China is fast making inroads in the global automotive market, surpassing Japan in auto exports for the first time in the first quarter after passing Germany last year to now sit at the top, at least for now, according to S&P Global Mobility.

It remains to be seen if China will hold onto the lead for the year. S&P points out that China has multiple hurdles in the way: brand recognition, regulatory obstacles and political question marks.

Moody’s Analytics, quoted by CNBC, says China is still behind Japan on auto exports by an average of about 70,000 units per month but that it’s on pace to surpass it by the end of the year.

The Asian upstart has made big strides in advancing its auto manufacturing, technology and design, S&P says. Citing data from the General Administration of Customs in China, it says the country exported 3.32 million vehicles last year, up 57% year-over-year, more than a quarter of them battery-electric models. It ramped up exports even more in the first quarter to almost 1.5 million, a 76% year-over-year gain.

A big factor in the growth in exports has been many Chinese brands’ access to a full supply chain during a shortage of chips and other supplies that has hampered Western carmakers, S&P says.

The Biden administration has been working to change that by incentivizing companies to ramp up domestic electric-vehicle production and materials sourcing to gain independence from Chinese suppliers.

China’s domestic passenger vehicle sales, meanwhile, have slumped for two months in a row, down nearly 3% in both June and July. Exports balanced that, as its overall sales rose 1.7% in the first seven months of the year to 11.4 million.

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