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In April 2026, Asia became the largest buyer of Chinese electric vehicles (EVs), as Chinese exports jumped by almost 40 percent. Within this broader trend, South Asian nations – Nepal, Bangladesh, Sri Lanka, Pakistan, Bhutan and the Maldives – are emerging as important markets. Through the export of vehicles, batteries, charging infrastructure and digital ecosystems, Beijing is steadily restructuring South Asia’s technological standards. China exports not just products but complete mobility systems designed to generate long-term structural reliance that binds importing nations to Chinese manufacturers, standards and supply chains. This will have long-term implications for the region by creating dependency and security challenges, and by eroding India’s trade advantages.
China’s Domestic EV Transformation and Global Leadership
China’s dominance of the global EV industry is the outcome of three decades of sustained state-led effort. Between 2009 and 2023, China invested over US$230.8 billion in the EV industry. Government spending has been the primary driver, accounting for 60 percent of total global spending in 2025. Schemes such as purchase tax exemptions, performance-linked incentives and scrappage schemes have accelerated adoption, while large-scale investment has enabled China to account for 80 percent of the world’s installed charging capacity. In 2025, it sold 13 million electric cars, accounting for 65 percent of global EV sales, with sales projected to reach 14 million in 2026. Chinese automobile firms – BYD, SAIC, Geely, Changan, NIO and Xpeng – have emerged as major players across the world. At the centre of this ecosystem is Contemporary Amperex Technology Co., Limited, which controls 38 percent of the global lithium-ion battery supply, exemplifying how vertical integration has solidified China’s position.
EVs offer a domain in which China can set standards, shape supply chains and gain a long-term technological advantage, while reducing its exposure to oil import shocks and advancing its 2060 carbon neutrality targets.
China’s drive to dominate the sector is fuelled by both ambition and vulnerability. It seeks to break the historical pattern of Western and Japanese dominance in the conventional automobile sector. EVs offer a domain in which China can set standards, shape supply chains and gain a long-term technological advantage, while reducing its exposure to oil import shocks and advancing its 2060 carbon neutrality targets. It has built a highly integrated system spanning the mining, refining and processing of key minerals, large-scale battery and component manufacturing, and software and charging infrastructure. China controls around 70 percent of global rare earth mining, 90 percent of separation and processing, and over 80 percent of lithium-ion battery manufacturing. Additionally, China has been expanding abroad because of its overcapacity and domestic price wars amid slowing demand.
Expansion of Chinese EV Ecosystem in South Asia
South Asia has emerged as an increasingly attractive destination for China’s EV industry. The West imposes high tariffs and other non-tariff barriers on the country, whereas South Asian markets offer expanding consumer bases, favourable investment conditions and policy alignment with national green transition agendas. Nepal aims for carbon neutrality by 2045, Sri Lanka targets net-zero by 2050, Bhutan emphasises sustainability via Gross National Happiness, and Bangladesh pursues 30 percent EV deployment by 2030. Furthermore, the rising cost and risk of importing fuel, along with multiple economic shocks since COVID-19, are motivating countries to embrace this transition. This creates a window for monopolistic Chinese firms to systematically exploit South Asian markets.
Chinese EVs also stand out for their competitive pricing. In Nepal, Chinese manufacturers account for the majority of new EV sales, owing to their affordable pricing. Dealers earn higher margins on Chinese vehicles than on those of other players. A mature manufacturing supply chain, lower input costs and favourable financing conditions allow China to offer the world’s lowest battery prices. Another tool of expansion is Government-to-Government assistance. For instance, in January 2026, China donated 100 electric buses to Sri Lanka for its major Colombo-Kandy and Colombo-Galle routes; similar gestures have been extended to Nepal. Such grants build familiarity and consumer appeal, while also creating dependence on Chinese spare parts and maintenance services. Recently, Sri Lanka requested Chinese assistance in building charging stations nationwide.
Chinese firms have also pursued assembly operations in the region. In Pakistan, BYD has established a facility, but operations remain limited, with no local R&D or component manufacturing. Bangladesh shows a similar pattern. Since the 2021 National Electric Mobility Action Plan was initiated, China has continued to establish distributor networks and explore battery assembly in export zones, though investments are yet to materialise. At the same time, Bangladesh’s structural dependence on Chinese capital across sectors gives Chinese firms preferential access that Asian and European competitors lack. With supply lines and local partnerships already in place, market entry is easier for Chinese firms. This also provides a way to bundle in vehicle software and connected charging networks, and to integrate them.
There has been a significant increase in both the value and the number of Chinese EV units imported into South Asia between 2019 and 2025 (as Table 1 and Graph 1 show). The year 2019 is taken as the baseline, given the noticeable shift in EV trade that year. In Nepal and Bhutan, around 90 percent and 60 percent, respectively, of vehicles imported from China are EVs. Graph 1 shows that imports have increased significantly in Sri Lanka, and moderately in Pakistan, the Maldives and Bangladesh. The demand for EVs has fuelled an increase in total imports of Chinese vehicles since 2019, with Bangladesh as an exception. Table 2 shows that Chinese EV imports dominate the EV market in the region, with Bangladesh and the Maldives being exceptions. While Japanese vehicles and two-wheelers have dominated the Maldivian market, Bangladesh, until recently, lacked a policy framework and public appetite for EVs. This is gradually changing.
Table 1. China’s Vehicle and EV Trade with South Asia
Source: Authors’ collation from UN Comtrade and official trade statistics from respective countries’ ministries.
