by Bill Russo and Emily Wang
November 2026
As Chinese automakers establish production overseas, fewer finished vehicles may need to cross a particular border. Yet the plants replacing those imports can remain connected to China through equipment, specialized components, software and engineering.
This is the localization paradox: local assembly can reduce dependence on imported vehicles while creating new dependencies across the industrial network. The strategic question is which capabilities move closer to customers, which remain concentrated in China, and who coordinates the connections between them.
In the August 2026 article China Going Global 2.0: How Chinese OEMs Are Rewriting Automotive Globalization, Bill Russo and Wenjia (Jackie) Tang argued that Chinese automotive expansion is moving beyond exports toward localized industrial ecosystems. [1] This article examines the supply-chain consequences. Production can become more regional while technology, supplier relationships and operating knowledge continue to connect markets across borders.
China becomes an origin of industrial capability
China’s automotive globalization draws on accumulated strengths. Made in China created manufacturing scale and supplier depth. Innovated in China added the ability to integrate batteries, electronics and software and commercialize them quickly. Globalized from China extends these capabilities into overseas products, companies and production networks.
Figure 1 | China’s cumulative industrial capabilities
Source: Automobility analysis
Going Global 1.0 emphasized vehicle exports. Going Global 2.0 adds a broader deployment of industrial capabilities. The two models coexist: exports remain essential even as companies build a deeper presence overseas.
Export growth increases the stakes overseas
China exported 8.205 million vehicles in January–September 2026, up 65.8 percent year on year and exceeding the approximately 7.10 million exported during all of 2025. New energy vehicles accounted for 4.006 million units, or 48.8 percent of the nine-month export total. [2, 3]
Domestic shipments fell 22.4 percent to 15.066 million units. Within that total, non-NEV shipments fell 33.6 percent to 6.600 million, while domestic NEV shipments declined 10.6 percent to 8.466 million. Exports consequently rose from 20.3 percent to 35.3 percent of total manufacturer shipments. Stronger overseas sales offset much of the domestic contraction, limiting the decline in total shipments to 4.5 percent. [2, 3]
Figure 2 | Exports offset much of the domestic shipment decline
Source: CAAM; Automobility calculations. January–September in each year; thousand vehicles.
Shipments here refer to manufacturer sales including exports, rather than retail registrations. NEV includes battery electric, plug-in hybrid and fuel-cell vehicles. Non-NEV is the remaining category, including conventional hybrids; it should not be read as a pure gasoline-only category.
Pressure at home helps explain the urgency of overseas expansion. Stronger products and industrial capabilities help explain how companies can pursue it. Export growth alone, however, does not establish that overseas manufacturing is viable. That requires a separate investment case.
A further distinction matters for the thesis: China-origin capability is broader than Chinese ownership. Multinational suppliers and partnerships can carry China-developed engineering, products and production practices into overseas programs.
Localization depends on sustained production economics
Exporting often provides an economical way to enter a market. It preserves China-based scale, limits fixed investment and allows an OEM to test demand. Freight, insurance, tariffs, inventory and working capital determine the delivered cost of that flexibility.
Local production changes the cost structure. Capital commitments, plant utilization, labor productivity, supplier readiness and ramp-up losses must be weighed against market access, delivery speed and potential savings in logistics and duties. Local assembly does not automatically confer preferential market access; the applicable origin and sourcing requirements remain part of the investment case.
There is no universal crossover volume. Figure 3 uses the illustrative annual sales levels of 50,000 and 100,000 vehicles from the framework in the 2024 article by Bill Russo, Benjamin Fan and Lorenzo Song. These reflect Bill Russo’s experience and provide orientation rather than fixed investment rules. The relevant measure is sustainable plant throughput, potentially across several models and markets. Contract assembly, existing assets and a greenfield factory require different commitments. [4]
Figure 3 | Illustrative volumes and stages of localization
Source: Russo, Fan and Song (2024) [4]. Illustrative volumes reflect Bill Russo’s experience, not universal thresholds.
The supply-chain implications also change over time. Equipment and tooling imports are concentrated around plant launch. Kits and imported components may dominate early production. Supplier development can subsequently reduce imported content and transport distance per vehicle.
The paradox therefore concerns the structure and dependence of the network, rather than an inevitable increase in freight. More production locations can create more relationships to coordinate even as physical imports decline. Companies must distinguish launch-related flows from recurring inputs and assess which capability connections persist as local sourcing deepens.
Three overlapping levels of localization
Building a factory is only one part of localization. Market capabilities support customers; manufacturing capabilities establish production; engineering and supplier development embed the industrial operating system. Companies can develop these levels together and choose different depths in different markets.
Figure 4 | Market manufacturing and capability localization
Source: Automobility analysis
Market localization determines whether an exported product becomes a sustainable local business. Manufacturing localization brings selected activities closer to demand. Capability and ecosystem localization gives local teams and suppliers a larger role in adapting products and delivering future programs.
These configurations create different networks. A market supplied mainly through imports needs reliable distribution, customs execution and service parts. A manufacturing base needs inbound material planning, supplier qualification and production logistics. A regional engineering center also needs access to software, technical standards and joint development processes.
Deeper localization is not the right objective everywhere. The appropriate depth depends on the market’s role, expected demand, available capabilities and investment requirements. Companies should avoid treating a mature local ecosystem as the inevitable endpoint of every market-entry strategy.
Supplier relationships show what is changing
Factories reveal where vehicles are made. Supplier relationships show how capabilities are deployed. Three documented projects illustrate different parts of this transition; they establish investment and operating footprints, rather than proving commercial returns or a universal increase in cross-border trade.
