Is Investing in the Chinese Automotive Industry a Good Idea?

China has stood as the largest automotive market in the globe for many years. For that reason, most carmakers from all parts of the world have been fighting for a share in the market. Further, the auto sector is among the key pillars of its economy and an important employer. It contributed around 9.6 percent of the total consumer goods retail sales. It also accounted for over 10 percent of the total employment.

Even though the local car manufacturers have dominated the market, the industry offers many opportunities for offshore investors. The demand for commercial and passenger vehicles is also high in the country. Keep reading to understand the industry and the opportunities it provides for foreigners.

A Close Look at the Chinese Auto Industry

The Chinese automobile industry has been growing very fast since the early 1990s. The number of trucks, buses, cars, and vans on the Chinese roads had increased from 62 million in 2009 to 250 million in 2019. The growth is unlikely to stop soon. Industry experts believe that the number of vehicles in China will have increased to 600 million in 2030. Most investors are working hard to fill the gap and offer auxiliary services.

Even more, the country has many large local car manufacturers including FAW, SAIC Motor, Chang’an, and Dongfeng. Many top multinationals are also working with local companies to meet the ever-increasing demand. A quick example, Honda Motors joined hands with Guangzhou Automobile Group and Volkswagen is working with Audi under the Volkswagen Group China.

Effects of Covid-19 on Chinese Automobile Market

The covid-19 pandemic affected almost every industry in China. The automobile industry was badly hit and it experienced a slowdown. In 2020, the monthly sales of new passenger cars stood at 1.3 million. That was around 23 percent lower than the number reported in the first half of 2019.

Fortunately, the market has shown signs of recovery and it might be the best time to invest there. Covid-19 pandemic promoted the electric car market. That accelerated the direction the auto market was taking.

Therefore, if you are considering investing offshore, the electric car market is worth your consideration. You do not have to be a car manufacturer to invest in the country. You can be a supplier too.

The Chinese Administration has Been Supporting Investors

The Chinese manufacturing niche has been growing rapidly. We can peg the growth on two factors. The factors are support from the Chinese administration and the ready market. The administration has been offering incentives to foreign investors.

A quick example, investors who locate their auto companies away from the free trade areas and coastal cities enjoy great tax reductions. That means that your profits will be higher if you establish your business away from the area.

 Many Bilateral Agreements

The large Chinese automobile market has influenced many foreign investors to establish their businesses in the country. China has also signed many bilateral trade agreements with Asian countries to allow expansion of businesses and that has attracted many foreign investors. Furthermore, it has signed free trade agreements with many countries like:

  • Georgia
  • Switzerland
  • Canada
  • Australia
  • Iceland
  • Pakistan
  • New Zealand

The Chinese automobile industry has many opportunities for foreign investors. Therefore, it is a good choice for potential investors. You can target the car production, parts production, supplies, or even export market. However, you will have to register your company in China before you start operations.

The company registration process can be lengthy and tedious. So, you might need the services of an agency of experts. The experts will help you complete the registration, and craft your business strategies. They will also help you with accounting, bookkeeping, and other executive functions.

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