There is nothing new under the sun.
The intense competition unfolding in China's automotive industry today is not entirely unfamiliar when viewed against the broader history of Chinese manufacturing over the past several decades.
Technology advances rapidly. New players enter the market. Production capacity expands. Products become increasingly sophisticated and diverse, while price competition intensifies.
The market grows, industrial capabilities improve, yet companies find it increasingly difficult to make money.
We have seen similar developments in China's home appliance, solar photovoltaic (PV), and smartphone industries.
What is interesting, however, is that these three industries have followed very different paths.
After decades of competition, China's major home appliance markets have become increasingly concentrated, and several Chinese companies have developed strong global operating capabilities.
China's solar PV industry has achieved global leadership in technology and manufacturing scale, yet it continues to struggle with overcapacity and profitability.
The smartphone industry has undergone intense competition and consolidation, but the competitive landscape in China has not necessarily determined the position of Chinese companies in global markets.
In my conversations with automotive executives in China and around the world, one question comes up repeatedly: When will China's automotive industry finally enter a decisive phase of consolidation?
According to conventional industry logic, as competition intensifies and profitability declines, less efficient companies should gradually exit, allowing market share and resources to become more concentrated.
Yet the reality in China's automotive industry appears more complicated.
There has been constant discussion about consolidation, restructuring, and market exits. But the number of participants has not declined as quickly as many expected. Instead, new vehicle models continue to enter the market.
Some companies are already facing serious financial difficulties, yet remain in the market through new financing, restructuring, or partnerships. Others have relatively limited market shares in China but are beginning to find opportunities overseas.
Meanwhile, the rapid development of electric vehicles, intelligent driving, and software technologies is continuously reshaping the competitive advantages of established players.
So how will China's automotive industry consolidate? Which companies will successfully navigate this transition? And how will the international expansion of Chinese automakers reshape the competitive landscape?
To explore these questions, it is worth looking at the development of other industries.
Home Appliances: What Remains After Industry Consolidation?
Looking back at the development of China's home appliance industry, particularly air conditioning, we can identify several similarities with today's automotive market.
From the 1990s into the early 2000s, China's residential air conditioning market expanded rapidly as household incomes rose and living conditions improved. Numerous companies entered the market. Competition was driven by pricing, distribution expansion, and investment in manufacturing capacity.
But growing demand did not guarantee success for every participant.
According to data from China's State Information Center, the number of air conditioning brands monitored in major Chinese cities declined from 52 to 34 between two consecutive industry sales years, with the latter ending in July 2008. During that period, Midea, Gree, and Haier together accounted for 52.51% of the monitored market.
The data reflects a clear trend: competition was driving market share toward stronger players. However, fewer brands did not mean the end of competition, nor did it guarantee profitability.
Even today, Midea, Gree, and Haier must continue investing in R&D, product development, manufacturing efficiency, distribution networks, and customer service. Raw material costs, technological changes, and shifts in consumer demand continue to affect their performance. Brand exits, therefore, are only one visible outcome of industry consolidation.
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The more important question is: Why were some companies able to survive and continue growing over the following decades?
Scale certainly matters.
Air conditioners, refrigerators, and washing machines benefit from economies of scale. Higher production volumes allow companies to spread R&D, procurement, manufacturing, and distribution costs across more units.
But scale alone is not enough.
Over years of competition, leading companies developed more comprehensive capabilities in product engineering, manufacturing management, quality control, branding, distribution, and customer service.
These capabilities reinforced one another, enabling companies to develop products consistently and respond more effectively to changing market conditions.
As these companies expanded internationally, those accumulated capabilities created new opportunities.
In 2026, unusually hot weather across parts of Europe created significant opportunities for Chinese air conditioning manufacturers.
One particularly interesting example is Midea's PortaSplit portable split air conditioner, developed for the European market.
Many European homes were not originally designed for air conditioning.
In some older buildings, restrictions on modifications to external walls make conventional split-system installation difficult. Professional installation can also be expensive and involve long waiting times.
