Building Global Competitive Advantage? A Preliminary Study of Chinese EV OEMs’ FDI and Internationalisation Strategies

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Abstract:

The global automotive industry is undergoing a disruptive transformation driven by electrification and digitalisation. Chinese automotive firms have taken an early lead in both domains, enjoying a first-mover advantage. Their competitive edge extends not only to electric vehicles (EVs) and software-defined vehicles (SDVs) but also to internal combustion engine (ICE) vehicles and their entire value chains. Under the strong guidance of national industrial policies, the Chinese automotive sector has also developed what can be described as a “national competitive advantage”.
As Chinese OEMs grow, expand in scale, and increase EV exports, they are becoming increasingly international. China has emerged as the world’s largest exporter of cars and auto parts, moving from a trade deficit of US$20 billion in 2020 to a trade surplus of US$127 billion in 2024 — and US$186 billion if lithium-ion battery trade is included. As the era of global competition in EVs unfolds, the world trade landscape is experiencing significant shifts, with protectionism on the rise. This return of protectionism is questioning the global organisation of the automotive industry over the past thirty years. Most of the new tariffs and other protectionist measures introduced since 2019 are reactions to the expansion of Chinese OEMs (the so-called ‘China challenge). However, trade protectionism has, in turn, accelerated the internationalisation of Chinese OEMs, shifting their strategy from export-oriented trade to foreign direct investment (FDI). Historically, this shift mirrors the trajectory observed in the automotive industry, particularly the post-Second World War rise of Japanese automakers, suggesting that such a transition is a common path in the growth of automotive firms.
Against this background, a critical question arises: Are Chinese OEMs leveraging FDI to generate global competitive advantages in host countries? Are Chinese EV manufacturers exporting the “China EV industry model” — with its embedded national competitive advantages — abroad, and if so, what type of hybridisation does this entail? Research on incumbent multinational companies (MNCs) suggests that global competitive advantage typically requires leveraging home-country resources and capabilities while simultaneously developing new resources and capabilities abroad, achieving both global integration and local adaptation. However, Chinese EV OEMs, as latecomers, followers, or emerging multinational companies (EMNCs) in the automotive globalisation process, generally lack extensive experience in global business management. Consequently, the strategic choices and market entry practices of their FDI-oriented internationalisation process are likely to significantly influence the formation of subsequent global competitive advantages.
This study addresses these questions through a qualitative case study approach, examining the leading Chinese EV manufacturers that have expanded overseas. The analysis focuses on three dimensions of internationalisation: strategic choices, entry modes, and operational management. By mapping the types of international strategic pathways, country and location selection, firm-level industrial structure and value chain configurations, entry modes, and the organisational and managerial characteristics of foreign subsidiaries, the study identifies the dominant internationalisation strategies adopted by Chinese EV OEMs and characterises how their overseas operations are conducted.
This approach allows for the assessment of whether these strategies constitute an effective overseas operational “business model,” in comparison with the rich debate surrounding the Japanese internationalisation model in the 1980s and 1990s. Furthermore, by evaluating the appropriateness and effectiveness of the key components of these internationalisation strategies — such as the alignment of strategic pathways with external environmental challenges and internal capabilities — the study provides inferential insights into whether Chinese OEMs are effectively leveraging and developing their domestic competitive advantages through FDI to create global competitive advantages abroad.
Theoretically, the study contributes to international business and strategy research by offering insights into how firms from emerging markets can transform home-country resources and capabilities into global competitive advantages, even as latecomers to industrial globalisation. It adds to the literature on multinational enterprise strategy by examining the interplay of leverage and development mechanisms in internationalisation processes and the potential for hybridisation between global integration and local adaptation.
Practically, the study offers guidance for EV firms seeking to design internationalisation strategies in an increasingly competitive global industry. It provides lessons on strategic pathway selection, market entry modes, and organisational and managerial arrangements that can enhance the effectiveness of overseas operations. In doing so, it also highlights the role of FDI in enabling emerging-market firms to export domestic competitive advantages and adapt them successfully to international contexts.
Overall, this research sheds light on the evolving dynamics of global competition in the EV industry and the strategic pathways through which Chinese OEMs may convert national competitive advantages into global ones. By linking empirical evidence with broader theoretical frameworks, the study contributes to a deeper understanding of how latecomer firms from emerging economies can navigate internationalisation, generate global competitiveness, and influence the structure of a strategically critical global industry.