December 30, 2025

China Overtakes Japan to Become the World’s Top Automaker in 2025

Price-Competitive EVs Propel China to the Top

Chinese automakers are set to become the world’s largest sellers of new vehicles in 2025, ending more than two decades of Japanese dominance in global auto sales. Total sales by Chinese brands are forecast to reach around 27 million units, a 17 percent increase from the previous year. Japanese manufacturers, once the undisputed leaders, are expected to slip to second place with just under 25 million units, even as they continue to outperform the United States.

This rapid ascent reflects China’s long-term industrial strategy centered on electrification. Backed by government incentives, domestic manufacturers now account for roughly 70 percent of vehicle sales in their home market. New energy vehicles, including EVs and plug-in hybrids, already make up close to 60 percent of passenger car sales in China. The scale of domestic demand has enabled manufacturers to cut costs aggressively, build vast production capacity, and introduce new models at a speed few rivals can match.

Yet success has brought new challenges. The Chinese market is increasingly characterized by oversupply and relentless price competition. Industry leader BYD has repeatedly cut prices, pushing the entire market downward. According to the China Association of Automobile Manufacturers, most new energy passenger cars sold between January and November were priced around 2 million yen, with the most common band, 100,000 to 150,000 yuan, accounting for 23 percent of total sales. Profit margins are thinning, forcing companies to seek new growth opportunities abroad.

Trade Barriers Rise as Chinese Exports Flood Global Markets

As domestic competition intensifies, Chinese automakers are rapidly expanding exports in what some countries describe as “deflationary exports,” shipping surplus low-priced vehicles overseas. The impact is already evident across multiple regions. In ASEAN, where Japanese brands long dominated, Chinese vehicle sales are expected to surge 49 percent to about 500,000 units. In Thailand, Japanese cars represented 69 percent of new sales as of November, down sharply from around 90 percent five years ago.

Europe is also seeing an influx of Chinese models, with sales projected to rise 7 percent to roughly 2.3 million units. Although the European Union has imposed additional tariffs on Chinese-made EVs, plug-in hybrids remain exempt, and their export share is climbing quickly. Growth is accelerating in emerging markets as well, with sales forecast to increase 32 percent in Africa to 230,000 units and 33 percent in Latin America to 540,000 units.

This expansion has triggered a strong protectionist response. The United States and Canada now impose tariffs exceeding 100 percent on Chinese EVs, while the EU has introduced duties of up to 45.3 percent. Brussels is also preparing new standards for small EVs with lighter technical requirements, encouraging production within Europe and further strengthening barriers against low-cost imports.

Japanese Automakers Face Strategic Crossroads

Japanese automakers are struggling to defend their traditional strongholds. Their share has eroded in China, Southeast Asia, and parts of Europe, exposing delays in electrification and a loss of cost competitiveness. In response, they are increasingly adopting Chinese-style production methods. Nissan has begun exporting low-cost EVs developed under China-led initiatives, while Toyota is expanding procurement from Chinese parts suppliers in Southeast Asia to improve its pricing power.

Looking ahead, competition is likely to intensify further. By 2026, the gap between Chinese and Japanese manufacturers may widen again, making it difficult for any single automaker to compete with the combination of scale, speed, and pricing that Chinese firms now command. The global auto industry is entering a period of restructuring in which China’s rise as an automotive superpower will reshape not only markets but also trade relations worldwide.