Midea addressed these challenges with a portable split-system design that does not require drilling through external walls, while offering effective cooling, relatively low indoor noise, and convenient installation.
According to information disclosed by Midea in June 2026, PortaSplit's business-to-business shipments in Europe had exceeded 200,000 units, approximately double the level recorded during the comparable period a year earlier. Midea's European website subsequently reported that cumulative sales had exceeded 300,000 units since the product's European launch in 2024.
Image source: Midea
High temperatures certainly helped stimulate demand. But the product was able to capture that opportunity because it addressed practical problems faced by local consumers.
I believe this example is particularly relevant to the automotive industry.
Chinese companies have already developed highly competitive manufacturing capabilities and supply chains. But whether these capabilities translate into lasting advantages overseas depends not simply on how many existing products they can export, but on how well they understand what local customers actually need.
I had a similar impression at the Paris Motor Show 2026.
The growing presence of Chinese automotive brands in Europe represents important progress.
However, some of the vehicles I observed still appeared to be primarily Chinese-market products adapted for Europe, rather than products defined from the outset around European customer needs.
Of course, not every product needs to be developed from scratch for an overseas market.
Adapting an existing vehicle or platform can be a commercially sound strategy. The key question is whether that adaptation genuinely addresses local customer requirements, rather than merely satisfying regulatory requirements for market entry.
The history of China's home appliance industry shows that consolidation is not simply about reducing the number of competitors.
It is also about accumulating capabilities in R&D, manufacturing, branding, distribution, and management.
And those capabilities create new competitive advantages when they are applied effectively to specific market needs.
To judge whether an industry has truly matured, we should look beyond how many companies have disappeared and examine what capabilities the remaining companies have built—and whether those capabilities can continue to create value.
Solar PV: Why Does Better Technology Not Necessarily Mean Higher Profits?
If the home appliance industry illustrates how competition can lead to consolidation and capability accumulation, China's solar PV industry offers a different and more cautionary lesson.
The development of China's solar PV industry is one of the most remarkable stories in global manufacturing.
Through sustained technological progress, large-scale investment, and supply chain development, Chinese companies have established strong global positions in solar cells, modules, and related manufacturing processes.
The cost of solar power has fallen dramatically, making solar energy an increasingly important part of the global energy transition.
Yet there is an apparent contradiction.
Technology keeps improving. Global demand continues to grow. But manufacturers do not necessarily earn higher profits.
According to the International Energy Agency's Renewables 2025 report, global annual solar PV module manufacturing capacity reached approximately 1,100–1,350 GW in 2024—more than twice the volume of solar PV systems deployed globally that year.
Manufacturing capacity and annual installations are not identical statistical measures. Nevertheless, the gap illustrates how rapidly manufacturing capacity expanded relative to demand.
Why does overcapacity emerge even when the market is still growing?
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One important explanation is that decisions that make sense for individual companies do not necessarily produce a sustainable outcome for the industry as a whole.
When demand is expanding rapidly, every company has an incentive to increase capacity, reduce costs, and capture market share.
For an individual manufacturer, investing in new equipment, expanding production, and improving efficiency may all be commercially rational decisions. But when many companies make those investments simultaneously, additional supply can exceed actual demand. To maintain capacity utilization and market share, companies may reduce prices further.
Lower prices compress margins, pushing manufacturers to pursue additional technological upgrades and cost reductions. The industry can become trapped in a cycle: more investment, better technology, cheaper products—and increasingly difficult profitability.
This resembles a classic prisoner's dilemma in industrial competition.
There is another issue in solar PV that deserves closer examination: whether technological progress can create sustainable competitive barriers.
Image source: 699pic.com
Solar manufacturing relies heavily on production equipment and process engineering.
When a company develops a new cell technology or improves manufacturing efficiency, equipment suppliers are often involved in development, testing, process optimization, and mass production.
But equipment suppliers typically serve multiple customers.
