Gasgoo Munich-China's auto market is enduring a brutal shakeout. The numbers don't lie—they lay bare the intensity and complexity of this culling in a way that feels visceral.
Data compiled by Gasgoo Institute shows that in the first half of 2026, domestic passenger car sales totaled 12.72 million units, down 6% year on year. Domestic sales, dragged down by fading policy incentives, high fuel prices, retreating joint ventures, and bloated inventories, posted their steepest drop in a decade—plunging 24.3%.
Yet, even as domestic demand collapsed in the first half, there were bright spots. The penetration rate of new-energy passenger vehicles climbed to 54%, up from 51.4% in 2025. Notably, battery-electric models overtook internal combustion engines in the second quarter to claim the largest market share among all powertrain types.
Those three figures—12.72 million in total sales, a 24.3% domestic decline, and 54% NEV penetration—paint a truth more complex than a simple downturn. The overall market isn't vanishing; it's restructuring. The share ceded by gasoline cars is being devoured by new energy vehicles; the ground abandoned by joint ventures is being filled by Chinese brands. And the industry's profit pool is being drained by this upheaval.
By the first half of 2026, the auto industry’s sales profit margin had slumped to a record low of 3.8%. Gross margins are razor-thin, yet R&D demands astronomical sums. Between falling margins and rising investment, China’s auto sector has officially bid farewell to the old logic of trading volume for space, entering a new phase where technology dictates survival. Yang Dayong, executive vice president at Changan Automobile, sized up the stakes: China currently hosts over 120 automotive brands, but only about 25 active ones generate 80% of sales. By 2030, or perhaps sooner, only about 20 will remain.
Roughly 100 brands will be forced out in the coming years. It is against this backdrop of industry consolidation that Changan has chosen to mass-produce the Tianshu Pilot intelligent driving system—a proprietary technology developed over years at a cost of tens of billions.
Days ago, the Qiyuan Q06—the first model equipped with Tianshu Pilot—began pre-sales. This launch wasn't just another product rollout; it was a direct response to a core question in the survival game: As AI permeates everything from R&D to manufacturing, should automakers buy off-the-shelf solutions for speed, or insist on in-house development to control their destiny?
How to Enter the "Finals"?
Yang Dayong’s baseline forecast for the future is stark: the number of Chinese car brands will shrink sharply from over 120 to just over 20.
This isn’t fear-mongering; it is the reality unfolding before us.
Not long ago, a rumor that the Ministry of Industry and Information Technology had removed eight automakers from the production roster caused an industry-wide stir. Though officials and companies quickly denied it, the fact that unverified information could spread so wildly shows it touched a raw nerve. The intense focus on "who might fall behind" is itself a silent rehearsal for the culling to come.
The anxiety isn't unfounded. Most of the automakers named in those rumors may not have been officially delisted, but many had already halted production and effectively dropped out years ago. As the market slides and resources cluster at the top, these marginal brands—long on tech investment and short on new products—stand little chance of revival. The signals of market delisting were flashing long ago: shrinking R&D budgets, broken product cycles, and withering dealer networks.
Gasgoo Institute points out that M&A activity in the supply chain is accelerating. The dynamic is twofold: clearing the tail and consolidating the head. The tail consists of edge brands that have lost their viability; the head involves dominant players merging horizontally and vertically in technology, capacity, and channels. Resources are rapidly concentrating among a few players with systemic strength.
The cruelty of this contest lies in its speed—it’s not a steady process, but an accelerating one. He Gang, a vice president at Changan, narrowed the lens to smart driving: the sector could see a major shuffle around 2028. That means the entire chain, from automakers to tech suppliers, is facing simultaneous winnowing.
Where does Changan stand in this? Yang Dayong is clear-eyed. Competition will remain white-hot through 2030. To be one of the survivors, Changan must build unique advantages in brand, product, and marketing. He revealed that Changan has shifted its performance metrics from a domestic focus to a global one—his personal KPI is now tied to the brand’s global sales.
The mass production of Tianshu Pilot, developed over years at a cost of tens of billions, is a critical part of Changan’s preparation for the shocks ahead.
At its core, this survival game is a battle for efficiency. And efficiency starts with who controls the definition of core technology. Outsourcing can level the playing field in the short term, but it doesn’t build long-term defensive moats. When everyone can buy the same sensors, algorithms, and chips, homogenization is inevitable—and price war becomes the only weapon left. That is a key reason industry margins are at historic lows. After experimenting with outsourced solutions, Changan’s decision to double down on in-house smart driving answers a fundamental question: In a saturated market, why should a consumer choose you over a rival? For Yang Dayong, the answer lies only in proprietary technology.
Self-Research: The "Hard but Right" Path
In the smart driving race, Changan has chosen a path rarely seen in the industry: full-stack in-house development.
In February 2025, Changan upgraded its "Beidou Tianshu 2.0" plan, pledging to develop only intelligent products going forward. The company has poured over 60 billion yuan into the smart sector, including 22.5 billion specifically in smart products. Its smart tech team has grown from zero to 7,500 people.
Why insist on self-research? Yang Dayong’s answer is simple: the brand. "We want core technologies for brands like Changan Qiyuan and Changan Automobile to remain in our own hands. In the smart EV era, that core technology is intelligence. No matter the cost or the difficulty, we must provide in-house solutions for the Changan brand."