BYD in Thailand demonstrates manufacturing depth. BYD inaugurated its Rayong plant in July 2024 with stated annual capacity of 150,000 vehicles. The announcement described stamping, welding, painting, final assembly and component production. This extends localization beyond importing finished vehicles, but nameplate capacity alone does not establish utilization or the share of locally created value. [5]
FORVIA and BYD show a multinational supplier following a Chinese customer. The partners inaugurated a seat assembly plant in Rayong in July 2024. The case connects a Chinese OEM’s overseas footprint with a multinational supplier’s local production capability. It illustrates why established suppliers must evaluate Chinese customers as sources of business outside China as well as within it. [6]
CATL and Stellantis illustrate capability deployment through partnership. The companies announced a joint venture in December 2024 to invest up to €4.1 billion in an LFP battery plant in Zaragoza, Spain, with potential capacity of up to 50 GWh. Construction began in November 2025. The original announcement targeted production by the end of 2026; the announced capacity is not a measure of realized output. The project combines China-origin battery capability with an established multinational’s European manufacturing footprint. [7, 8]
These cases point to several supplier strategies. Chinese suppliers can follow existing customers into new production locations or use overseas operations to serve global OEMs. Multinational suppliers can expand around Chinese programs. Suppliers already based in destination markets may qualify for those programs and, over time, gain access to wider platforms.
For local suppliers, that last path is an opportunity rather than an automatic outcome. Assembly work can remain dependent on imported inputs. Deeper participation requires quality approval, competitive costs, engineering support and access to procurement decisions. Evidence of local sourcing should therefore distinguish the location of a supplier’s plant from the value and capabilities created locally.
The commercial test for a supplier is whether committed program volume and the prospect of additional customers justify the investment. Following one OEM can preserve a relationship while increasing exposure to that customer’s demand, launch schedule and production ramp-up.
Chinese OEMs must decide where control resides. Keep the advantages of China-based platforms and development processes while giving local teams enough authority over adaptation, service and supplier development. Evaluate factories against utilization, quality and delivered cost, alongside market access.
Suppliers must price the cost of following customers. Secure credible program commitments, plan for ramp-up losses and develop a broader customer base where possible. Destination-market suppliers should seek engineering and qualification roles that deepen participation beyond final assembly.
Supply-chain partners must earn a wider operating role. Connecting plants, suppliers and service networks creates opportunities in launch planning, inventory management and disruption recovery. Greater complexity does not automatically improve margins: OEMs, lead suppliers or internal teams may retain network control. Partners create value when they measurably improve delivery reliability, inventory efficiency or recovery time.
Multinationals must connect China-developed capabilities with overseas assets. Determine where products, technologies and development practices originating in China can support global programs. Partnership design must make sourcing authority, technical standards, data access and responsibility for disruption explicit.
Winning through selective localization
Going Global 2.0 will be judged by whether overseas production preserves the strengths of China’s industrial base while developing capabilities suited to local markets. More locations create opportunities for responsiveness and market access, alongside risks of duplicated investment, fragmented inventory and uneven execution.
The emerging system combines selective regionalization with continuing cross-border dependence. Competitive advantage will depend on choosing which capabilities to centralize, which to localize and how to connect them reliably. That is where the next phase of China’s automotive globalization will be won.
Sources and data definitions
[1] Bill Russo and Wenjia (Jackie) Tang, China Going Global 2.0: How Chinese OEMs Are Rewriting Automotive Globalization, August 2026, Automobility.
View source
[2] Ministry of Industry and Information Technology of China, September 2026 Automotive Industry Economic Performance (Chinese-language release), 12 October 2026. The release explicitly identifies CAAM as the data source.
Source: https://www.miit.gov.cn/gxsj/tjfx/zbgy/qc/art/2026/art_8a878aeeb8a34a5b88975c5bbe94f7bf.html
[3] CAAM shipment series reproduced in the original article chart; Automobility calculations. January–September 2026: total 23.271m; domestic NEV 8.466m; domestic non-NEV 6.600m; NEV exports 4.006m; non-NEV exports 4.199m. January–September 2025: 24.363m; 9.470m; 9.944m; 1.758m; 3.191m, respectively. Full-year 2025 manufacturer exports of approximately 7.10m are also reported by AP.
Source: https://apnews.com/article/5b01cbd4763eb40a11186cf365b71f90
[4] Bill Russo, Benjamin Fan and Lorenzo Song, The Path to Globalization of China’s Automotive Industry [2024 Edition], 7 September 2024, LinkedIn. Figure 3’s illustrative volumes reflect Bill Russo’s personal experience; investment thresholds vary by market and production model.
View source
[5] BYD, 4 July 2024, Thailand factory inauguration. Capacity is the stated annual production capacity, not realized output.
Source: https://www.byd.com/us/news-list/BYD-Thailand-Factory-Inauguration-and-Roll-off-of-Its-8-Millionth-New-Energy-Vehicle.html
[6] FORVIA, 18 July 2024, announcement of the FORVIA–BYD seat assembly plant in Thailand.
Source: https://www.forvia.com/sites/default/files/2024-07/FORVIA AND BYD OPEN NEW SEAT ASSEMBLY PLANT IN THAILAND.pdf
[7] CATL and Stellantis, 10 December 2024, joint investment announcement. Investment and capacity are announced ceilings; production timing was a target.
Source: https://www.catl.com/en/news/6328.html
[8] CATL, November 2025, construction milestone for the Zaragoza battery plant.
Source: https://www.catl.com/en/news/6614.html
Calculation basis: export growth = 8.205 / 4.949 − 1; export share = exports / total manufacturer shipments. Figures use the same manufacturer shipment series throughout, rather than combining it with customs export totals. Percentages may differ slightly because of rounding.