As a manufacturing process matures and equipment solutions become more standardized, related capabilities may spread through equipment sales, engineering experience, and the movement of skilled professionals.
The solar manufacturing equipment industry has itself advanced rapidly.
Equipment suppliers continuously improve productivity, precision, and cost performance, enabling more manufacturers to adopt advanced technologies.
For the industry as a whole, this is beneficial.
The diffusion of advanced equipment reduces manufacturing costs and contributes to lower solar electricity costs. But for companies that invested first in developing a particular technology, the implications are more complicated. If a technological advantage depends largely on equipment that competitors can purchase and processes that can be replicated relatively easily, early innovators may struggle to maintain their lead. Competitors can potentially narrow the gap by acquiring similar equipment and improving their production processes.
This does not mean the solar PV industry lacks intellectual property protection or technological barriers. Companies hold extensive patents and proprietary know-how, and patent disputes around technologies such as TOPCon demonstrate the growing importance of intellectual property.
The relevant question is not whether innovation is protected at all, but how long an innovator can retain the economic benefits of its technological lead when certain capabilities can spread rapidly through the industrial ecosystem.
When technology diffuses quickly and the industry has abundant capital and manufacturing capacity, innovation may reduce costs across the entire sector without necessarily generating sustained excess profits for individual companies.
Technological transitions can create another challenge.
When a new technology emerges, companies may invest in new production lines to avoid falling behind.
If older capacity has not yet exited the market, new investment can further intensify the supply-demand imbalance. China's solar PV industry experienced a major adjustment around 2011–2013 and has faced renewed profitability pressures since 2023.
The technological, policy, and market conditions of these periods were different. But both episodes suggest that one round of industry restructuring does not prevent another cycle of excessive investment.
There are important parallels with China's automotive industry today.
As electric and intelligent vehicle technologies evolve, automakers continue launching new models and upgrading powertrains, electrical and electronic architectures, and intelligent driving systems.
From the perspective of an individual company, these investments may be necessary. Without them, the company risks falling behind in the next technological cycle.
But when the entire industry invests heavily in developing numerous vehicles with overlapping features and market positioning, and many of those models fail to achieve sufficient lifetime sales volumes, the economics become increasingly difficult.
R&D expenditure, tooling, production facilities, and supplier development costs must all be recovered over the commercial life of a vehicle program.
If volumes fall short of expectations, these investments become difficult to amortize.
The same problem affects automotive suppliers.
More vehicle programs mean more engineering work and development expenditure. But if relatively few programs achieve meaningful production volumes, suppliers may struggle to recover their investment.
Price reductions, payment-term pressures, and fluctuations in raw material costs further complicate the situation.
Technology also spreads through the automotive supply chain.
An advanced feature may initially differentiate one automaker's products. But as suppliers mature their solutions and costs decline, similar technologies can become available across a growing number of competing vehicles.
This benefits consumers and accelerates technological adoption.
But purchasing advanced technology is not the same as building a competitive advantage that others cannot easily replicate.
Of course, automotive technology involves more complex system integration, safety validation, software capabilities, and long-term quality responsibilities. We should not assume that all automotive technologies will become standardized as quickly as certain solar manufacturing processes.
The most important lesson from solar PV is therefore not simply about overcapacity.
It is about the relationship between technological innovation and economic value.
Technology can advance an entire industry, but whether individual companies capture sustainable returns depends on technological barriers, investment discipline, product differentiation, and the structure of competition.
Technological leadership, manufacturing scale, and profitability are three different things.
Smartphones: Why Domestic Market Leadership Does Not Determine Global Success
Now consider the smartphone industry.
Over the past two decades, China's mobile phone market has experienced intense competition.
From the large number of domestic brands in the feature-phone era to the wave of new entrants following the rise of smartphones, the industry once supported a wide range of competitors.
As technological development accelerated, R&D requirements increased, and distribution competition intensified, market share gradually concentrated among leading brands.
