· China's dominance in electric vehicle production is based on a number of competitive advantages, but it has work to do if it is to turn it into an engine of growth.

· Indeed, its electric car makers must look beyond the U.S. and Europe to other emerging markets to expand. That's where the Belt and Road could play a key role.

After overtaking South Korea and Germany in the past few years, China is expected to overtake Japan as the leading exporter of automobiles this year.

Japan and South Korea's export-oriented auto industries epitomize the rise of their economies. In China's case, the growth in its auto exports came long after it became a manufacturing powerhouse and its largest trading nation.

Behind the headlines, however, it is unclear whether China's auto industry, which has significant overcapacity, can become a profitable engine of economic growth.

China's auto industry has been the world's No. 1 in terms of sales since 2008. Unlike the situation in Japan and South Korea, foreign brands long dominated the Chinese auto market before the arrival of electric cars. General Motors and Mercedes-Benz sell more cars in China than in their home markets, and China's biggest car exporter is Tesla.

The largest export markets for Japanese and South Korean automakers are the United States and Europe. The U.S. market is largely closed to China as the U.S. imposes high tariffs on Chinese-made cars. While China has made inroads into some European countries such as Belgium, Britain and Spain, it still faces resistance to selling more electric cars in Europe.

In the first half of this year, China's biggest auto export markets were Russia and Mexico, where it sold mostly fossil-fueled vehicles. Gasoline and diesel-powered vehicles still make up the bulk of China's auto exports, although the country's auto exports are being boosted by electric vehicles.

BYD is expected to equal Tesla's electric car sales this year. BYD, China's best-selling car brand, relies heavily on the domestic market. In the first half of this year, Tesla exported far more cars from China alone than BYD and remains the biggest EV brand in Europe, where BYD had less than 1 percent market share last year.

Unlike Japan and South Korea, where the auto industry is dominated by a handful of national leaders, China's auto industry is much more decentralized, with more than 100 companies, many of which are supported by local governments. This is fundamentally different from the industrial policies of Japan and South Korea, which have a much higher degree of national coordination.

As a result of uncoordinated local government competition in support of the electric vehicle industry, a bloodbath similar to the one that occurred in China's photovoltaic industry a decade ago is likely to occur. Indeed, China's EV assemblers, which numbered around 500 at their peak in 2017, have only about 200 left today.

That hasn't stopped new entrants like Xiaomi from joining an already crowded market. Well-capitalized companies with established brands and distribution channels may have an advantage over independent startups. That's what Evergrande's foray into electric cars was all about in the first place, but it's exacerbated Evergrande's woes.

China has managed to outpace other countries in electric cars, in part because they are simpler to manufacture than cars powered by internal combustion engines. Moreover, in addition to having an abundance of cheap steel and electronics, China's EV industry benefits from its world-leading supply chain for EV batteries.

China's Ningde Times outpaces South Korean and Japanese rivals to hold a 35.9 percent share of the global EV battery market, supplying companies like Tesla and BMW. A key competitive advantage for BYD, which started out as a battery maker, is its own batteries, such as long-range blade batteries. While the industry may be fragmented at the assembly stage, China's real strength in EVs may lie upstream.

Looking ahead, smart navigation (including autonomous driving) will be a key factor in shaping China's EV leadership. The joint venture between Baidu and Geely is expected to launch its first model early next year.

A key factor in China's EV growth is its charging infrastructure. With more than 1 million units installed, China has more than half of the world's public slow charging points. In addition, by the end of 2022, China had 760,000 fast chargers, more than 10 times the level in Europe and more than 27 times the level in the U.S. In 2022, China accounted for nearly 90% of new fast charger installations.

Europe's unbalanced EV charging infrastructure will be boosted by new regulations that require full coverage of all major highways. The cumulative investment required in charging infrastructure by 2030 is €240 billion ($254 billion).

Most of the EV charging infrastructure in the US was built by Tesla, which operates an extensive network of Superchargers.

China's car exports face tariffs of 27.5% in the US and 10% in Europe (tariffs could rise after the EU launches an investigation into subsidies for electric cars). Unlike Japan and South Korea, China cannot rely on these two key markets and must look elsewhere, such as Southeast Asia and Latin America, where demand for EVs is expected to grow.

However, limited charging infrastructure is a major barrier to the rollout of EVs in developing countries. It requires huge investments that electric vehicle manufacturers cannot realistically finance.

With the necessary experience, capital and incentives, China is a natural investor in international EV infrastructure. Through such investments, China can expand the EV market in developing countries. This should be one of the highest priority projects under the Belt and Road Initiative, which will enhance China's industrial competitiveness and promote economic growth.