Gasgoo Munich- As the penetration rate of new energy vehicles (NEVs) breaches 52% and L2 driver assistance exceeds 70%, the competitive logic of China's auto industry is quietly shifting.
At 2026 International Forum (TEDA) On Chinese Automotive Industry Development, figures from policy, industry, and retail gathered to debate a core question: With scale leadership no longer the only answer, what will drive China's auto sector to continue its ascent?
Image source: TEDA Forum
Beneath the Scale Lead, Tech Innovation Enters Deep Waters
At the opening ceremony, Gong Jinfeng, deputy party secretary and general manager of CATARC, set the tone with a set of data points.
From January to August 2026, NEV sales in China surpassed 10.65 million, pushing market penetration to 52.4%. The penetration rate of passenger cars equipped with L2 driver assistance reached 70.5%, while the first batch of L3 conditionally autonomous models began operating in specific zones. Auto exports hit 6.41 million in the first seven months, up 54% year-on-year, putting the full-year total on track to breach 10 million.
"China remains the world's largest single market for NEVs, with domestic sales accounting for over 50% of global passenger vehicle sales," Gong said. He noted that while market scale leads, breakthroughs in core technologies are happening across the board.
Energy density for semi-solid batteries has broken through 400 Wh/kg, and solid-state battery R&D has made phased progress. The localization of high-compute automotive chips and intelligent operating systems is accelerating, while megawatt-level ultra-fast charging and vehicle-to-grid technologies are rolling out faster.
Wang Fang, chief scientist at CATARC, refined this assessment from a technical perspective.
She pointed out that global NEV sales reached 20.7 million in 2025, with a penetration rate of 23.6%. China accounted for 70% of that volume, selling 13.36 million units to rank first globally for the 11th consecutive year. In intelligence, L2 penetration in passenger cars has surged from 25% in 2021 to over 70% today.
She summarized current innovation around three battery keywords—safety, charging, and solid-state—while intelligent connectivity is advancing in four directions: driving, cockpit, chassis, and vehicle-road-cloud collaboration.
Tian Jietang, director of the Industrial Economy Research Department at the State Council's Development Research Center, took a broader view. He noted that China's manufacturing share of global output has reached 27%, and with AI leading the world, "AI + manufacturing" is creating a unique comparative advantage.
"Manufacturing and innovation are tightly linked, with over 60% of global R&D spending happening in this sector," Tian said. AI's empowerment is moving from isolated applications like visual inspection and parameter tuning to deep, full-chain integration.
He highlighted that the auto industry is shifting from selling standard products to selling scenario-based solutions. Future cars will become a "third space" beyond home and office, potentially even evolving into mobile stores. "Whoever solves motion sickness in the next five years will have a massive selling point," he added.
Gong Jinfeng acknowledged that behind the achievements lie multiple challenges: a deep adjustment in global competition, where tech barriers, regulatory games, and standard battles are central. He proposed four strategies: focus on core tech to maintain the lead, deepen cross-sector integration for ecosystem growth, hold the line on product safety, and stick to open cooperation to boost global competitiveness.
From Feature Stacking to System Rebuild: Companies Race in the Second Half of Smart Tech
As the marginal returns of "feature stacking" diminish, rebuilding competitiveness from the system level up has become the shared challenge for all players.
Intelligence has entered the era of the "vehicle intelligent agent," according to Chen Xiaofeng, vice president and chief scientist at Great Wall Motor's Tech Center. Traditional intelligence relied on stacking isolated, passive features. Now, AI-driven systems are becoming holistic agents—breaking down capabilities in power, chassis, cockpit, and driving into atomic services that an agent can call upon in real-time to understand scenarios and execute tasks.
Based on this, GWM launched Coffee AI OS 4, an architecture combining "large models + AI subsystems + multi-agents + AI interaction." It achieves three leaps: a "1+N" structure where a central brain collaborates with domain experts; the open orchestration of over 4,000 MCP atomic capabilities; and a shift from "users finding services" to "services finding users."
Zhang Xiaoyu, executive vice president of Changan Automobile, offered a similar take. He defined the essence of intelligence as "a vehicle's ability to self-evolve while holding core tech in its own hands." Changan's Tianshu large model integrates perception, audio-visual processing, and motion control. It upgrades the industry's traditional "Clip" training to "Episode" training—a full closed loop from seeing the road and understanding intent to execution and model feedback, creating a logic of continuous evolution.
Image source: TEDA Forum
Zhang revealed that Changan and BAIC jointly secured China's first batch of L3 autonomous driving product licenses. By early September, Changan users had logged 1.539 billion kilometers, with AEB interventions triggered 15.2 million times and automated parking 12.43 million times.
Wang Chao, vice president of Huawei Digital Energy, turned attention to the long-overlooked motion domain. He argued innovation here follows an "AI + embodied intelligence" paradigm, and that breaking down silos between domains is key to the second half of the smart race.
Wang outlined a three-stage evolution: 1.0 relies on instinctive safety and super components for distributed experience; 2.0 adds redundant safety and local closed loops with predictive algorithms; 3.0 explores holistic safety by integrating with driving and cockpit domains in real-time. On efficiency, Huawei will be "ready" with 12 km/kWh technology in 2025, mass-produce models at that efficiency in 2026, and aim for 14 km/kWh in 2027.
