As the market structure continues to diversify and domestic luxury brands bolster their competitiveness, overseas expansion has become an imperative strategy. By 2025, Chinese automotive brands aim to achieve dual breakthroughs in both domestic and international markets.

Amidst profound transformations in the automotive industry, the transition from traditional vehicles to intelligent mobile terminals is accelerating. Chinese brands are not only deepening their roots in the domestic market by accurately perceiving and swiftly responding to consumer needs with innovative models and software applications but are also setting their sights on global expansion.

Against the backdrop of a complex yet opportunity-laden industry, what are the short-term development trends for Chinese brands? How should they navigate globalization challenges? To delve into these questions, Auto Review interviewed key analysts from S&P Global Mobility and China's automotive consulting business to provide an in-depth analysis from the perspectives of macroeconomics, market structure, production forecasts, and overseas expansion. Notably, the forecasts and viewpoints mentioned in this article are based on the market situation prior to the comprehensive tariff dispute between China and the United States.

Light vehicles are expected to experience mild growth in 2025.

Looking back at 2024, driven by the country's two rounds of subsidy replacement policies and robust export performance, the overall auto production market displayed a trend of a low start followed by a high finish, with a significant tail-raising effect. Entering 2025, the Chinese government's work report at the beginning of the year conveys optimism. It predicts that China's GDP growth will hover around 5% in 2025, supported by flexible fiscal tools and monetary policies to counteract external economic uncertainties. However, the beginning of Trump's second term has cast a shadow of uncertainty over the global economy.

This complex economic environment presents both challenges and opportunities for China's auto market. The sluggish momentum of global economic recovery and increasing variables in international economic and trade cooperation undoubtedly pose obstacles to the auto market's development. Yet, robust domestic policy support has injected a strong impetus into the stable growth of the auto market, providing automakers with opportunities to seek breakthroughs amidst difficulties.

S&P Global Mobility believes that the continuation of the replacement subsidy policy in 2025 will offer some support for the stability of the auto market. Simultaneously, the rise in foreign trade uncertainties and the waning effect of incentive policies may gradually normalize the seasonal output of the auto market.

In the second half of 2025, China's auto market still holds potential to hit annual sales targets, albeit with a gentler tail-raising amplitude compared to 2024. In terms of production growth, China's light vehicle production is expected to remain stable in 2025, with an anticipated annual growth rate of 2%. However, in the long run, the downward pressure on population growth exceeds analysts' previous expectations, leading to further downgrades in medium- and long-term forecasts. The long-term growth rate is expected to remain relatively stable.

Market structure will continue to differentiate in the short term.

In recent years, as China's auto market has expanded, the penetration rate of new energy vehicles (NEVs) has surged, nearing 50% in 2024. This data intuitively reflects consumers' enthusiasm for electrification and intelligence.

Reflecting on the growth of NEV penetration in 2024, two key time points stand out: one is the market upsurge triggered by subsidy differences (RMB 20,000 for NEVs, approximately RMB 15,000 for fuel vehicles, with tax exemptions for NEVs) after August; the other is after March, when independent brands launched various popular models, introducing 5 to 10 new models every month since April of last year, over 90% of which were NEVs. Additionally, independent brands' NEVs are characterized by immediate delivery upon launch, rapid volume increases in the first month, strong delivery capacity, and fast growth rates (typically reaching peak monthly sales volumes within 5 to 10 months, significantly shorter than the 12 to 24 months for fuel vehicles). For instance, BYD Qin LDM-i achieved sales of 50,000 units in a single month six months after its launch, whereas it took approximately 21 months for the 2015 version of Volkswagen Lavida to reach monthly sales of 20,000 units.

Furthermore, market competition intensified in 2024, with entry-level economic car series becoming the most fiercely contested "red ocean," witnessing rampant price wars. Many automakers faced immense profit pressure in 2023 and 2024. Notably, the continuous rise in NEV penetration has become a pivotal factor in the decline of joint venture brands' overall market share.

In 2025, with the successive launch of new models, coupled with the continuation of the country's trade-in policy and financial support from special treasury bonds, NEVs will remain a primary driver of overall market sales growth, further enhancing their penetration rate.

