanged all around the world as the battle for market share heats up.

Winners

The winners of all of this, again, are consumers. Buyers are already spoilt for choice with models available at all price points. For many Chinese OEMs, the critical selling point is becoming the passenger experience, largely achieved through application of the latest technology for both comfort and entertainment.

In response, carmakers are installing features including large infotainment screens, karaoke, voice-activated AI assistance, massage chairs, projector displays and air purification tools, as well as advanced driver assistance systems.

This shift is quite different from consumers in markets such as the US, Europe and Australia, where states are more focused on the driver experience and appeal – including elements like performance and fuel efficiency. To take full advantage of these regional specificities, many OEMs are working with local partners where possible to adjust their strategy.

China’s dominance in the automaking space is such that in 2023, the economy became both the largest manufacturer, and consumer, of new passenger vehicles in the world. But the opportunity is not just restricted to China.

The automotive space is a sector rich with growth potential, has an export-led growth model, and is increasingly converging tech supply chains, particularly in the Asia Pacific. At ANZ, our unique footprint across the region gives us unparalleled expertise in the space. We’re well-placed to support participants right across the industry as companies continues to navigate through the tariff uncertainties

As the automotive sector continues to evolve, the opportunity is one that will only grow. As the rules of trade around the world are rewritten, now may be an ideal time to hit the accelerator.

Alfred Bae is Head of International Tech & Auto, and Michael Kay is an Executive Director at ANZ