He Gang framed this choice within the broader history of auto competition. The first round, centered on engines, lasted nearly a century—those who mastered it survived. The second, driven by the new energy wave starting around 2015, favored those who mastered batteries. The current round is about full-stack intelligence—not just driving assist, but cockpits, chassis, vehicle control, interaction, and cloud services. "Whoever masters the complete intelligent capability will stand firm in this round," he said.
Of course, the challenges are immense. He Gang cited three: rapid iteration—from rule-based to two-stage to end-to-end in just a few years; insufficient data, a problem plaguing the whole industry; and talent, where automakers must fight not just peers but the embodied intelligence sector. Tao Ji, Changan’s chief intelligent driving technology officer, added that while smart driving is scalable now, embodied AI has a longer commercialization cycle. Keeping the team stable is a constant challenge.
Technically, Tianshu Pilot’s standout feature is multimodal interaction, particularly voice-controlled driving. Tao Ji explained the logic: first, addressing real user pain points—some drivers dislike frequent lane changes on highways or have personal commuting habits they want the car to follow. These fuzzy, personalized requests are hard to execute via buttons. Second, following the laws of tech evolution: cars are key carriers of embodied intelligence; without human interaction capabilities, their value diminishes significantly.
Changan is also technically ready for L3 commercialization. He Gang noted that Changan was the first automaker in China to receive a dedicated L3 license plate and among the first batch to obtain L4 testing permits.
Importantly, insisting on self-research doesn’t mean rejecting external partners. At the launch, Chairman Zhu Huarong explicitly "saluted pioneers like Huawei and Tesla," noting that intelligence is an endless journey. Changan will continue to deepen cooperation with Huawei in data, technology, and product projects.
The strategy of "primarily self-research plus open cooperation" ensures autonomous control over core tech while leveraging external strength to accelerate in specific areas.
Finding the Value Anchor in the Mainstream Market
The first mass deployment of Tianshu Pilot has been assigned to the Changan Qiyuan brand.
Changan’s three current EV brands—Avatr, Deepal, and Qiyuan—follow different tech paths. Avatr uses Huawei’s solution; Deepal uses a mix of Huawei and others; Qiyuan was designed from the start to wait for Tianshu Pilot.
This differentiation is a deliberate branding strategy: Qiyuan carries the label of Changan’s proprietary intelligent technology.
Qiyuan targets global mainstream families. Yang Dayong defines the core demographic as middle-class households. The price range is 80,000 to 200,000 yuan—no products above 300,000 yuan.
Below the 200,000 yuan mark, intelligence is shifting from a bonus feature to a prerequisite. Data shows that since the start of 2026, the penetration rate of L2 combined driver assistance in passenger cars has reached 70.5%, with pilot-assist features hitting 34.2%.
Equipping the Qiyuan Q06 with the Tianshu Pilot Ultra edition brings high-end intelligent driving to the 150,000 yuan level. This breaks the industry stereotype that advanced tech belongs only to luxury vehicles.
Qiyuan is entering a growth phase. In August alone, global sales topped 45,000 units. The arrival of the Q06 should boost this further; official figures show pre-orders hit 11,000 within two hours. Yang predicts that with the Q06 launch, Qiyuan’s monthly sales could reach 60,000, with annual volume potentially hitting around 400,000 units.
Qiyuan is already profitable. In an industry where most EV brands bleed red ink, Yang Dayong attributes Qiyuan’s success to three keywords: experience reuse, hit-model strategy, and cost control.
Before Qiyuan, Changan built Avatr and Deepal. The successes, failures, and methodologies from those brands have all been fed back into Qiyuan’s development.
Qiyuan doesn’t have many models, but every mainstay stays competitive in its segment. Dividing total monthly retail sales by the number of models on sale, Qiyuan averages over 6,000 units per car. Hot-selling models effectively dilute costs.
With intelligence, Qiyuan’s value is becoming tangible. Previously, sales staff could only demonstrate styling, hardware specs, and ride comfort. Hard capabilities like safety and rigorous testing were hard to show. But high-level driver assistance changes that—users can experience it immediately. Voice interaction and driving features are intuitive.
Intelligence is becoming the best vehicle for Changan to demonstrate its product prowess.
Summary:
In 2026, the elimination race is accelerating. The test for automakers is no longer just about building good products, but about building sustainable technical capabilities and brand recognition.
Changan has chosen a clear path. Full-stack self-research in intelligence, making Tianshu Pilot an exclusive tech label; positioning Qiyuan as the intelligence anchor for the mainstream market with a 100,000 to 200,000 yuan matrix serving families. Behind these choices lies a fundamental belief: in the smart EV era, no proprietary core tech means no brand differentiation—and without differentiation, survival in the elimination round is impossible.
Of course, there is no room for complacency. The sustained high cost of R&D and the regulatory and data challenges of global expansion are real hurdles. But as He Gang noted, the self-research path is difficult. Outsourcing is easier and less risky for OEMs. But if buying solutions could solve everything, no automaker would have bothered mastering engine and battery technology years ago.
Changan has chosen to do what is right. The outcome of this elimination race will ultimately be written by technological strength, brand heritage, and strategic stamina.
