China’s carmakers are pulling ahead of their Japanese and European rivals with advanced technologies in artificial intelligence and electric vehicle charging, eyeing an eventual entry into the US market.
Volkswagen chairman Oliver Blume was spotted at the booth of Chinese EV maker Xpeng on the first day of this year’s Beijing Auto Show.
He was listening intently to Xpeng CEO He Xiaopeng, who was talking about the just-announced GX SUV, said to be capable of the equivalent of Level 4 autonomous driving.
Volkswagen took a roughly 5% stake in Xpeng in 2023, and has been jointly developing EVs with the company since then. Volkswagen’s ID Unyx 08, an EV released on April 16, comes equipped with two Turing AI chips developed by Xpeng.
Xpeng has already incorporated these chips into mass production vehicles for so-called “end-to-end” driver assistance that uses AI to detect and assess the vehicle’s surroundings. Volkswagen is looking to improve driver assistance performance by adopting Xpeng’s technology.
In 1985, Volkswagen was one of the first companies to set up a joint venture in China as the Beijing government worked to foster its domestic automotive sector. Since then, it has led the Chinese car market.
Four decades later, a top Volkswagen executive eagerly listening to an announcement by a Chinese EV startup is a sign of changing dynamics between China’s automakers and foreign companies operating there.
Japanese companies such as Toyota Motor and Nissan Motor are also relying on Chinese companies’ tech, though to varying degrees. State-owned giant Guangzhou Automobile Group (GAC), which has joint ventures with Toyota and Honda Motor, in 2023 declared that the “post-venture era” has arrived for China’s car sector. Three years later, it is clear that the country’s automakers no longer rely on foreign capital.
With their newfound confidence, China’s automakers are now setting their sights on foreign markets.
Domestic automotive sales in the first quarter of 2026 dropped 20% on the year, while exports rose by 57%, according to the China Association of Automobile Manufacturers (CAAM). It is becoming more critical for automakers to break into other markets, as total new vehicle sales by Chinese automakers, including exports, are only projected to grow this year by 1% over 2025 levels due to weak domestic demand and changes to incentives for new energy vehicles.
“We’ll begin exports to Germany, one of the world’s toughest markets, in 2027,” Lei Jun, CEO of major smartphone maker Xiaomi, announced at the Beijing show. The company entered the EV market in 2024.
Xiaomi established an R&D center in the German city of Munich last year, and plans to unveil its YU7 GT at the end of May. The SUV is the first vehicle in which the center played a key role.
The booth belonging to China’s BYD, the world’s leading EV manufacturer, stood out on the vast 380,000-square-meter floor of the venue. The company had several EVs covered with frost in a room labeled “-30 degrees Celsius.”
The room is a demo for the company’s Blade Battery, which was updated in March. The new version is said to be able to charge from 10% to 97% in around nine minutes, and in roughly 12 minutes at -30 degrees Celsius.
BYD plans to install a total of 6,000 charging ports compatible with these batteries outside of China by the end of 2026, rapidly expanding its presence overseas through the rollout of new technologies.
Chinese automakers have been gaining ground in regions such as Southeast Asia, Europe and South America, but the US is one market they have not been able to enter due to high tariffs.
But cracks are starting to show. Just prior to the car show, Canadian minister of international trade Maninder Sidhu visited Guangdong to tour offices and facilities of companies including BYD, Xpeng, and GAC.
In January, Canadian Prime Minister Mark Carney announced that tariffs for China-made EVs would be conditionally lowered to 6.1% for up to 49,000 vehicles annually. The country imposed a 100% tariff on Chinese EVs in 2024. One executive at a Chinese carmaker said it is “preparing to enter the Canadian market.”
Canada could be a stepping stone for Chinese automakers looking to export to the US, as its car safety standards are similar to those of the US.
US President Donald Trump made comments that appeared to allow Chinese manufacturers building cars in the country, alarming their rivals in the US, including General Motors and Toyota.
“The US has been their last bastion, but they don’t have much time,” Yoshinori Suganuma, principal at KPMG in the US, said of Japanese automakers. They will need to “start thinking in real terms about their responses if [Chinese companies] start entering the US market within the next three to five years.”
National security concerns related to the collection of in-vehicle data by imported Chinese EVs have prompted many countries to impose strict regulations. China’s automakers will need to work with governments and businesses in target markets to comply with local laws for their vehicles to use AI-powered driver assistance and other advanced features.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.