Automotive industry in China
The automotive industry in China has been the largest in the world measured by automobile unit production since 2008., China is also the world's largest automobile market both in terms of sales and ownership.
The Chinese automotive industry has seen significant developments and transformations over the years. While the period from 1949 to 1980 witnessed slow progress in the industry due to restricted competition and political instability during the Cultural Revolution, the landscape started to shift during the reform and opening up period that started in the late 1970s, especially after the government's seventh five-year plan between 1986 and 1990 prioritized the domestic automobile manufacturing sector. The entry of China into the World Trade Organization in 2001 further accelerated the growth of the automotive industry. Tariff reductions and increased competition led to a surge in car sales, with China becoming the largest auto producer globally in 2008. Foreign investment and joint ventures played a crucial role in attracting foreign technology and capital into China. American Motors Corporation and Volkswagen were among the early entrants, signing long-term contracts to produce vehicles in China. This led to the gradual localization of automotive components, and the strengthening of key local players such as SAIC, FAW, Dongfeng, and Changan, collectively known as the "Big Four". Strategic initiatives and industrial policy such as Made in China 2025 specifically prioritized electric vehicle manufacturing.
In the 2020s, the automotive industry in mainland China has experienced a rise in market dominance by domestic manufacturers and a shrinking market share for foreign car brands, with a growing focus on areas such as electric vehicle technology and advanced assisted driving systems. The domestic market size, technology, and supply chains have also led foreign carmakers to seek further partnerships with Chinese manufacturers. Due to rapid advancements by Chinese companies, China's automotive industry is regarded as one of the most competitive and innovative in the world. In 2023, China overtook Japan and became the world largest car exporter. In 2025, Chinese automobile companies overtook Japanese companies in global vehicle sales to become the world's largest sellers of vehicles. The industry also faced heightened scrutiny, increased tariffs and other restrictions from other countries and trade blocs, especially in the area of electric vehicles due to allegations of significant state subsidies and Chinese industrial overcapacity.
History
The first automobile in China was purchased from Hong Kong in 1902 by Yuan Shikai and gifted to Empress Dowager Cixi. It was later put on display in the Summer Palace Museum. During the early twentieth century, major western automobile manufacturers such as the Ford Motor Company, General Motors, and Mercedes-Benz had plants operating in Shanghai.However, the Second Sino-Japanese War hampered the progress of the Chinese auto industry, as seen by the relocation of the Changan Automobile factory from Shanghai to Chongqing in the wake of the city's bombing and attack. After the foundation of the People's Republic of China in 1949, plants and licensed auto design were established in China with assistance from the Soviet Union in the 1950s, marking the beginning of the country's automobile sector. However, the Chinese automotive industry did not exceed 100–200 thousand automobiles produced per year during the first 30 years of the PRC.
China's annual automobile production capacity first exceeded one million in 1992. By 2000, China was producing over two million vehicles. After China's entry into the World Trade Organization in 2001, the development of the automobile market accelerated further. Between 2002 and 2007, China's national automobile market grew by an average 21 percent, or one million vehicles year-on-year. In 2009, China produced 13.79 million automobiles, of which 8 million were passenger cars and 3.41 million were commercial vehicles and surpassed the United States as the world's largest automobile producer by volume. In 2010, both sales and production topped 18 million units, with 13.76 million passenger cars delivered, in each case the largest by any nation in history. In 2017, total vehicle production in China reached 28.879 million, accounting for 30.19% of global automotive production. In the first half of 2023, China overtook Japan to become the world's largest exporter of automobiles, exporting 2.34 million vehicles compared to 2.02 million for Japan. In 2025, Chinese automobile companies overtook Japanese companies in global vehicle sales to become the largest sellers of vehicles worldwide; Japan had maintained its leadership for over two decades.
, China is the world's largest market both in terms of automobile sales and ownership.
