Qatar National Bank (QNB) confirmed that the current boom in Chinese electric vehicle exports reflects the success of China’s industrial strategy, but at the same time it reveals the growth challenges facing the sector as it exceeds the boundaries of the local market.
The bank explained, in its weekly report, that the future of the electric car sector will be increasingly determined by its ability to compete in global markets and the pace of its integration into the local market, with Chinese policy shifting from active support for the sector to managing surplus production capacity and enhancing efficiency.
He pointed out that electric cars still represent a source of strength and international influence for China, but at the same time they are testing the ability of the Chinese economy to redirect growth away from surplus production capacity driven by investment, towards a more sustainable expansion led by strong demand.
The report pointed out that, over the past decade, China has become a dominant force in global automobile exports. In 2025, exports of new energy vehicles, which include battery electric cars, plug-in hybrid vehicles, and fuel cell vehicles, will reach about 2.62 million units, i.e. double their level recorded a year ago.
He added that exports of battery-operated electric vehicles alone rose by about two-thirds to reach 1.65 million units, while exports of plug-in hybrid vehicles increased more than three-fold.
The report explained that this boom contributed to raising China’s total car exports to more than 7 million units, which confirmed the country’s position as the largest car exporter in the world by a large margin.
The bank indicated that this momentum will continue in 2026, as exports of new energy vehicles doubled again in the first quarter compared to the previous year to approach one million units, accounting for more than 40 percent of all vehicles exported abroad.
On the other hand, the report highlighted the complexities facing the local market, indicating that China’s new fifteenth five-year plan, which covers the period from 2026 to 2030, excluded new energy vehicles for the first time in 15 years from the list of strategic emerging industries.
The bank explained this shift as not reflecting a decline in support for the sector, but rather indicating that the industry has reached a stage of maturity that allows it to rely to a greater extent on market forces, instead of continuing to rely on government support.
Qatar National Bank monitored three main factors behind the boom in China’s exports of electric cars, the extent of its compatibility with the priorities of the new five-year plan, and its repercussions on the broader Chinese economy.
In the first factor, the report pointed out that exports have become the main driver of growth in the automotive sector in China, in light of a significant decline in domestic demand at the beginning of 2026 with the reduction of the generous purchase tax incentives and the replacement of the previous full exemption with an effective rate of 5 percent.
He also stated that sales of new energy vehicles in the local market decreased by about a quarter during the first quarter, despite the continued increase in production capacity.
The Qatar National Bank report considered that operating factories at levels well below efficient utilization rates made foreign markets a safety valve to absorb surplus production, in addition to being a source of larger profit margins, as vehicles are usually sold at higher prices abroad compared to the highly competitive Chinese domestic market.
He pointed out that manufacturers, including BYD, Geely, and Chery, have expanded their global presence at a rapid pace, with their exports currently representing about a third of the sector’s total volume.
Secondly, the report found that the export momentum is closely aligned with the strategic shift outlined by the new five-year plan, as new energy vehicles have already exceeded the 50 percent share of domestic car sales, an achievement achieved more than a decade before the original target date, which means that the sector no longer needs the priority it previously received.
He added that the new plan directs resources towards emerging areas such as quantum technology, hydrogen, and advanced manufacturing, while reframing the role of electric vehicles as part of a broader energy system strategy, with ambitious goals of nearly doubling the size of charging infrastructure and integrating vehicles with the electricity grid by 2030.
He also pointed out that the campaign to focus on quality rather than quantity aims to reduce the intense price competition that has eroded profitability, and encourage mergers in the sector.
When the report addressed the third factor, it saw that these developments had a dual impact on the broader economy. On the one hand, this industry has become a pillar of Chinese export performance and a model highlighting its manufacturing and technological capabilities, as it has contributed to recording a record surplus in merchandise trade. On the other hand, years of bold expansion have left the sector with a large surplus in production capacity, as more than a hundred brands compete in the local market, and factory utilization rates hover around 60 percent, while the sector’s profit margins have declined to historically low levels of about 3 percent.
The bank concluded its report by noting that these developments reinforced broader deflationary factors, the impact of which extends beyond the automobile sector, warning that heavy reliance on exports entails risks, with several major markets raising trade barriers, which prompted manufacturers to move towards increasing their production capabilities abroad.