Investing in the Chinese Auto Industry: Is it a Good Idea?


China is the globe's biggest auto market, which explains why every car maker worldwide is fighting to win local consumers. The auto sector is also one of the main pillars of the Chinese economy. Although there is a huge dominance of the local vehicles, the automotive industry remains one of the high-potential areas for offshore investors. Keep reading to learn more about the Chinese car industry and the main reasons why it is a great investment opportunity for foreigners. 

A Closer Look at the Auto Industry 

The automobile industry has been developing very fast in China since the 1990s. By 2009, the number of buses, trucks, vans, and cars on Chinese roads was 62 million and 250-million by 2019. The number is projected to grow and reach more than 600-million by 2030. This gap, plus auxiliary services, is the target that most investors are seeking to fill. 

The largest local car manufacturers in China are SAIC Motor, FAW, Dongfeng, and Chang’an. Other top multinationals have also partnered with local companies to try and meet the fast-growing demand.  For example, Honda Motors has a Joint Venture with Guangzhou Automobile Group while Volkswagen and Audi work under the Volkswagen Group China. 

The Chinese Auto Market is Rebounding

Following the outbreak of the COVID-19 pandemic, most industries in China, including the automobile, experienced a slowdown. However, the auto industry is already showing signs of recovery, and this might be a great moment to invest there. Indeed, COVID-19 boosted the electric car market, which only appears to accelerate the direction where the auto market was headed. 

Therefore, if you are looking forward to joining the industry, the electric car market niche is expected to grow immensely. Remember that you do not have to be a full car maker, but positioning your company as a supplier of major parts might also be a great idea.

AdvertisementBuild online presence with trusted marketing software (en)

Great Support from the Chinese Administration 

Taking a closer look at the Chinese market, you will realize that its manufacturing niche is growing rapidly. This is mainly pegged on two factors, a ready market and support from the central administration. The Chinese administration offers some incentives to foreigners investing in the country. For example, if you locate your auto company away from the coastal cities and in free trade areas, it will enjoy amazing tax reduction. This can go a long way ensure you keep the bulk of the profits. 

Multiple Bilateral Agreements  

For most foreign investors, the main motivation for opening companies in China is because of its large market. With a population of over one billion people, you are sure of a ready market. And you know what? China has signed a lot of bilateral trade agreements with most Asian countries to help businesses expand there. In addition, the country has signed free trade agreements with the following countries: 

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

This post has demonstrated that the automobile industry in China is a high potential niche for offshore investors. Therefore, if you have an interest in the industry, whether targeting the production of cars, parts, supplies, or exports, this can be a great niche. To take advantage of this high potential niche, you need to start by registering a company in China, and this can be pretty lengthy and tedious. So, consider working with an agency of experts for help with registration, crafting strategies for success, bookkeeping, accounting and other executive functions.