According to Omdia, China's mainland smartphone market recorded approximately 282.3 million shipments in 2025. Huawei, vivo, Apple, Xiaomi, and OPPO ranked among the five leading vendors, together accounting for nearly 80% of shipments. The Chinese smartphone market has therefore become highly concentrated.
But concentration has not eliminated competition.
Leading brands continue investing heavily in semiconductors, operating systems, imaging technologies, artificial intelligence, product design, and distribution. Their market positions also change as technology, products, and consumer preferences evolve.
Image source: Gasgoo, enabled by AI
The smartphone industry nevertheless reveals another important characteristic.
Even though China's domestic market is relatively concentrated, the global market does not follow the same competitive ranking. Apple, Samsung, and Chinese smartphone brands occupy very different positions across countries and regions. Apple has built advantages through its premium brand positioning, operating system, and integrated ecosystem. Huawei has developed a broad combination of product engineering, proprietary technology, and ecosystem capabilities. Transsion, meanwhile, has followed a very different path, building its position through a deep understanding of consumers in specific regional markets.
Transsion is a particularly interesting example.
Unlike many Chinese smartphone manufacturers, Transsion did not first become a leading player in China before expanding internationally. Instead, it focused for many years on emerging markets, particularly Africa, developing products and business operations around local income levels, usage patterns, distribution structures, and service requirements. According to Transsion's 2025 annual report, the company shipped approximately 169 million mobile phones during the year, including both smartphones and feature phones.
Its share of the African smartphone market was approximately 40%.
What makes Transsion interesting is that its success has not depended on low prices alone.
It has built a combination of product development, branding, distribution, and after-sales service around the needs of local customers. Consumer expectations regarding price, battery life, photography, durability, and service accessibility can vary significantly between markets.
The ability to understand these differences and translate them into products and operating capabilities can be decisive in regional competition.
There are early examples of similar thinking in the automotive industry.
ROX Motor, for instance, has positioned its large luxury SUVs around demand in Middle Eastern markets, including off-road capability and outdoor travel.
This remains an early-stage example. ROX has not yet demonstrated the scale or business-model maturity of Transsion, and its ability to achieve sustainable profitability remains to be seen.
The point of the comparison is not to declare that a particular automaker has already succeeded.
Rather, it raises a broader question: Must a Chinese automaker first become a domestic market leader before it can establish a meaningful position globally?
I do not believe so.
The global market is not simply an enlarged version of China's domestic market.
Countries differ in income levels, consumer preferences, distribution structures, product requirements, and competitive environments.
A product or brand that is successful in one market may not enjoy the same advantages elsewhere.
Conversely, a company with limited domestic market share may still find opportunities in other regions.
Consolidation in one national market does not necessarily mean that global competition will consolidate in the same order or produce the same winners.
This distinction is particularly important as Chinese automakers accelerate their international expansion.
In the future, China's automotive industry may produce several large automotive groups operating across multiple regions.
It may also support companies that establish strong positions in specific markets, vehicle categories, or technological segments.
Whether those businesses can survive over the long term, however, will depend on their ability to create customer value and generate sustainable commercial returns.
Why the Automotive Industry Will Not Simply Repeat These Historical Patterns
Looking back at home appliances, solar PV, and smartphones, we can identify several common industrial dynamics.
Competition encourages the reallocation of resources and may gradually reduce the number of market participants. Technological progress improves industrial efficiency, but does not necessarily translate into higher corporate profits. And the outcome of domestic competition does not always determine a company's position in global markets.
However, it would be misleading to conclude that China's automotive industry will follow any one of these paths directly.
It may not consolidate as quickly as the home appliance industry. It may not remain trapped in repeated investment cycles like parts of the solar PV industry. Nor will its global competitive structure necessarily resemble that of smartphones.
The automotive industry has characteristics that make its evolution more complex.
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First, industrial scale and the cost of exit
Automotive manufacturing involves extensive R&D, production facilities, and supplier networks.