Early industrialization (1928–1949)
The first Chinese-built motor vehicle was a truck called the Minsheng 75 truck . It was designed by Daniel F Myers, and a prototype was made at the Liao Ning Trench Mortar Arsenal, Shenyang. The prototype was completed on May 31, 1931, for Zhang Xueliang. Prior to production commencing, the factory was bombed during the Japanese invasion of Manchuria and production never commenced. A fellow general, Yang Hucheng, patronized the inventor Tang Zhongming to make a new type of automobile engine powered by charcoal. In 1932 Tang founded the Chung Ming Machinery Co. Ltd. in Shanghai to produce the engines. Charcoal-powered vehicles were mainly used during the Second Sino-Japanese War because of fuel shortages. Tung oil was also used during the war as a petroleum substitute. The number of automobiles in China had been growing steadily which was close to 70,000 vehicles in 1937. However, due to the war, car ownership volume plummeted to 16,000 in 1940, which was only 23.8% of 1937. It was not until 1947 that car ownership volume returned to pre-war levels.After the establishment of the People's Republic of China (1949–1980)
The development of the Chinese automobile industry following the Chinese Communist Revolution was relatively slow due to the lack of free market competition and the turbulence of the Culture Revolution. Except for a degree of development in the 1950s with assistance from the Soviet Union, the Chinese automobile industry remained closed and lagging behind until the period of reform and opening up under Deng Xiaoping. Most domestically produced vehicles were primarily the Jiefang trucks for military or industrial departments and the Hongqi sedans used by a limited number of government officials. The concept of private cars had not yet emerged in China during this period.Several vehicle assembly factories were set up in the 1950s and 1960s. They were Beijing, Shanghai, Nanjing, and Jinan. The Second Automobile Works was founded in 1968.The first Chinese production vehicles were trucks made by the First Automotive Works in 1956, called the Jiefang CA-10. This was followed on March 10, 1958, by the 2½ ton light duty truck, which was based on the Russian GAZ-51, was produced in Nanjing. The truck was named Yuejin by China's First Ministry of Industrial Machinery.
In June 1958, the Nanjing Automobile, previously a vehicle servicing unit of the People's Liberation Army, began making China's first domestically produced light-duty trucks. Production continued until the last truck rolled off the assembly line on July 9, 1987. Cumulative production was 161,988 units. The first production automobiles were the Dongfeng CA71, Hongqi CA72, Feng Huang all from 1958.
Changan Automobile traces its origins back to 1862 when Li Hongzhang set up a military supply factory, the Shanghai Foreign Gun Bureau. It was not until 1959 when the factory was repurposed to manufacture Changjiang Type 46 jeep that it became an automobile manufacturer.
Economic reform (1980–2000)
The passenger car industry was a minor part of vehicle production during the first three decades of the People's Republic of China. As late as 1985, the country produced a total of only 5,200 cars. Cars were almost entirely purchased by danweis.Impact of foreign cars
As domestic production was very limited, import totals rose dramatically despite a 260 percent import duty on foreign vehicles. Before 1984, the dominant exporter of cars to China had been the Soviet Union. In 1984, Japan's vehicle exports to China increased sevenfold, and by mid-1985, China had become Japan's second biggest export market after the U.S. The country spent some $3 billion to import more than 350,000 vehicles in 1985 alone. Three taxi companies in particular imported many Japanese cars such as Toyota Crowns and Nissan Bluebirds.As this spending binge began to lead to a severe trade deficit, the Chinese leadership put on the brakes through the adjustment of import and foreign exchange policies. Customs duties on imported goods were raised in March 1985, and a new "regulatory tax" was added a little later. In September 1985, a two-year moratorium on nearly all vehicle imports was imposed.
Joint ventures
In July 1979, China adopted its first Law on Joint Venture Using Chinese and Foreign Investment. This law was effective in helping to attract and absorb foreign technology and capital from developed countries like the United States, facilitating China's exports to such countries and thereby contributing to China's subsequent rapid economic growth.While limiting imports, China also tried to increase local production by boosting the various existing joint venture passenger car production agreements, as well as adding new ones. In 1983, American Motors Corporation signed a 20-year contract to produce their Jeep-model vehicles in Beijing. The following year, Germany's Volkswagen signed a 25-year contract to make passenger cars in Shanghai, and France's Peugeot agreed to another passenger car project to make vehicles in the prosperous southern city of Guangzhou. These early joint ventures did not allow the Chinese to borrow much foreign technology, as knock-down kit assembly made up the majority of manufacturing activities; tooling may not have been allowed to slip past borders.
Until the late 1990s, there were eight joint venture enterprises in China producing passenger cars, including Shanghai Volkswagen, FAW-Volkswagen, Beijing Jeep, Guangzhou Peugeot, Dongfeng Citroën, Changan Suzuki, Changhe Suzuki, and Soueast Motor.