"Cutthroat Competition in China's Auto Industry... Only Four EV Makers Turn a Profit"
Amid intensifying oversupply and cutthroat competition in China's automotive industry, analysts have warned that the situation could persist for an extended period.
According to the Korea Automobile Research Institute's report, "The Paradox of China's Automotive Industry: Neijuan," released on November 10, 2025, China's annual automobile production capacity last year reached 55.07 million units-twice the size of its domestic sales volume of 26.9 million units. "Neijuan" refers to a state where competition becomes increasingly self-consuming, resulting in persistent, wasteful rivalry without any qualitative advancement across the industry.
For companies above a certain scale, the average operating rate in China's automotive industry last year stood at 72.2%. However, when the survey scope is expanded to include all registered manufacturers, the actual operating rate is estimated to be around 50%. Generally, an operating rate below 75% is considered indicative of overcapacity.
Due to oversupply in the Chinese automotive sector, profitability across the finished vehicle industry has declined. The average vehicle selling price for major electric vehicle manufacturers such as BYD fell from 31,000 dollars in 2021 to 24,000 dollars last year, and the industry's profit margin has been halved from 8% in 2017 to 4.3% in 2024.
Among 130 Chinese electric vehicle manufacturers, only four-BYD, Tesla China, Li Auto, and Geely-recorded a profit last year. Global consulting firm AlixPartners has projected that only about 15 companies will be financially viable through 2030.
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In response, the Chinese government has begun restructuring the industry, including removing electric vehicles from its list of strategic industries. However, the report concludes that the situation is likely to persist. The report states, "Unlike in the past, China's automotive industry is now emphasizing the smooth functioning of market mechanisms," and adds, "Given the increasingly segmented market and the industry's symbolic status as a high-tech sector, direct government intervention is expected to remain limited going forward."
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