(Yicai) Dec. 7 -- Intense competition is shrinking the profits of Chinese auto exporters even as sales boom in the world’s biggest car market, according to one such business owner.

Tangshan Yingkun Supply Chain Management’s profit margin has shrunk to 4 percent this year from 15 percent in the prior 24 months, owner Zhang Shaoqian, who has been in the parallel auto export business since 2021, told Yicai.

In parallel auto export traders buy vehicles in their home country and then ship them abroad through customs without the carmakers' authorization. The Chinese government began trialing the business in 2019, with Zhang starting to plan his company that same year.

Only about 100 pilot firms were approved at first, benefiting the development of Tangshan Yingkun, Zhang noted. Since then high profits have attracted traders to the parallel auto export business, with two or three thousand registered in China, he said.

But as new entrants crowd into the market, an ongoing price war is escalating, according to Zhang. “The number of entrants is soaring without an increase in foreign customers, so they have to compete for existing clients by constantly reducing prices,” he noted.

“In the past two years, foreign customers rushed to buy Chinese cars, especially new energy vehicles,” he said. “Geely Automobile Holdings' Zeekr 001 is priced at CNY300,000 (USD42,026) at home but can be sold for CNY50,000 more overseas.”

The same model is often cheaper in China than in global markets due to industrial chain advantages and labor costs. Volkswagen's ID series can be as low as CNY120,000 (USD16,757) in China, but can cost as much as EUR40,000 (USD43,036) in Europe.

Driven by NEV sales, China has surpassed Japan to become the world's largest auto exporter. Exports jumped 60 percent to 3.9 million in the 10 months ended Oct. 31 from a year earlier, with NEV shipments almost doubling to 1 million, according to data from the China Association of Automobile Manufacturers.

As the industry becomes more competitive, Tangshan Yingkun can only stay profitable through supply chain cost-cutting, including through lower premiums, logistics costs, and the prices paid for vehicles, Zhang said.

Editors: Dou Shicong, Martin Kadiev