Chongqing: How the world largest city becomes the electrical car production hub for China and the globe
The automotive industry in mainland China has been the largest in the world by vehicle production since 2008 . As of 2024, China is also the biggest automobile market, both in sales and ownership . Chongqing plays a pivotal role in this thriving automotive landscape.
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Reclaiming the title of largest car manufacturing city
In 2014, Chongqing became China’s largest car manufacturing base, producing 2,628,900 vehicles —more than 11% of the national total. After peaking at nearly 3.2 million vehicles in 2016 , production saw a significant decline in 2017, largely due to challenges encountered by the city’s leading automaker, Chang’an. This downturn marked a difficult period for Chongqing’s automotive sector.
However, the industry started to rebound in early 2019, and in 2023, Chongqing produced 2.32 million vehicles , marking a 30% year-on-year increase and securing its position as the second-largest car producer in the country. To put this number into perspective, Chongqing-based car manufacturers produced about the same number of cars as France and the UK combined. Recent data also indicates that Chongqing is now outpacing Guangzhou, having produced 997,100 vehicles in the first five months of 2024 and thus reclaiming the title of China’s largest car manufacturing city. A key factor in this recovery has been the transition of local car companies to new energy vehicles (NEVs).
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Transition to economical and sustainable NEVs
As a major automotive hub, Chongqing is embracing the shift toward green development. In 2022, the Chongqing Municipal People’s Government unveiled plans to establish a world-class industrial cluster for intelligent connected vehicles (ICVs) and NEVs, with the goal of nurturing one or two globally recognized brands by 2030 . Currently, the city I shome of many brands that are globally not yet known much, such as Changan, Seres AITO and AVATR. The city is therefore actively fostering a large, smart, and interconnected NEV industry cluster, producing more than 500,000 EV cars in 2023 ; compare that with one million produced in the whole of Germany.
In recent years, Chongqing has attracted more than 20 complete-vehicle manufacturers and around 1,200 large-scale parts suppliers . In the NEV sector, the local leader, Chang’an Automobile, has been joined by the Seres Group , which is quickly rising in prominence. During my visit to Chongqing, I was particularly impressed by the Seres Super Factory, where hundreds of robotic arms and over 1,000 intelligent devices were working seamlessly alongside 3,000 robots. These technological advances are a testament to the evolution of productivity in the automotive industry.
In Chongqing, I could see close-up even more trends in China’s automotive sector, especially in NEVs. With the world’s largest automotive supply chain, Chinese manufacturers are benefiting from lower production costs and enhancing their competitiveness in global markets. In 2023, China exported a record 1.203 million NEVs , achieving a remarkable year-on-year growth of 77.6%. About 40% of those cars went tu Europe (incl UK) , the following ex port markets were Sout East Asia (20%), Central and Middle-East (12.5%) and South Aisa (7.5%). However, this rapid expansion has not been without its challenges.
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EU’s import tariffs on Chinese electrical vehicles
The EU commission is concerned about high subsidies for EV manufacturers in China and overcapacity eventually flooding its markets . It therefore recently announced countervailing duties on battery electric vehicles (BEVs) from China, set to last for five years. These tariffs can be as high as 45%, depending on the state aid received by the manufacturer and their cooperation during investigations. These tariffs also apply to European manufacturers with factories in China, including BMW, Dacia, and Renault: they face an additional import duty of up to 20.7%.
Critics such as Daniel Gros, who is director of the Institute for European Policy-Making at Bocconi University, argue that such trade barriers are irrational . He insists that, given the global, existential nature of the climate threat, a race to develop green technologies is desirable, with all countries supporting the relevant technologies. However, any benefits of such support would largely disappear if every actor defends itself against the imports of goods developed with the help of subsidies. In other words, the new tariffs risk derailing the EU Green Deal, an economic and climate aiming to make Europe the first economically successful, climate-neutral continent. Gros argues, Europe would face raising prices for consumers, and jeopardizing EU exports to China—all to address a potential threat without any substantiated evidence. Indeed, Chinese brands accounted for just 3% of Western Europe’s new car market in the first five months of 2024, although they were gaining market share before the new tariffs were introduced.
On the other hand side, if critics like Gros are arguing against tariffs because there should be a race to develop green technologies, should this not also involve protecting the companies that are racing to develop those technologies from being crushed by foreign government subsidies?
In Germany, economists are split on whether the China EV car tariffs make sense. Among respondents to a recent survey of the country’s leading economists by the German ifo Institute , about a third were in favor of tariffs, a third were against them, 11% supported lower countervailing tariffs, and 6% wanted higher ones. Niklas Potrafke, director of the?ifo ?Center for Public Finance, said, “Dealing with China is challenging. Geopolitical risks, responses to China’s economic and export strategy, and the maintenance of free trade must be weighed against each other.”
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Chinese car makers start investing in Europe
Meanwhile, many Chinese automakers are establishing R&D centers and factories in Europe. For instance, Chery Auto has partnered with Spain’s EV Motors to launch its first European manufacturing site in Barcelona, while BYD is constructing its first European electric vehicle production facility in Hungary , which is set to open next year. NIO has a design center in Munich with more than 100 world-class designers and last year opened a new R&D facility in Berlin for software engineering. This shows that Europe is not merely a consumer market for Chinese companies but is also evolving into a valuable partner for mutually beneficial cooperation.
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Is a win–win situation possible?
Globalization and fast technological progress are transforming markets worldwide, not just in Europe. Chongqing’s automotive industry growth and its development as a railway hub for trains to Germany highlight both the speed of innovation and the power of globalization. Furthermore, protectionism may not be the best strategy for enhancing the European electric vehicle industry ; it is more like a painkiller, masking pain in the short term but leaving the underlying problem untreated . Countries like Germany, which heavily rely on exports, must work within the dynamics of the open market, and companies should grow through faster innovation, greater efficiency, and unique ideas rather than building higher walls.
Global supply chains, investment, and trade all foster economic and technological exchanges, benefiting companies and nations alike. We should hope that the news this weekend of an potential agreement between the EU and China on EV car tariffs is pointing in that direction.
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