The Global Investments Powering China’s EV Push

The zero-emission vehicle (ZEV) supply chain represents the first major test case of Chinese manufacturers’ ambitions to globalize through FDI. Drawing on Rhodium Group’s China Cross-Border Monitor (CBM) and Global Clean Investment Monitor (GCIM) datasets, we compare the trajectory of Chinese investment in the ZEV supply chain at home and abroad. 

• Overseas investment now leads for the first time. In 2024, Chinese ZEV firms invested more abroad than at home, a historic shift after years of directing around 80% of investment to the domestic market. Overseas projects have generally mirrored domestic patterns but typically lagged and trailed in scale.
• Batteries dominate, but ZEV assembly is catching up abroad. Chinese ZEV investment has focused on batteries, both abroad (74%) and at home (69%), but overseas ZEV assembly is growing rapidly.
• Production capacity is still anchored at home. Despite growing overseas investment, China’s production capacity remains mostly domestic. Only around 15% of announced battery cell and ZEV assembly capacity is overseas.
• Chinese ZEV investments face higher costs, delays, and risks abroad. Overseas cancellation rates are twice as high and only 25% of investments are completed, compared to 45% domestically.
• Chinese firms have adopted different FDI strategies, depending on their market segment. Battery makers are far more internationalized, leading early overseas expansion, while ZEV makers remain focused primarily on the domestic market. 

Overseas investment patterns tend to follow domestic investment with a lag

Chinese companies began scaling up their investment in the ZEV supply chain in the mid-2010s, driven by growing policy support. Announced domestic investment rose from under $5 billion in 2014 to an average of $39 billion between 2017 and 2019. After reaching a high of $43 billion in 2018, investment dropped to only $25 billion in 2020. Policy support, including the 2019 credit scheme for new energy vehicles, then catapulted domestic investment to an average of $92 billion in 2021 and 2022, before falling to $41 billion in 2023 and just $15 billion in 2024. Overseas investment lagged behind but otherwise followed a remarkably similar trajectory: little investment in early years, gradual growth from 2018-2020 and then sharp growth in 2022 and 2023 followed by a steep drop in 2024. However, in 2024, announced overseas investment narrowly surpassed domestic ZEV investment for the first time.  

Battery investments lead overseas, but ZEV assembly is catching up

Chinese outbound investment in the ZEV supply chain has concentrated on batteries. Battery investments account for 69% of domestic investment, illustrating the capital intensity of battery manufacturing. The share of batteries in overseas investment is even higher (74% of total investment) because battery manufacturers were early movers in overseas expansion. In 2018, CATL’s $2 billion battery plant in Germany marked the first major international move by a Chinese player in the ZEV space. Battery giants like CATL, Envision, and Gotion followed their existing clients like Tesla and BMW abroad, driven by high transport costs and client requests for localized supply. In contrast, Chinese automakers have only recently begun to put greater emphasis on local production amid rising trade barriers and domestic overcapacity. BYD’s first major overseas passenger ZEV assembly plant in Hungary ($4.6 billion) was not announced until 2023.

More projects get completed at home than abroad

Our data shows clearly that Chinese companies face greater challenges investing abroad than at home. Overseas projects tend to be more expensive, take longer to build, and encounter higher regulatory and political risks. Of the total ZEV manufacturing investment abroad announced by Chinese firms, only 25% has been completed, in contrast to a 45% full completion rate for domestic projects. Chinese firms not only complete projects faster at home but also initiate construction sooner. Battery factories in China typically begin construction within 3 to 12 months, compared to 10 to 24 months abroad. In some cases, the pre-construction process takes more than two years, for example CALB’s $2.1 billion plant in Portugal. Due to these added hurdles, overseas investments are generally less resilient, with cancellation rates nearly twice as high as domestic projects, hitting 14% by value for overseas investments versus 7% domestically.

The share of overseas production capacity remains relatively low

Despite growing outbound activity, China’s production capacity for both batteries and vehicle assembly remains overwhelmingly domestic. Combining both existing and announced capacity as of 2024, Chinese firms’ battery cell capacity within China stood at 4,647 GWh, compared to just 707 GWh abroad. Likewise, Chinese firms plan to produce 28 million ZEV units within China, compared to only 4 million units overseas (Figure 7). In relative terms, this means only about 13.2% of announced battery capacity and 12.6% of vehicle assembly capacity will be located outside China. These figures trail the share of announced battery cell investment overseas (17%) but align more closely with the vehicle assembly investment share (12%), reflecting more challenges of battery investments abroad. While overseas battery project announcements have declined in 2023–2024, vehicle assembly capacity abroad, though still small, is expanding more rapidly.

Global production diversification varies starkly across firms

Chinese firms have adopted markedly different internationalization strategies through FDI. Battery makers Envision, Gotion, and EVE stand out, each allocating more than 30% of their investment abroad, with Envision reaching almost 60%. These firms led the first wave of outbound activity between 2018 and 2020. Svolt was part of this early push as well, though 99% of its overseas investments were later canceled. In contrast, ZEV manufacturers like Chery, Geely, or BYD are less internationalized than battery makers, allocating on average a more modest 17% of their investment to foreign markets.

Outlook

The future of Chinese ZEV firms’ globalization through FDI will be shaped by several key dynamics. China’s domestic overcapacity and price wars are pushing firms to look abroad for profit amid slowing demand and tight margins, with ZEV assembly and battery factories operating at just 49% and 36.5% capacity in 2023. However, global ZEV demand overall is cooling, with a 33% drop of ZEV sales in 2024. Moreover, growing regulatory pushback in host markets like the EU is raising barriers to entry and will push more Chinese companies to establish local manufacturing operations. At the same time, Chinese firms will also have to manage Beijing’s increasing concern over technology leakage, job losses, and industrial hollowing-out, which may result in tighter controls on outbound investment in strategic sectors.