Can China hold its EV lead?
Narayan: China’s dominance in autos is anchored by its domestic market. The domestic Chinese auto market is the biggest in the world, with Chinese OEMs holding 65% of the domestic electric vehicle market in 2025 – and looking set to hold 80% by 2030.
Control of the battery supply chain facilitates this strong home advantage. It starts from the processing of raw materials like lithium, cobalt, and nickel to cell manufacturing. China has also benefited from decades of big state subsidies, low labor costs, greenfield electric vehicle facilities, and a fast-iteration development culture.
How far are Chinese automakers now expanding into Western markets?
Narayan: The next phase of China’s electric vehicle growth is increasingly playing out abroad. Some Chinese OEMs have boosted their exports to Europe and Southeast Asia, for example. That’s because China cut its domestic incentives for new energy vehicles, including electric vehicles and hybrids, to ease the pricing war at home, which hit demand slightly. More significantly, Chinese OEMs are localizing aggressively in Europe, including through facilities and partnerships in Hungary, Turkey, Spain and Austria, which could help them gain market share despite tariffs.
"Chinese OEMs are localizing aggressively in Europe."
Tom Narayan, Lead Equity Analyst in Global Autos, RBC Capital Markets
Because of tariffs between China and Europe, Chinese OEMs that localize are more likely to grab significant market share. Rising fuel costs and tightening carbon regulations could also give China a stronger opening in today’s European market.
What does China’s expansion mean for Western automakers and suppliers?
Narayan: Despite continued China dominance, projections suggest European OEMs will still grow production gradually, though they may lose European market share to China. While some investors flag the risk of Chinese suppliers displacing Western incumbents due to Chinese localization, Western suppliers may actually be net beneficiaries of this trend. EU standards could compel Chinese OEMs to use Western suppliers abroad. We’re not sure Chinese suppliers have the financial capacity to localize in Europe in the short term, and order books for suppliers in our coverage are increasingly weighted toward Chinese OEM customers.
"We’re not sure Chinese suppliers have the financial capacity to localize in Europe in the short term."
Tom Narayan, Lead Equity Analyst in Global Autos, RBC Capital Markets
Chinese OEMs are technically prepared to penetrate the U.S. market, however. Younger U.S. consumers are open to Chinese vehicles. We estimate that Chinese OEMs could ultimately take 20% to 25% of the U.S. market but remain cautions due to policy volatility in the U.S. Currently there is a 100% tariff on Chinese auto imports, so market entry in the near term is unlikely.
How will consumer preferences shape EV’s going forward?
Narayan: In the Chinese market, autonomous features are already becoming part of everyday consumer expectations. This takes the form of L2++ features, which are not fully self-driving, but allow capabilities like hands-free or semi-automated driving under certain conditions.
Chinese consumers are younger, more tech-forward and don’t see autonomy as a luxury but rather as an everyday practical took to help them navigate mega-city traffic. Some global OEMs are recognizing their Western-built systems don’t fit Chinese expectations and are partnering with Chinese players to develop products for that market. We’ll have to see how, and whether, L2++ is embraced in Western markets and whether it becomes a premium product.
The next phase is L3 autonomy: eyes-off, hands-off driving, which may be the point at which buyers are willing to finally pay a premium. The auto industry has a long history of absorbing valuable features into the product without raising prices – so only time will tell how this all plays out.
How will the auto sector adapt to China’s rise?
Narayan: While Chinese OEMs are expected to penetrate the European market and eventually reach the U.S., how that takes place is an open question. They will probably utilize local labor and supply chains, so it may not be as problematic as some fear. We do think ultimately Western OEMs will survive, and the supply base will modify and adapt. But make no mistake, Chinese automakers are not only coming, they’re already here, and they’re going to have a pretty big impact as the auto complex evolves.
"Chinese automakers are not only coming, they’re already here, and they’re going to have a pretty big impact as the auto complex evolves."
Tom Narayan, Lead Equity Analyst in Global Autos, RBC Capital Markets
