Country's buyers value technology over prices

China's auto market is entering a phase where consumers prioritize reliable technology, user experience and brand credibility over big discounts, according to a new survey by McKinsey & Company.

The findings of its 2026 China Auto Consumer Insights suggest the yearslong price war in the world's largest auto market is beginning to lose its effectiveness. It comes as automakers continue to slash prices across electric and gasoline-powered vehicles.

According to the China Passenger Car Association, around 70 new energy vehicle models across premium, joint-venture and domestic brands offered discounts in the first quarter. Average price cuts reached 38,000 yuan ($5,300), or 13.7 percent of sticker prices. Gasoline-powered vehicles faced similar pressure, with average discounts of 37,000 yuan, or 14.3 percent.

Yet despite the scale of the discounts, consumer demand remained subdued. Passenger vehicle sales fell 18.5 percent year-on-year in the first four months, while new energy vehicle retail sales declined 17.2 percent, reflecting cautious consumer sentiment.

McKinsey found that among consumers who purchased a car within the past year, 22.2 percent viewed the ongoing price war negatively, compared with 16.5 percent who held a positive view.

The consultancy said repeated rounds of discounting have reinforced expectations that waiting longer could bring lower prices. This encouraged consumers to delay purchases and extended buying cycles.

By contrast, technology upgrades and improved features generated a net positive effect of 20.7 percent on purchase intentions, nearly double the 2025's level.

"Consumers are voting with their behavior," said Thomas Fang, a McKinsey partner. "What drives purchase decisions now is higher value, not lower prices."

The shift highlights how competition in China's car market, especially the NEV segment, is increasingly moving away from sticker prices toward software capability, product execution and long-term brand trust.

In one of the survey's clearest signs of changing consumer priorities, "brand" rose to become the second-most important purchase factor for electric vehicles, behind only driving range and charging convenience.

Meanwhile, the number of brands that consumers initially consider has begun to narrow for the first time in years. McKinsey said consumers are gravitating toward brands perceived as capable of consistently delivering intelligent-driving functions, software updates and smart cockpit experiences.

"In a highly competitive market like China, the winners will be companies that can articulate a clear and differentiated customer proposition — and consistently deliver it through smart EV technologies, products and user experience," said Daniel Birke, a McKinsey partner.

The report suggests that traditional notions of brand heritage are becoming less relevant in China's NEV era.

Instead, consumers increasingly judge automakers based on whether advanced technologies work reliably in everyday use from assisted-driving systems to over-the-air software updates and in-car intelligent features.

That growing emphasis on "technology delivery" is reshaping expectations around autonomous driving and artificial intelligence inside vehicles.

According to the survey, 69 percent of respondents now consider advanced assisted-driving features such as urban Navigate on Autopilot a "must-have" when purchasing a car. Meanwhile, 84 percent said they expect in-car AI assistants to evolve beyond simple voice-command systems into proactive digital companions capable of understanding habits and anticipating needs.

McKinsey said the findings point to a broader industry transition in which competitive advantage increasingly depends on system-level capabilities rather than isolated product specifications.

"The future winners will be those that can turn innovation into stable user experiences, brands into trusted promises, and industrial collaboration into system-wide competitiveness," said Guan Mingyu, a senior McKinsey partner and leader of its automotive practice in China.