Chinese EV Illustration: Tang Tengfei/GT

Editor's Note:

Currently, China's economy is steadily advancing along the path of high-quality development, even as domestic and international circumstances become increasingly complex. Some Western media, due to misunderstanding or bias, have repeatedly questioned or even distorted China's economic development. Accordingly, the Global Times launches the "Q&A on China's Economy" column to publish opinion pieces to present facts and clarify perceptions.


Data shows that China's auto exports have maintained strong growth. In the first half of this year, China exported 6.14 million vehicles, up 66.8 percent year on year. New-energy vehicle exports reached 2.909 million units, surging 120 percent year on year. Yet some Western media continue to play the same discordant old tune, claiming that China's growth in automobile exports is driven by "overcapacity." This view not only misreads the underlying dynamics of the auto industry but also misinterprets the direction of changes in global market demand.

The rise of China's auto industry is, in essence, the result of a systemic shift from old growth drivers to new ones in the global auto industry. The conventional internal-combustion-engine vehicle market is now accelerating into a downward cycle, while new-energy vehicles, as a new growth driver, are experiencing explosive growth. The rapid increase in China's auto exports is simply a direct reflection of this structural transformation on the trade front.

Industrial economics has long shown that every industry goes through a cycle of development and evolution, from infancy and growth to maturity and decline, with the transition from old to new growth drivers running throughout the process. During such transitions, shrinking demand for traditional products and expanding demand for emerging ones both rise and fall in tandem. It is therefore inappropriate to determine whether an industry is "in overcapacity" based simply on fluctuations in aggregate output at any given point in time. Nobel laureate George Stigler's "survivor method" shows that more efficient firms continuously increase their market share while less efficient ones see their shares decline. This shifting distribution of market share is itself a test of the efficiency of capacity allocation.

The development of China's automobile industry is a clear reflection of the abovementioned rule. The fluctuations in the domestic auto market from January to July, alongside rapid export growth, are not merely changes in output and sales volumes but rather a period of profound transformation in industrial structure, product structure, market structure, and capital structure. In recent years, the penetration rate of new-energy vehicles (NEVs) in China rose from 5.34 percent in 2020 to 47.9 percent in 2025. In the first seven months of 2026, NEV penetration reached 51.2 percent, while the penetration rate of Level 2 advanced driver-assistance systems exceeded 70 percent, the highest in the world. The simultaneous withdrawal of outdated capacity and expansion of advanced capacity is a textbook case of the transition to new growth drivers - not "overcapacity" in the aggregate.

Historically, today's situation is hardly unprecedented. Following the two oil crises of the 1970s, fuel-efficient and durable Japanese cars became hugely popular in the US. Japan's auto exports soared from approximately 1.09 million vehicles in 1970 to 5.97 million in 1980, while exports to the US reached about 1.9 million vehicles in 1979, accounting for roughly 20 percent of the US new-car market. At the time, Detroit likewise denounced this as "dumping excess capacity" and pushed for trade restrictions. Yet such measures ultimately failed to stop the global auto industry's shift from large-displacement luxury vehicles toward economical, fuel-efficient models. Japanese cars remain mainstream vehicles in the US market to this day. Today, the protagonists have simply changed: China has taken center stage, and this time the new growth drivers are electrification and intelligent technologies.

The underlying logic of the transition from old to new growth drivers is equally clear. On the demand side, decarbonization pressures, fluctuations in energy prices, and growing consumer preferences for intelligent mobility are reshaping global consumers' car-buying decisions. On the supply side, many countries have been slow to transform their auto industries, while some major European and US automakers remain mired in losses in their EV businesses, missing the critical window of opportunity created by the market's explosive growth. Chinese automakers have stepped into this supply-demand gap, leveraging the world's most complete NEV supply chain, a global market share of more than 65 percent in power batteries, and faster product iteration cycles to offer overseas consumers competitiveness that comparable models at the same price point often struggle to match.

Ultimately, whether a country's auto production capacity is "excessive" should be determined by the global market's ability to absorb it. Global NEV penetration is still far from reaching its ceiling. The rapid growth of China's auto exports is clear evidence that this advanced production capacity is not "excessive"; rather, there is still a significant gap, and the world needs this capacity.

The transition from old to new growth drivers means replacing old economic drivers with new ones, or using new technologies to transform and upgrade traditional economic models. It inevitably involves a painful adjustment period in which outdated capacity is phased out while advanced capacity expands. Fluctuations in output and exports during this stage are a normal manifestation of the market mechanism optimizing the allocation of resources. In fact, in 2025, Chinese automakers' combined global sales approached 27 million vehicles, putting them in first place worldwide for the first time. If China's production capacity were truly "excessive," how could it continue to be absorbed by global markets and win the votes of consumers around the world with their hard-earned money?

The transition to new growth drivers in the auto industry is, in essence, a systemic upgrade - from "fuel tanks" to "batteries," and from "mechanics" to "intelligence." Rather than concocting the "overcapacity" narrative to "build walls and barriers," it would be better to optimize the international division of labor, expand markets and share innovation through openness and cooperation. After all, there is only one real measure of whether this transition has succeeded: whether people around the world can afford better cars that are better to drive. That is the consensus the entire industry should be working toward.