China's auto sector expected to see greater capacity in 2025 despite US tariffs: Fitch Ratings analyst

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By Chi Jingyi (Global Times) 13:46, May 28, 2025

US tariffs have a limited direct impact on China's auto exports, and multinational automakers will increase production capacity in China, an analyst from Fitch Ratings said on Tuesday, painting a positive picture for China's auto sector despite challenges for the global industry amid US tariffs.

At the Fitch on China 2025 event in Beijing, when answering a Global Times' question on automakers' adjustments to their supple chains in response to the US tariffs, Wang Ying, managing director of Asia-Pacific corporate ratings at Fitch Ratings, said that there are growing partnerships between joint-venture automakers, foreign brands, and Chinese supply chain partners.

In April, the US imposed a 25 percent tariff on imported passenger vehicles, light trucks, and certain automobile parts, aiming to strengthen US vehicle assembly operations by encouraging companies to expand domestic production capacity, according to a statement on White House's website.

However, not all localized production is driven by tariff concerns. In China, many joint-venture and multinational automakers are increasingly investing in the development and sales of new-energy vehicle (NEV) products for the domestic market, prompting them to consider shifting some related production capacity to China, according to Wang.

"We have observed growing partnerships between joint-venture automakers, foreign brands, and Chinese supply chain partners, including collaborations with Chinese automakers in the NEV industry chain, spanning research & development, and design. This increased cooperation is likely to boost their production capacity in China," said Wang.

Many foreign businesses have been stepping up their localization efforts in China, according to some business leaders.

"Companies are managing realities like tariffs, but they're also seeing opportunities. Looking into this, a prominent phenomenon in the market is the localization wave, which we call localization 3.0," Martin Hofmann, chairperson of German Chamber of Commerce in China, also Executive Vice President and Board of Management of Volkswagen (China) Investment Co, said at a plenary session of the Global Trade and Investment Promotion Summit 2025 held on Thursday in Beijing.

Hofmann said companies in the automotive industry across EU are upgrading partnerships into R&D partnerships. For its part, China teaches how to deploy innovation into practice and into the markets.

Last week, US carmaker General Motors (GM) confirmed to the Global Times that it had stopped exporting US-made vehicles to Chinaamid a restructuring of its Durant Guild, and has decided to correspondingly optimize GM China's operations.

"We will continue to strengthen our core business and drive the success of our joint ventures in China to deliver sustainable profitability now and for the future," GM told the Global Times in a statement.

In late April, Porsche officially announced that its R&D center in China had completed its strategic adjustment, which integrated three major R&D-related entities of Porsche in China, opening a new chapter of localization, according to a statement by the company.

The Fitch Ratings analyst on Tuesday also forecast that retail sales in the Chinese automotive market in 2025 will see a single-digit growth. "However, we believe the NEV market in China will maintain double-digit growth, remaining at a relatively high level, with its share of total vehicle sales expected to exceed 50 percent this year," Wang said.

Meanwhile, Fitch Ratings has downgraded the 2025 outlook for the global automotive industry from "neutral" to "deteriorating." The US government's announcement of tariffs on auto imports may lead to reduced production and increased costs for global automakers. Fitch Ratings expects automakers to raise prices globally to offset US tariffs, though the impact may vary across brands and models.

Also, Fitch Ratings has lowered its 2025 US vehicle sales forecast from 16.3 million units earlier this year to 15.2 million units and reduced its European sales forecast from 13 million units to 12.5 million units.

(Web editor: Tian Yi, Liang Jun)