I. Preface

China's automotive industry is undergoing a transformation dominated by electrification and intelligence, with market growth drivers, competitive logic, and global positioning being reshaped. Based on 2025 market analysis, this report distills key trends and looks ahead to 2026, providing reference for industry decision-making.

II. Summary of Core Trends

Trend One: Diminishing Policy Effectiveness and Slowing Growth in the Auto Market

· Policy Impact: In 2025, the average monthly application volume for subsidies under the 'Two News' policy declined by 13% year-on-year, and its contribution to sales dropped to 48%, indicating diminishing marginal utility.

· Market Performance: In 2025, passenger vehicle sales reached 23.74 million units (a year-on-year increase of 3.8%), with growth slowing compared to 2024; the monthly trend showed 'high in early months, flat in mid-months, low in late months', significantly influenced by policy timing.

· Outlook for 2026: Passenger vehicle sales are expected to reach 24 million units (growth rate of 1%), with new energy vehicle sales at 14.15 million units (penetration rate of 59%), which may be the last year of double-digit growth.

Trend Two: Diversification of New Energy Vehicle Structure, with Pure Electric Vehicles Leading Growth

· Market Share: By 2025, the new energy vehicle share will reach 53.9%, surpassing fuel-powered vehicles for the first time. The growth driver has shifted from plug-in hybrid (PHEV) and range-extended electric vehicles to pure electric vehicles.

· Pure Electric Market: Significant growth is observed at both ends: sub-compact models (benefiting from policy incentives) and mid-large and above models (with a 50% surge in sales).

· PHEV & Range-Extended Electric Vehicles: Due to a 7% decline in sales in the compact segment, reduced new vehicle supply, and weakened price competitiveness, their growth rate is declining from a high level. Their market share may remain flat or decline by 2026.

Trend Three: Chinese Brands Achieve Both Volume and Price Growth, Overseas Brands Continue to Decline

· Chinese Brands: Independent new energy brands have driven market share to break through 65%. The proportion in the mid-to-high-end market above 200,000 yuan reached 42.3% (+16.8 percentage points), achieving both volume and price growth.

· Overseas Brands: Through localization cooperation (such as Volkswagen and Xpeng's joint development) and adjustments in new platform models (such as Nissan N6/N7), but with limited sales scale (only three models selling over 5,000 units monthly), it is difficult to reverse the downward trend.

Trend Four: Intelligent Driving Promotes Accelerated Intelligence, 'Oil and Electric Same Intelligence' Gap Exists

· New Energy Intelligence: Smart Cockpit Penetration Rate 87% (nearly standard), Intelligent Driving (L2+) Penetration Rate 66% (+11 percentage points), High-end Intelligent Driving in Markets Below 200,000 RMB Breaks Through from Zero, L3-level Vehicles Pilot Commercial Use (such as Changan Deep Blue SL03, BAIC Arcfox Alpha S).

· Gasoline Vehicle Intelligence: Growth of Smart Cockpit and Intelligent Driving Penetration Rates has Stagnated, Equivalent Only to the Level of New Energy Vehicles Before 2023, Significant Gap in 'Oil and Electric Same Intelligence' Exists.

Trend Five: 'Anti-internal holing' only treats the symptoms, not the root cause; industry profits are low.

· Price and Profit: The average market price rebounds due to changes in sales structure (increase in premium mid-to-high-end models), but the per-vehicle average price of four types of brands has declined; the industry profit margin has fallen to a historical low, and new energy vehicles are still incurring losses.

· 2026 Pressure: The market share of models below 150,000 yuan accounts for 60%; policy subsidies declining may force automakers to increase promotions, making it difficult to improve profits.

Trend 6: Lower-Tier Markets Become Growth Engine, Regional Gaps Narrow

Contribution from Lower-Tier Cities: New energy vehicle sales in fourth- and fifth-tier cities grew year-on-year by 19.0% and 27.7%, respectively, with adoption rates reaching 48.9% and 43.8%. Growth is driven by the "Full Coverage of Charging Infrastructure in Townships" policy.

Regional Divergence: Due to low temperatures, the adoption rate of new energy vehicles in Northeast China is nearing saturation, while the gap in adoption rates among other regions has narrowed to within 10 percentage points. Battery electric vehicles (BEVs) serve as the primary driver.

Trend 7: Exceeding Export Expectations, "Localized Production" Fuels Overseas Expansion • Export Performance: In 2025, exports surpassed 7 million vehicles, primarily driven by plug-in hybrids (growing 227%) and battery electric vehicles (+23%). Latin America, Africa, and the Middle East contributed 73% of the incremental growth.  • Outlook for 2026: With the ramp-up of overseas production capacity (e.g., BYD’s factory in Hungary, Chery’s factory in Spain), the growth model is shifting from "export-driven" to "localization-driven." Europe and Southeast Asia are emerging as core growth regions.   III. Key Conclusions In 2025, the passenger vehicle market was characterized by "policy phase-out, structural differentiation, the rise of Chinese brands, and accelerated intelligentization." In 2026, the growth rate of new energy vehicles may slow, with continued pressure on industry profits. Lower-tier markets and localized overseas production are poised to become the key growth drivers.