Multinationals fast-track localization to leverage China NEV boom

The rapid evolution of China's new energy vehicle (NEV) sector is driving multinational corporations to restructure their China strategies, prompting some to scale up local investments across R&D, production and supply chains.

German chemical giant BASF earlier this week announced a 500-million-yuan (about 69.3 million U.S. dollars) investment for the expansion of its Shanghai Cellasto plant, which provides noise, vibration and harshness reduction solutions for automobiles.

To capitalize on China's booming NEV market, the new facility will feature advanced mold lines and is scheduled to be operational in 2027, with a nearly 70-percent capacity increase.

As a leading chemical supplier to the automotive industry, BASF strives to accelerate business growth in China's automotive sector, said Jeffrey Lou, president and chairman of BASF Greater China.

"BASF has made substantial investments in China since entering the Chinese market 140 years ago. Today's expansion is another strong testament to BASF's commitment to staying close to the local market and our customers," Lou remarked.

To deepen ties to China's NEV ecosystem, some foreign automakers are shifting from traditional manufacturing partnerships to localized R&D.

In March, German carmaker BMW partnered with Chinese tech giant Huawei to develop a China-specific in-car digital ecosystem, set to debut on BMW's locally produced next-generation electric models in 2026.

Before that, Japanese auto behemoth Toyota announced the establishment of a new company in Shanghai for the R&D and production of all-electric Lexus vehicles and batteries, with plans to start production in 2027.

The new plant marked a significant investment in enhancing Toyota's R&D and production capabilities specifically tailored for the EV sector in China, the world's largest auto exporter.

In January, Chinese NEV maker XPENG and German giant Volkswagen announced that they had signed a memorandum of understanding for strategic collaboration on a superfast charging network in China.

Behind these localization initiatives is China's supportive environment for the NEV market through measures like vehicle purchase subsidies, investment in charging infrastructure, and development of intelligent connected vehicles.

Industry insiders believe that Chinese consumers' openness to new technologies and demand for smart connectivity are unlocking fresh business opportunities for multinationals.

Official data showed that China's NEV production and sales both exceeded 3 million units in the first quarter of 2025, with each rocketing around 50 percent year on year. The country's measures to stimulate consumption, including large-scale trade-in programs, are expected to provide a strong boost for NEV production and sales.

"China's NEV market holds huge potential, with a constantly improving business environment and well-developed, efficient industrial and supply chains," said Gao Yuning, deputy dean of the School of Public Policy and Management at Tsinghua University. "These are key reasons why foreign automakers are stepping up investment and deepening their footprint in China." ■