Automotive exports set to underpin Chinese steel demand in 2026

China’s automotive industry is expected to play an even bigger role in sustaining domestic steel demand in 2026, as vehicle exports offset weakening construction activity and softer demand at home, according to analysis by MEPS International.

With China’s property sector still under pressure, manufacturing remains central to growth expectations. The automotive industry now accounts for close to 10% of Chinese GDP and is a key pillar behind forecasts of around 4.5% economic growth this year. Domestic new-car sales rose 6% to roughly 24 million units in 2025, but industry forecasts point to a 3–7% decline in sales volumes in 2026. Exports, however, are set to rise sharply, allowing vehicle producers to maintain output levels – and, by extension, steel consumption.

Total vehicle production in China increased by 10.4% last year to 34.5 million units, driven primarily by electric and plug-in hybrid vehicles. Output of these models jumped 29% year on year to 16.63 million units. While overall production growth is expected to flatten in 2026 amid a broader global slowdown in automotive markets, overseas demand is becoming increasingly critical.

Analysts at UBS estimate that Chinese vehicle exports will rise by around 25% this year, from 5.7 million units in 2025 to 7.1 million units. A surge in electric vehicle shipments – forecast to increase by about 50% – is expected to be the main driver. Looking further ahead, UBS projects exports could reach 9.4 million units by 2030, roughly double their 2024 level.

Chinese manufacturers such as BYD, Geely, Chery and Great Wall Motors are aggressively expanding overseas sales, but Western-owned producers with manufacturing bases in China, including Tesla and Volkswagen, are also increasing export volumes. Although China’s domestic market still represents about 30% of global new-car sales, access to the US market has effectively been closed to Chinese producers following the introduction of 100% import tariffs. Elsewhere, however, market access is widening.

Canada, for example, announced in mid-January that up to 49,000 Chinese EVs could enter the market at a tariff rate of 6.1%, far below the punitive levels applied in the US. South America and the Middle East are also emerging as important growth destinations. In Europe, the UK has not imposed additional tariffs on Chinese EVs, and preliminary data show Chinese-built cars captured almost 10% of the UK market in 2025, nearly double their share a year earlier.

Within the EU, duties on Chinese-made battery electric vehicles introduced in 2024 have so far failed to prevent aggressive pricing by Chinese brands. The European Commission has signalled that minimum price thresholds could be the next policy tool. At the same time, European steelmakers remain under pressure from weak automotive output. EUROFER expects vehicle production in Europe to have fallen by 3.8% in 2025, with only a modest recovery forecast for 2026.

By contrast, China’s steel demand continues to benefit from automotive strength, even as construction drags on overall consumption. Steel overcapacity remains a structural issue, despite a 4.4% fall in Chinese crude steel output to 960.8 million tonnes in 2025, according to worldsteel data. For now, rising vehicle exports appear set to remain one of the few reliable supports for Chinese steel demand in the year ahead.

Source: MEPS, Photo: Fotolia