China's auto industry is entering a period of structural adjustment after years of rapid growth, as traditional growth drivers weaken and new ones emerge around electrification, intelligent technology and globalization, said Zhang Yongwei, president of China EV100.
The direction of the transition from internal combustion engines to smart electric NEVs is clear and unlikely to reverse, he said, but the shift will be a long process involving changes in market structure and increasing differentiation among companies.
The first signs of adjustment are emerging in the market. Zhang expects China's auto market in 2026 to fall short of the high growth rate recorded in 2025, with maintaining stable growth becoming an important task during the 15th Five-Year Plan (2026-30) period.
Domestic demand is undergoing a deep adjustment featuring double-digit falls and thin profit margins, while exports are becoming an increasingly important source of growth.
Statistics from the China Association of Automobile Manufacturers show that domestic sales, including passenger and commercial vehicles, fell 24.2 percent year-on-year to 1.7 million in August. It marks the fifth consecutive month in which the decline exceeded 20 percent.
Total vehicle exports, by contrast, rose 65.3 percent year-on-year to 1.01 million in the month. It was the third month in a row that saw exports exceed 1 million units.
Exports are estimated to reach 11 million units this year, according to China EV100.
Commercial vehicles and passenger vehicles are also showing different trajectories, with the former maintaining growth while the latter gradually entering a more stable phase.
"Structural increases and decreases are not necessarily a bad thing," Zhang said. "What really matters is whether new sources of growth can emerge during the adjustment."
Competition is also likely to intensify as the industry moves beyond its phase of rapid expansion.
Zhang said the traditional development model based largely on scale expansion is facing increasing constraints.
Tighter regulation is raising requirements for compliance, safety and environmental performance. Meanwhile, fiercer competition, changing consumer demand and weaker profitability are forcing companies to reconsider how they grow.
Over the past few months, China has issued a series of policies to boost the sector's healthy development.
One released in early September demands that automakers should pay small and medium-sized suppliers within 30 days of acceptance and no later than 60 days.
In late August, the authorities, including the Ministry of Industry and Information Technology and the State Administration for Market Regulation, launched a one-year campaign to enhance vehicle production consistency and quality.
The initiative targets issues arising from cutthroat competition and the frenetic pace of model launches, focusing on production consistency, reliability, durability, technology testing and validation.
This adjustment is also changing the significance of globalization for Chinese automakers.
Although China's auto exports continue to grow rapidly, geopolitical risks, tariffs and non-tariff barriers and localization requirements are making overseas expansion more complex.
Zhang said companies need to move beyond simply exporting vehicles and develop global capabilities covering brands, manufacturing and operations.
Localization and cooperation with overseas partners will become increasingly important as Chinese automakers build a more sustainable global presence, he said.
Technology is another major factor reshaping the industry. Zhang said artificial intelligence, intelligent driving, battery technology, and charging and battery-swapping infrastructure are creating new opportunities as the sector searches for new growth drivers.
"The auto industry must be among the first to embrace AI," Zhang said.
AI is expected to expand beyond intelligent vehicle cockpits and driving systems into corporate management, sales, maintenance and the used-car business.
Zhang expects AI to become a major area of development for the industry over the next few years.
He also called on automakers to develop a "second growth curve" by extending their capabilities around new hardware platforms into emerging areas such as embodied intelligence, low-altitude mobility, energy storage and new services.
The shift suggests that the next stage of China's auto industry will be less about expanding volume and more about reshaping where and how growth is generated.
The industry needs to remain confident in its long-term transition while recognizing that structural adjustment and competitive differentiation are an inevitable part of the process, said Zhang.
(Source: China Daily)