A single vehicle assembly plant may support numerous suppliers, engineering teams, jobs, and local industrial activities.
Even when an automaker loses competitiveness, its manufacturing assets and related industrial resources may not exit the market quickly.
They may continue operating through mergers, restructuring, partnerships, or asset transfers.
As a result, consolidation in the automotive industry may not be reflected in a rapid disappearance of brands or a corresponding reduction in manufacturing capacity.
We may see fewer brands while factories remain in operation.
Companies may be restructured without their original capacity actually leaving the market.
This means changes in the number of automotive brands do not necessarily provide a complete picture of whether industrial resources are being used more efficiently.
Second, the complexity of technology and industrial specialization
A vehicle is not simply a consumer product.
It is a complex engineering system involving mechanical, electrical, electronic, software, materials, energy, and safety technologies.
The development of electric and intelligent vehicles is also changing the division of responsibilities between automakers and suppliers.
Some technologies previously led by suppliers are increasingly being developed in-house by automakers.
At the same time, components that were once developed relatively independently are becoming part of integrated systems requiring closer coordination across multiple technologies.
Future consolidation may therefore occur not only among brands and companies, but also across technology platforms, engineering organizations, manufacturing assets, and supplier relationships.
Even if the number of brands does not decline significantly in the near term, the underlying industrial resources may already be becoming more concentrated.
In fact, we are beginning to see elements of this process today.
Third, geopolitics and industrial policy are changing the conditions of global competition
I consider this particularly important.
Over the past several decades, the international expansion of China's home appliance, solar PV, and consumer electronics industries benefited significantly from global trade, industrial specialization, and supply chain integration.
These industries have also faced trade restrictions and international competition.
But the environment confronting today's automotive industry is especially complex.
Tariffs, rules of origin, industrial subsidies, investment screening, local manufacturing requirements, and regulations covering data, safety, and intelligent technologies all influence how companies operate internationally.
Even a company with advanced technology and a strong manufacturing cost advantage may not be able to enter every market through the same business model.
Exports may remain commercially effective in some regions.
In others, companies may need local manufacturing, technology partnerships, joint ventures, or other arrangements to secure market access.
Image source: Ningbo Port
Global automotive competition is therefore no longer simply about maximizing the efficiency of a unified global production and sales system.
Companies must make more complex trade-offs between cost efficiency, supply chain resilience, market access, and regional operations.
Fourth, differences in economic development and consumer demand
China's rapid development of electric and intelligent vehicles has been supported by a distinctive combination of conditions.
These include a large domestic market, a comprehensive supply chain, expanding charging infrastructure, consumer acceptance of intelligent technologies, and intense product competition.
But these conditions do not exist to the same extent everywhere.
Europe, Japan, South Korea, India, Southeast Asia, the Middle East, and Latin America differ significantly in income levels, energy prices, infrastructure, road conditions, and consumer preferences.
Demand for battery-electric vehicles, hybrids, plug-in hybrids, and conventional combustion-engine vehicles may coexist for many years.
The global automotive industry is unlikely to transition at the same pace or follow a single technological pathway.
Chinese automakers therefore need to reassess which advantages developed in China can be transferred directly, which require additional investment, and which may not remain relevant in certain overseas markets.
These differences help explain why the future evolution of China's automotive industry may be more complex than that of other manufacturing sectors.
Competition in China may drive further concentration of industrial resources, while differences in regional demand, policy environments, and industrial structures create new forms of global competition.
These two developments are not contradictory. They may occur simultaneously.
Where Is China's Automotive Industry Heading Over the Next Three to Five Years?
Taking together the lessons from other industries and the distinctive characteristics of automotive manufacturing, I see three important developments that could shape China's automotive industry over the next three to five years.
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First: Domestic Consolidation — From Fewer Brands to the Restructuring of Industrial Resources
As competition intensifies, companies will increasingly have to confront questions of operating efficiency and investment returns.
But we need to broaden our understanding of what industry consolidation actually means.
