Industry must adopt long-term view, say execs

China's automotive industry has exited high-speed, scale-driven growth, with competition now shifting toward operational sustainability, technological depth and long-term market viability, executives noted at a recent industry conference.

Official data show national passenger vehicle sales surpassed 26 million units in 2025, with more than half of transactions coming from trade-in purchases. This indicates buyers now prioritize quality, driving experience and product value over basic transport functions.

New energy vehicles have become the core driving force of the transformation, with their market penetration reaching 61 percent for new passenger vehicles in April. Globally, Chinese automakers hold 70 percent of the plug-in hybrid market and 60 percent of the battery electric vehicle market.

Yet behind the rapid expansion lies a worrying squeeze on profitability. The industry's average profit margin stood at 4.1 percent in 2025 before declining to 2.9 percent in the first two months of 2026. For comparison, the figure stood at 6.1 percent in 2021, according to data from the China Passenger Car Association. It highlights a widespread "high volume, low profit" predicament across the sector.

"Sales without profits are pointless and scale gained through price wars is illusory prosperity," Wang Hui, chairman of Avatr, said at the fourth Man Machine Mobility conference in Shenzhen, Guangdong province, in late May.

He added that the past three to five years have seen the industry rely excessively on homogeneous competition, with automakers engaging in blind rivalry in pricing, vehicle configurations and after-sales services. This continuously erodes corporate profits and hinders high-quality industrial development.

Xu Jun, senior vice-president and COO of Leapmotor, pointed out at the conference that automakers are plagued by the widespread issue of "over-satisfying user demands", which triggers ineffective industry competition.

Similar to the smartphone sector, where nearly half of new functions are rarely used by consumers, automakers are blindly stacking mileage figures, computing power and smart configurations that deliver little practical value for daily driving scenarios.

For instance, the perceived difference between a 700 km and 1,000 km EV range is negligible for average users, yet automakers face exponentially higher R&D and production costs to achieve these upgrades. Xu explained that competing on technical specs decoupled from real-world usage scenarios yields no tangible market value.

Wang from Avatr, an EV arm of Changan Automobile, noted that car buyers have grown more rational now. They focus less on superficial features such as acceleration performance and battery range, and pay more attention to brand philosophy, corporate values and product reliability. Consumers increasingly evaluate whether a brand is worthy of long-term trust, underscoring the rising significance of brand soft power.

More than 150 new vehicle models were launched in China in 2025, but most fail to capture consumers' attention, resulting in a massive waste of R&D, production and channel resources, Wang noted.

Changan plans to streamline its product lineup from 63 to 36 models during 2026-30, concentrating resources on building star products.

William Li, founder and CEO of Nio, also said the company will not invest in R&D for additional range-extended, plug-in hybrid and MPV models to streamline operations and optimize resource allocation.

The capital- and technology-intensive auto industry demands steadfast, long-term strategic thinking and adherence to the principle of "spend when needed, save otherwise", he stressed.

Nio has poured over 68.8 billion yuan ($10.15 billion) into cumulative R&D spending over the past 11 years, with more than 20 billion yuan invested in battery swap infrastructure.

As domestic market competition grows fiercer, global expansion has emerged as the core incremental growth driver for China's auto sector. Cui Dongshu, secretary-general of the CPCA, projected that annual global vehicle sales will surpass 100 million units in the future, fueled by industrial cost reduction and large-scale standardized production.

The shift from internal combustion engines to electric motors has cut vehicle component quantities and manufacturing costs, lowering car purchase thresholds for consumers in emerging markets across Southeast Asia, Africa and South America, he said.

Chinese automakers, leveraging their mature industry chain capabilities and prominent cost advantages, are poised to witness explosive growth in overseas markets over the next five years, Cui added.

caoyingying@chinadaily.com.cn