A Nio ET9 on display at the Guangdong-Hong Kong-Macao Greater Bay Area auto show in Shenzhen on May 31. CAO YINGYING/CHINA DAILY
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.