Additionally, there has been a notable shift in market share between independent and joint venture brands. Looking back at 2024, in the non-NEV market, joint venture brands such as Volkswagen and Toyota still accounted for over 60% of sales, but their market share has shown a gradual downward trend. Conversely, in the NEV market, Tesla's market share is less than 7%, Volkswagen's combined market share in China and Germany is around 2%, and Toyota's is less than 1%. Overall, joint venture brands hold a relatively low market share.

In response, many joint venture brands, particularly Japanese ones, launched several NEV models in early 2025 in collaboration with Chinese suppliers, such as GAC Toyota Platinum 3X, Dongfeng Nissan N7, and Dongfeng Honda S7, to explore new solutions and pricing strategies. Despite these efforts, S&P Global Mobility believes that these strategies have had a limited impact on joint venture brands' overall sales thus far.

From a short-term market perspective, the domestic market will continue to differentiate. Leading enterprises will further consolidate their positions through technology and services, while joint venture brands and small- to medium-sized brands may face greater challenges. For example, top-tier independent automakers will achieve growth amidst uncertainty by leveraging economies of scale, equitable rights in intelligent driving, and close collaboration with strong suppliers. Emerging forces represented by HarmonyOS Smart Auto, XPeng, and Xiaomi will also exhibit sustained growth momentum in 2025. In stark contrast, joint ventures, especially Japanese brands, will face greater impacts in the fierce market competition of 2025, potentially affecting their market share.

The NEV market in 2025 presents three key characteristics.

The rapid development of NEVs has given rise to distinct market features.

First, independent brands' NEV models are increasingly prominent. They offer significant advantages over joint venture fuel vehicles in terms of size, pricing, and subsidies. Currently, independent brands' NEV models not only compete with joint venture fuel vehicles but also actively benchmark against the same brand's fuel vehicles and mainstream NEV models. By adopting products from non-tier-one battery suppliers and other cost-reduction measures, they achieve pure electric prices lower than hybrid prices, fostering further improvements in NEV penetration rates.

Second, intelligence has emerged as the annual theme of China's auto market in 2025. BYD pioneered the integration of mainstream models with varying levels of Tianshen Eye intelligent driving assistance systems, garnering widespread industry attention. Chang'an, Geely, Chery, and emerging players like Lixiang and Leap Motor have followed suit, releasing or emphasizing their own assisted driving strategies.

It's worth noting that on April 16, the First Department of Equipment Industry of the Ministry of Industry and Information Technology organized a meeting on the product access and software online upgrade management of intelligent and connected vehicles. The meeting emphasized that combined driving assistance products are still in the stage of technical improvement and are not yet fully mature. There is still a gap between functionality being available and being user-friendly. At present, the combined driving assistance functions provided by Chinese automakers in on-sale vehicles all fall under the Level 2 driving assistance functions specified in GB/T 40429-2021. According to the standard, drivers must keep their hands on the steering wheel and their gaze focused on the road ahead. When the driving assistance function is enabled, the driver must continuously monitor the driving task and remain responsible for the entire process.

Finally, domestic luxury brands are significantly impacting the traditional luxury market with their price and technological advantages. Domestic NEV high-end brands have essentially covered the entry-level medium and large sedan and SUV segments of traditional luxury brands in terms of size and pricing. For instance, in the luxury sedan market, some popular independent brand models are priced between RMB 200,000 and 300,000, featuring industry-leading intelligent driving assistance configurations. Intelligent cabins and other configurations are gradually becoming standard or optional through promotional activities, owner points, etc. These changes have shifted the focus of competition among domestic luxury sedans from rivalry with foreign luxury brands to internal competition.

Price Wars: A Transition from Intense to Stable

Historically, price wars have been a significant competitive strategy in the auto market. However, the market displayed a different scenario in 2025. S&P Global Mobility anticipates that changes in direct price discounts will tend towards stabilization.

Previously, price wars erupted primarily due to capital investments and the actions of leading players. To ensure competitive pricing, brands needed to invest heavily in pre- and post-sales incentives such as vehicle subsidies, interest discounts, loan concessions, and insurance subsidies, placing immense financial strain on enterprises.

