The global push to diversify supply chains away from China may be more aspirational than practical, at least in the near term, with China continuing to dominate manufacturing at a scale few countries can match. This was highlighted by Neelkanth Mishra, Chief Economist at Axis Bank, while speaking at the virtual press conference for the unveiling of the India Economic & Market Outlook 2026 Report.
Addressing questions on global manufacturing shifts, Mishra argued that the widely discussed China+1 strategy has inherent limitations because China remains the primary manufacturing base for global corporations. He cited the automobile industry as a telling example. In November alone, China produced about 3.5 million vehicles. Annualised, this translates to nearly 42 million vehicles—around half of total global automobile production.
Global auto production typically ranges between 85 and 90 million units annually, underlining the scale gap between China and the rest of the world. Beyond sheer volumes, China’s dominance extends across the supply chain, including auto components, electronics and batteries, particularly for electric vehicles. This integrated ecosystem enables cost efficiencies and speed that alternative manufacturing hubs struggle to replicate.
While several countries have positioned themselves as beneficiaries of China+1—including India, Vietnam and Mexico—the data suggests that these markets are still playing catch-up. India, for instance, produced roughly 5 million vehicles in FY24, making it one of the world’s fastest-growing auto markets but still a fraction of China’s output. Although policy initiatives such as production-linked incentives (PLI) have boosted investment, scaling up to China-like levels will require sustained capital expenditure, logistics upgrades and workforce expansion.
Globally, companies appear to be adopting a more nuanced approach. Instead of shifting production wholesale, multinational firms are adding incremental capacity outside China to hedge risks, while keeping China at the core of their manufacturing networks. This has resulted in diversification at the margins rather than a structural relocation.
Mishra’s remarks come at a time when global markets remain focused on supply-chain resilience amid geopolitical tensions and trade realignments. However, the data-driven reality, as highlighted in Axis Bank’s economic outlook, suggests that China’s manufacturing dominance—particularly in capital-intensive sectors like automobiles—continues to anchor global production, making China+1 an adjustment strategy rather than a true alternative.