Liu Zongcheng, president of Seres Group's tech company, showed how an "industrial brain" reshapes the entire car-building process through "Auto + X" cross-sector integration. Seres built a "1+2+N" strategic framework. Its industrial brain boasts a knowledge graph with 2 million nodes and 100P of computing power, boosting R&D efficiency by 20% and on-time delivery by 13%.
Liu proposed a "three-integration" path: product integration to break tech-business barriers, manufacturing agglomeration to form a one-hour supply chain, and industrial integration led by champions to build a collaborative ecosystem. He stressed "five high standards"—safety, reliability, performance, quality, and value—arguing that "the biggest risk in this industry isn't moving slowly, but rushing."
Zeng Qinglin, general manager of the Yiying brand, shared insights from the joint venture between Dongfeng and Huawei's Qiankun. He highlighted three industry dilemmas: a product trap where specs are treated as "corporate language" while scenarios are the "user's language"; a demand shift where families want fair experiences for all passengers; and a brand limit where going it alone has hit a ceiling.
Yiying's answer is "three elevations": elevating safety with a "Dome Shield" architecture; elevating scenarios through full-cycle user co-creation, including child vision protection in development; and elevating the brand by combining Dongfeng's manufacturing heritage with Huawei's top-tier intelligence.
Zhang Xiaoyu summed up Changan's strategy as "Three Nos": No intelligence, no Changan; no safety, no Changan; no ecosystem, no Changan.
On safety, Changan built a system covering risk detection, avoidance, and escape, achieving 10-millisecond domain-wide linkage and active stability control even at 225 km/h during a blowout. On ecosystems, he sees a shift from "big industry, small ecosystem" to "big industry, big ecosystem," requiring the integration of innovation, supply, capital, and talent chains to leverage massive investment for massive returns.
The Convergence of Ecosystem Export and a New Industrial Ecosystem
As the domestic market enters an era of stock competition, globalization and ecosystem reconstruction have become the next imperative for China's auto industry.
Chen Xiaofeng noted that perceptions abroad are fundamentally changing. Chinese smart cars are now dubbed "smartphones on wheels," with system fluidity and localization often surpassing local brands.
He divided Great Wall Motor's global expansion into three phases:
Phase 1.0 (pre-2023) was hardware export—homogeneous products competing on price. Phase 2.0 (2023-present) is tech export, involving localization but with massive global differences. Phase 3.0 (this year onward) is ecosystem export, building AI-based reusable intelligent systems to gradually take the lead in global ecosystem rules.
GWM has independently developed a "1+N+AI" intelligent service architecture and deployed models like the Ora 5, Jolion, and Haval H7 overseas.
Liu Zongcheng defined overseas markets as Seres' "must-win battlefield for the new decade," proposing to build a unified global quality and service system based on European high-end standards.
He called for Chinese automakers to avoid going it alone, advocating for "ecosystem and holistic exports." This means pushing for mutual testing recognition, shared standards, supply chain synergy, and shared service networks to leap from exporting products to exporting brands, capabilities, and standards.
Sopon Sornsanti, president of the Electric Vehicle Association of Thailand and executive vice president of SAIC Motor CP, offered a vivid snapshot of the ASEAN market for Chinese exporters.
He noted that the share of internal combustion engine cars in new registrations in Thailand has dropped from over 90% in 2021 to 44.7% in the first eight months of this year. NEVs now hold 55.3%, with pure electrics at 29.2%. Pure EV sales have surged from roughly 2,000 units in 2021 to 149,000 in the first eight months of this year.
Thai policy is shifting from "stimulating demand and attracting investment" to "building local supply chains and long-term competitive advantages," with a push to accelerate local manufacturing. Geely, BYD, and GAC Aion are among the Chinese firms investing in factories there.
Sopon added that Thailand serves not just domestic demand but also regional export markets, creating opportunities in batteries, charging, commercial fleet electrification, smart mobility software, and recycling.
Wang Du, vice president of the China Automobile Dealers Association, brought the focus back to the "second half" of the domestic market.
He pointed out that China's auto parc has reached 371 million vehicles, with NEV ownership rising rapidly. The industry's center of gravity is shifting from manufacturing to aftermarket services and the stock market.
Yet the distribution sector is in pain: average gross margins on new cars are -21.4%, inventory cycles average 1.58 months, and dealer satisfaction with OEMs is just 56.3%—the lowest in years.
"Selling cars is no longer a profit tool for dealers; it's just a traffic entry point," Wang said. He believes the industry has entered an elimination round where dealer profit models must be reconstructed from "selling cars" to "managing users" to maximize lifecycle value. While models like direct sales, agency, and hybrids are being explored, the essence of distribution remains unchanged: connecting supply and demand, with service at the core.
From morning policy discussions to afternoon corporate practices, multiple speakers converged on two keywords: "standardization" and "open ecosystems."
There is a consensus that standardization and openness are key to breaking the deadlock. "Competition determines how fast we run, but symbiosis determines how far we go," Liu Zongcheng remarked—a fitting footnote to this clash of ideas.
From leading the scale with intelligent, green foundations to system innovation fueled by ecosystems, and now to a global layout of co-creation and win-win outcomes, China's auto industry stands at a new starting point for the 15th Five-Year Plan. With technology as its pen and ecosystems as its ink, it is writing a new chapter in its journey from a major automotive power to a truly strong one.
