China’s automotive industry is dazzling the world

China’s automotive industry is impressing the world but facing serious difficulties at home. By September, Chinese consumers had bought around 22 per cent fewer passenger vehicles this year than during the same period last year, The Wall Street Journal reported. Full-year sales are expected to reach just 18.5 million vehicles, the lowest figure since 2014. At Skyworth Auto’s showroom in Nanjing, the company’s ambitions are on full display, but its actual sales in China amounted to just 660 vehicles by September this year, despite a declared annual production capacity of 100,000.

“There are so many competitors, and there is a lot of consolidation that needs to happen for long-term The growth model that fuelled the industry’s rapid rise is now making it difficult to put the brakes on as conditions turn against it. For decades, local governments joined forces with the private sector to invest in the automotive industry

Chinese cities poured billions in public funding into local champions, while the number of Chinese electric vehicle brands grew to a record 143 by the end of 2025. The industry’s problems are not confined to Beijing. Desperate for customers, Chinese manufacturers are turning to overseas markets with highly competitive products. The five largest players captured 11.7 per cent of the European market in September.

You get an earthquake in China, you get

“You get an earthquake in China, you get a tsunami outside,” said Michael Dunne, founder of the consultancy Dunne Insights. Volkswagen, the global carmaker with the greatest exposure to China, has begun its second major restructuring programme in less than two years, targeting up to 50,000 jobs. BMW is cutting around 8,000 employees, while Stellantis is losing money in Europe, partly because of competition from Chinese brands.

This year, China has factories capable of producing around 63 million passenger vehicles annually, more than three times the number its consumers are expected to buy. NIO has been losing more than $1 billion a year since 2021, while BAIC Motor, a partner of Mercedes-Benz, has issued a profit warning. China is on course to export 12 million vehicles this year, up from around one million a year at the beginning of the decade.

Beijing has shown little sign of addressing the problems facing the automotive industry, partly because it does not have complete control over the situation. “The progress of provincial governments depends on generating tax revenue and preserving jobs. There is a mismatch between the central plan and what happens locally,” said Tu Le, managing director of the consultancy Sino Auto Insights.

The Chinese government has expressed concern about what

The Chinese government has expressed concern about what it calls “involution”, or excessive competition, and has urged carmakers to stop cutting prices so aggressively. He Xiaopeng, founder of XPeng and one of the pioneers of China’s electric vehicle industry, said that manufacturing cars alone was no longer afeng and Changan announced restructuring plans but subsequently abandoned them

“Car factories employ so many people and are so deeply embedded in local economies,” said Fengming Lu, a researcher at the Australian National University. | BGNES