Hidden Competition in China’s EV Export Drive: Gross Margins Nearly Halved

As evening falls over Nansha Port, rows of pristine Chinese electric vehicles await final export inspections against the backdrop of a cobalt sky and sea. Soon, these cars will sail to markets in Central Asia, Europe, and Russia, serving as dynamic ambassadors of China’s manufacturing prowess.

Simultaneously, Hongqi models navigate Middle Eastern boulevards with increasing frequency, while BYD, Chery, and Great Wall electric vehicles begin to dot streets in South American cities, earning growing local acceptance. In Russia’s major metropolitan areas, Li Auto and Zeekr have already established recognizably domestic silhouettes on urban thoroughfares.

These developments illustrate the remarkable expansion of China’s new energy vehicle (NEV) industry on the global stage. According to the China Association of Automobile Manufacturers, exports of Chinese NEVs surged to 1.203 million units in 2023—a 77.6 percent increase year-on-year—before reaching 1.284 million units in 2024 (up 6.7 percent) and 855,000 units in the first five months of 2025 (up 64.6 percent), laying a robust foundation for continued outreach.

Yet this outward march has encountered mounting challenges. Domestic competition has intensified, patent litigation has proliferated, and foreign certification processes remain exacting—dilemmas that ensnare both automakers and dealers. Faced with these headwinds, industry participants must decide whether to press ahead with innovation and localization or to retreat and limit exposure.

In markets such as Brazil—South America’s largest auto sector and the world’s sixth—Chinese NEVs have secured overwhelming market share. Data from the Brazilian Electric Vehicle Association indicate that in the first half of 2024, Chinese brands accounted for 91.4 percent of all imported electric vehicles, generating approximately USD 1.2 billion in sales. Great Wall Motor, whose export network spans the Middle East, South America, Central Asia, Africa, and the Asia-Pacific region, recorded sales of 229,800 vehicles in Russia during 2024, capturing roughly 12 percent of the local passenger car market.

Dealers report emerging opportunities in nations like Chile, Peru, and Argentina, where warm climates and nascent charging infrastructures mitigate concerns about driving range and encourage adoption of Chinese EVs. Local buyers are particularly drawn to advanced features—smart cockpit interfaces, driver-assist systems, and even integrated conveniences such as refrigerators—that bolster the vehicles’ appeal. In contrast, markets with narrower roads, such as Egypt, tend toward smaller EV models.

However, entry into regions like Russia and the Middle East brings its own hurdles. Import tariffs, value-added taxes, and disposal fees can double retail prices, deterring price-sensitive consumers. Early entrants also struggled with localization: many pre-adapted infotainment systems lacked Russian-language support and region-specific functionalities. In response, dealers have partnered with manufacturers to refine software localization and have reengineered logistics and supply-chain operations to reduce costs and improve competitiveness.

An alternative distribution method known as “parallel exports” has gained traction. This approach involves registering new vehicles domestically as zero-kilometer “used” cars before shipping them abroad, allowing dealers to offer substantially lower prices than those achievable through official export channels. Although automakers caution that parallel exports may dilute brand equity, consumer demand persists, and clear regulatory procedures since 2019 ensure that vehicles permanently designated for export cannot be reintroduced into the domestic market.

Yet as more players enter this space, dealers report that gross margins on parallel exports have dropped from around 15 percent to nearly half that level. Currency fluctuations and extended payment cycles—often three to six months in markets like Russia—further strain cash flow. To secure deals, some dealers negotiate partial upfront payments, but the risk of order cancellations and unpaid balances remains a persistent concern.

Beyond distribution challenges, patent disputes and certification requirements compound the complexity of exporting Chinese EVs. In July 2025, Japanese patent firm IP Bridge filed suit in Brazil alleging that BYD’s in-car communication modules infringe its 4G patents. Shortly thereafter, Nokia initiated litigation against Geely in Germany over alleged 5G patent violations, and a German court ruled against Sunwoda, ordering a ban on sales, recalls, and destruction of batteries found to infringe LG Energy Solution patents. Such rulings underscore the strategic use of litigation to protect market share or extract licensing revenue.

Certification processes in regions like the European Union further test exporters. Securing whole-vehicle type approval demands compliance with hundreds of safety, environmental, and efficiency standards, with significant fees and procedural opacity often deterring smaller manufacturers from participating. Exposing proprietary technical details to foreign certifying agencies also raises concerns about intellectual property.

Under these pressures, Chinese automakers continue to boost research and development investments, sharpen product differentiation, and expand marketing efforts—from test drives and auto shows to livestreamed demonstrations on local social platforms. Distribution networks are being optimized to improve market coverage and inventory turnover.

In the current era of global NEV expansion, China’s automakers and dealers navigate a landscape of bold opportunities and underlying threats. Only through coordinated innovation, robust patent strategies, transparent certification compliance, and enhanced cost optimization can they secure a sustainable presence in the competitive global marketplace.