In the first decades of the PRC, China’s automobile production set off with an emphasis on commercial vehicles for industry and military purposes. The automobile industry in China did not gain momentum until the beginning of the 1990s. The rapid growth of the domestic market has also further accelerated the automobile industry in China. The number of newly registered passenger vehicles amounted to about 21.2 million units in 2015, which was more than five times of that in 2005.
China’s automobile market has attracted many well-established foreign brands to invest in their automobile production in China. However, most foreign brands are only allowed to produce their vehicles in China by establishing joint ventures with domestic automobile manufacturers. Due to technical development and lower production costs, several indigenous brands of China’s leading automobile manufacturers have also gained more and more popularity in the automobile market.
Facing fierce competition within their domestic market, Chinese car manufacturers are also looking for new markets overseas. While most vehicles manufactured in China are sold within China, manufactured vehicles for exports only contributed approximately 2.5 percent to the overall automobile production volume in China in 2016.
In order to promote NEV (new energy vehicle) sales, China has introduced various measures, such as tax exemptions, subsidies for car purchases and a requirement for government departments to buy more new energy cars, as a way to save energy and reduce air pollution. NEV manufacturers also received financial support from the government to reduce their R&D and production costs. China’s production of NEVs grew from about 17,500 units in 2013 to 517,000 units in 2016. The growth and emphasis on NEVs in China is not only a measure to reduce urban air pollution, but can also be seen as a way for Chinese automobile manufacturers to become globally competitive against traditional automobile manufacturers which specialize in internal combustion engines.