Note:
*Figures are approximate and represent average estimates, as reported values vary across sources.
**Total Vehicle Imports are derived from WCO HS Code 8703: Passenger vehicles (all types), whereas EV Imports are derived from HS 870380: Battery electric vehicles (pure EVs) category.
Graph 1. China’s Share of EVs in Imports into South Asia
Source: Authors’ own
Table 2. Chinese Dominance in the South Asian EV Market
Source: Authors’ collation from UN Comtrade and trade statistics from respective countries’ official websites.
Note:
*Figures are approximate and represent average estimates, as reported values vary across sources.
** Total Vehicle Imports are derived from WCO HS Code 8703: Passenger vehicles (all types), whereas EV Imports are derived from HS 870380: Battery electric vehicles (pure EVs) category.
EVs as a Diplomatic Instrument and Their Strategic Implications
China’s expanding EV footprint risks creating a new form of “dependency diplomacy,” in which technological and industrial reliance translates into long-term economic influence. Sri Lanka, for example, possesses critical minerals but lacks the processing capacity to convert them into battery-grade materials. For South Asian economies, developing even parts of the full value chain requires large investment, sustained policy action and time. Furthermore, these countries depend on China for critical minerals, advanced components and chips. When batteries degrade, nations face expensive replacements or premature retirement of vehicles, owing to a lack of battery recycling capacity. Given China’s technology-transfer restrictions, assembly lines are expected to generate only logistics and retail employment. This makes it difficult for South Asian economies to develop genuine domestic manufacturing capacity.
China’s expanding EV footprint risks creating a new form of “dependency diplomacy,” in which technological and industrial reliance translates into long-term economic influence.
Security concerns also persist regarding these imports. Modern, internet-enabled Chinese vehicles generate detailed location data, driving patterns and camera feeds, which are stored on cloud servers. The most advanced variants function as ‘smartphones on wheels‘, equipped with facial recognition, AI systems and over-the-air software updates. This is further complicated by China’s National Intelligence Law, which obliges individuals and companies to assist state intelligence, opening up the possibility of Chinese authorities accessing this data. In sensitive environments, this could enable the tracking of movements near ports, diplomatic sites or military installations, as well as remote interference with vehicle fleets. Such concerns have already been raised in Norway and Denmark.
The Belt and Road Initiative’s (BRI) Green Finance Agenda, which has directed US$11.8 billion into renewable infrastructure, also feeds into China’s EV expansion. Pakistan’s BYD assembly facility, linked to the China-Pakistan Economic Corridor (CPEC), illustrates how EV investments are being integrated with geopolitical objectives. Future BRI projects, especially highways, are likely to be designed with EV integration in mind. If this trajectory continues, South Asia’s transport, energy and data infrastructures will become highly vulnerable.
Security concerns also persist regarding these imports. Modern, internet-enabled Chinese vehicles generate detailed location data, driving patterns and camera feeds, which are stored on cloud servers. The most advanced variants function as ‘smartphones on wheels’, equipped with facial recognition, AI systems and over-the-air software updates.
Finally, beyond these strategic and security challenges, Chinese dominance of the EV industry poses a significant threat to India’s trade in the region. India has traditionally been South Asia’s principal source of automobile and petroleum imports. Firms such as Tata, Mahindra, Ashok Leyland, Maruti Suzuki and TVS have built strong market positions through extensive dealer networks, joint ventures, readily available spare parts and well-established service ecosystems. As such, the growing preference for Chinese EVs is likely to affect India’s automobile and petroleum trade with all countries in the region (by 14 to 33 percent, as shown in Table 3), barring the Maldives and Pakistan.
Table 3. India’s Trade with South Asian Countries
Source: Authors’ collation from UN Comtrade and Trade Intelligence and Analytics Portal, Department of Commerce, Government of India.
Note:
*Total Vehicle Imports are derived from WCO HS Code 8703: Passenger vehicles (all types)
**Petroleum Imports values are derived from Chapter 27 of the HS Code, which covers “Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes.”
India is accelerating its EV transition to expand manufacturing and exports, and is deploying it as a foreign policy instrument — yet the scale of this expansion remains modest compared to China’s. Between 2020 and 2025, India’s EV sector attracted around US$25 billion in investment, well short of its targets, leaving China to dominate the market. At a time when India is investing significantly in energy and oil connectivity and easing trade and transit networks for its neighbours, the surge in Chinese EVs — and their potential transit through strategic regions, especially the Northeast — could add to existing economic and security risks.
At a time when India is investing significantly in energy and oil connectivity and easing trade and transit networks for its neighbours, the surge in Chinese EVs — and their potential transit through strategic regions, especially the Northeast — could add to existing economic and security risks.
China’s EV expansion in South Asia goes beyond commerce, reflecting a broader pattern of tactical economic integration. By exporting the entire EV ecosystem and offering India’s neighbours access to finance, technology and clean transport solutions, China builds leverage over them without resorting to coercion. For South Asia, affordable Chinese EVs — combined with growing climate commitments and the need to reduce dependence on imported fossil fuels — present a new set of choices. Taken together, these dynamics suggest that South Asia’s clean transport future lies as much in the realm of geopolitics as in markets and climate policy. While geography and commercial ties continue to favour India overall, these advantages alone may not be sufficient to sustain its primacy in trade.
Aditya Gowdara Shivamurthy is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation.
Sakshi Kapoor is a Research Intern at the Observer Research Foundation.
Disclaimer: ChatGPT 5.5 was used to generate infographics and tables.
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