According to a new analysis by Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), the promotional landscape in China's auto market is diverging in 2025. Industry operating pressure has eased, and profit margins have rebounded to mid-to-low levels.
The note says conventional gasoline cars and traditional hybrids face relatively light promotional pressure this year, while competition is far tougher in new-energy vehicles (NEVs) — with especially pronounced swings in incentives for plug-in hybrids (PHEVs) and range-extended EVs (EREVs).
Image source: BYD
By the numbers, plug-in hybrids have seen the biggest recent swings. In December, their average discounts were up 3.9 percentage points from a year earlier but edged down 0.4 percentage points from the previous month; incentives on range-extended EVs were roughly 4.5 percentage points higher than the same period in 2024; for battery-electric models (BEVs), promotions were 1.1 percentage points above December 2024 and about 0.4 percentage points higher month on month.
This divergence underscores how fierce the contest remains within the NEV market, with plug-in and range-extended technologies leaning on price to fight for share.
Cui stressed that the nationwide old-for-new trade-in program is delivering results, effectively lifting sales and, to a degree, cooling the race-to-the-bottom price cuts seen across the industry.
As policy support takes hold and consumer confidence mends, the pressure to trade price for volume has eased. Pricing is stabilizing, creating room for earnings to improve.
Profitability is flashing a positive signal: from January to November 2025, the auto sector's profit margin climbed back to 4.4%, still in the mid-to-low range. Cui says the rebound reflects both steady market expansion and more stable end-market promotions — a sign the industry is moving away from relying solely on price wars toward a healthier, more sustainable path.
Even with promotions still intense in NEVs, the recovery in overall profitability suggests the market is gradually finding a new balance under policy guidance and structural adjustment.
