According to Moody’s Analytics experts, China is going to overtake Japan as the world’s leading car exporter by the end of 2023, News.ro reports.

“China has gained attention during the pandemic, overtaking South Korea in 2021 and Germany in 2022 to become the second largest exporter of cars,” the rating agency said in a report.

China is now closing in on Japan, the report said, adding that the gap averaged about 70,000 vehicles a month in the quarter ended in June, compared with nearly 171,000 in the same period last year.

“At this rate, China is on track to overtake Japan by the end of the year,” Moody’s economists wrote, referring to the global rating that Japan has dominated since 2019.

Rising demand for electric vehicles has pushed China’s total car exports to pre-pandemic levels.

In the first half of 2023, China’s electric vehicle export revenue doubled compared to the same period last year. By comparison, Japan and Thailand’s total auto exports, which include both traditional and electric vehicles, have yet to return to pre-pandemic levels.

China boasts a competitive advantage in the production of lithium-ion batteries, which Moody’s said is a factor that gives automakers an advantage in the cost of producing electric vehicles.

According to Moody’s forecasts, China accounts for more than half of the world’s lithium supply thanks to low labor costs compared to rivals Japan and South Korea. China also boasts more than half of the world’s processing capacity for this metal.

As a result, some of the world’s largest car companies have established manufacturing facilities in China, including Tesla and BMW. However, Moody’s noted that foreign brands have not overshadowed local brands such as Chery and SAIC.

“Indeed, the speed with which China has introduced new technologies in the automotive industry is unparalleled,” the economists said.

The Asia-Pacific region, home to some of the world’s largest auto exporters, such as South Korea, China and Japan, has seen a mixed recovery in auto exports, Moody’s said.

However, electric vehicles accounted for nearly 30% of all passenger cars sold globally last year, up from less than 5% before the pandemic.

According to the International Energy Agency, sales of electric vehicles will grow to more than 10 million in 2022, with China leading the way, accounting for approximately 60% of the market.