Government-led trade-in and scrapping subsidies, along with local government replacement subsidies, played a crucial role in stabilizing market prices. The injection of subsidy funds alleviated the financial burden on brands, enabling them to offer more competitive discounts with less capital investment and provide consumers with diverse subsidy forms, such as three-year fixed-amount interest-free loans and complimentary vehicle insurance.

In 2024, the price war for NEVs was primarily concentrated in the first half of the year. With the official implementation of the national subsidy policy in the second half, the market price discount range significantly improved, and more manufacturers began relying on national subsidies to attract consumers. In the fuel vehicle and luxury vehicle markets, the discount range also increased in the second half, but the large subsidy gap between fuel vehicles and NEVs exacerbated the financial burden on fuel vehicle brands to some extent.

Currently, market leaders' strategies are evolving, shifting from price wars to pursuing revenue and profit growth. On one hand, they earn export profits and improve corporate gross profit margins by promoting the export of domestically produced models. On the other hand, they raise terminal market prices through model innovation and updates, such as BYD's standard intelligent driving system and Geely, Chang'an, and other automakers' standard intelligent cabins or lidar configurations, achieving sales targets without price reductions.

Although price wars are stabilizing, with the anticipated decline in prices of intelligent accessories for NEV models and battery raw materials, NEV brands still possess flexible product and pricing strategies, leaving room for future price reductions.

Outlook on Chinese Automakers' Overseas Strategies

Regarding global expansion, Chinese automakers have actively invested in overseas markets in recent years, achieving remarkable export results. Southeast Asia and Europe have emerged as key regions for Chinese automakers' competitive layouts. In the short term, China's auto exports are expected to maintain a growth trajectory, but given the complexity and increasing uncertainty of the external environment, the growth rate may decelerate. Trade barriers, geopolitical risks, and other factors have become significant challenges that automakers and suppliers must navigate during the export process.

Looking at the export performance of Chinese brands in 2024, Europe emerged as a significant market, accounting for 50% of exports. Notably, the Russian market in Eastern Europe was the primary destination, while Western Europe contributed 18%. The Middle East and Africa, together with South America, claimed 17% and 12% of exports, respectively. In North America, Mexico was the key export target, while the ASEAN and Oceania markets each accounted for 6%.

In terms of export growth, Eastern Europe (particularly Russia), North America (Mexico), the Middle East, Africa, and the ASEAN market exhibited robust momentum. However, geopolitical shifts and tariff adjustments could significantly impact Russia and Mexico, despite their high export volumes. Country-wise, Russia led with approximately 500,000 exports, followed by Mexico, Australia, the United Kingdom, and Saudi Arabia.

Faced with the European Union's countervailing tariffs on Chinese electric vehicles, automakers adopted diverse strategies. Chinese automakers swiftly adapted, with MG, for instance, introducing HPV products to the European market post-tariff imposition, achieving notable success. Leap Motor, as a technology exporter, spearheaded cooperation by providing Stellantis with its proprietary "Four-Leaf Clover Architecture" technology, marking a first for a Chinese automaker leading global cooperation through technological prowess. Through its joint venture "Leap Motor International," Leap Motor circumvented the traditional high-cost model of overseas channel building, leveraging Stellantis's extensive network of over 200 sales outlets and production bases in 30 countries for rapid international expansion. Additionally, the European light vehicle market's preferences shifted, with electric vehicle growth slowing and hybrid demand increasing.

Long-term, the globalization of Chinese brands will continue to progress, with overseas sales expected to exceed 20% by 2030, according to S&P Global Mobility. Despite the export peak potentially nearing, Chinese automakers are increasingly establishing localized production bases overseas in response to market demands and trade uncertainties, making overseas capacity expansion an unstoppable trend.

China's automotive market stands at a pivotal juncture, presenting both opportunities and challenges. To navigate the complex and volatile economic environment, seize the new energy development opportunity, and achieve breakthroughs in overseas expansion, Chinese brands must innovate continuously and adapt flexibly to thrive in the competitive market and ensure sustainable growth.

Note: This article was originally published in the "Industry Reports" section of the May 2025 issue of "Auto Review" magazine. Stay tuned for more updates.

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Article: Auto Review

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