Discussions about consolidation often focus on how many automakers or automotive brands will ultimately survive.
These are important questions, but they do not tell the whole story.
What may matter more is how technology platforms, engineering capabilities, manufacturing assets, and supply chain resources are reorganized.
Automakers need to reduce duplicated development, improve platform sharing, and spread engineering investment across more vehicle programs.
At the same time, existing manufacturing capacity must gradually become more productive through consolidation, restructuring, repurposing, or market exit.
Suppliers also need to reconsider the foundations of their competitiveness.
As automakers strengthen their in-house engineering capabilities, suppliers that rely primarily on production capacity, manufacturing execution, and individual vehicle programs may find it increasingly difficult to earn attractive margins.
Companies with technologies and engineering capabilities that can serve multiple customers and vehicle platforms are more likely to achieve sustainable economies of scale.
Consolidation may therefore begin behind the brands.
Even if the number of automotive brands does not decline rapidly, technology platforms, manufacturing resources, and supplier relationships may already be undergoing substantial restructuring.
But if consolidation merely reduces the number of brands without addressing inefficient capacity and duplicated investment, the industry's profitability problems may remain unresolved.
Second: Global Differentiation — China's Leaders Will Not Necessarily Lead in Every Region
As Chinese automakers expand internationally, different companies may develop increasingly distinct competitive positions.
Some may build global operations across multiple regions through scale, shared technology platforms, and supply chain capabilities.
Others may establish advantages through overseas brands, technology partnerships, or local manufacturing.
Still others may find viable positions in specific regions, vehicle categories, or customer segments.
But global differentiation is not simply the result of corporate strategy.
National industrial policies, trade rules, consumer purchasing power, energy infrastructure, and technological pathways are reshaping the conditions of competition.
A leading automaker in China may not enjoy the same advantages in every overseas market.
Meanwhile, a company with a relatively modest domestic position may establish a meaningful presence in a particular region.
The future global automotive industry may therefore include both large automotive groups operating across multiple regions and more specialized companies with strong regional or segment positions.
Further concentration of industrial resources within China and greater diversity in global competition are not mutually exclusive.
They may become two defining features of the next phase of China's automotive development.
Third: Rebuilding Economic Value — From Growth in Scale to Returns on Investment
The rapid development of China's automotive industry has been driven by market expansion, technological innovation, supply chain collaboration, and sustained investment.
These strengths remain important.
But as the market matures, companies can no longer rely solely on sales growth, the number of new vehicle launches, or the speed of technological development as evidence of competitiveness.
The more important questions are whether R&D investment generates sufficient vehicle sales, whether manufacturing capacity is used efficiently, whether suppliers earn reasonable returns, and whether international operations generate sustainable cash flow.
According to China's National Bureau of Statistics, capacity utilization in the automotive manufacturing industry was 66.2% in the third quarter of 2026, compared with 73.3% for manufacturing overall.
This measure covers the broader automotive manufacturing industry and should not be interpreted as the average operating rate of vehicle assembly plants.
Nevertheless, it highlights the importance of improving the efficiency with which industrial resources are deployed.
The experience of home appliances shows the importance of building enduring operating capabilities through competition.
Solar PV demonstrates that technological leadership and manufacturing scale do not automatically guarantee profitability.
Smartphones illustrate that different global markets can create different opportunities, but market share alone cannot replace sustainable economic returns.
Applied to the automotive industry, these lessons lead to one fundamental question: How can China's extensive capabilities in R&D, manufacturing, and supply chain development be translated into sustainable economic value?
The next phase of competition will not simply be about who can grow faster.
It will be about who can grow at a sustainable cost, translate technological innovation into value that customers are willing to pay for, establish enduring positions in global markets, and earn reasonable returns on investment.
China's automotive industry has already demonstrated its ability to develop technologies, manufacture products at scale, and compete internationally.
The next challenge is to turn those achievements into sustainable businesses.
That may prove to be the most important transformation of all.
