The Chinese automotive market continues to present challenges for foreign automakers. Chinese manufacturers are maintaining a dominant position in their home market as the world's largest automotive market transitions towards electric vehicles (EVs) and plug-in hybrids (PHEVs).
Domestic demand for these new energy vehicles (NEVs) increased by 18% in 2025, contrasting with the situation in Europe and the US, where EV adoption is slowing.
One reason for the declining popularity of imported vehicles in China is the ability of domestic automakers to adapt and update technologies much faster. Brands like BYD, Geely, and Changan continue to compete fiercely on technological features, outpacing Western manufacturers.
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Tesla Model Y was the best-selling foreign vehicle in China in 2025. Photo: Fotocars
Chinese automakers not only develop and implement new technology, but also seamlessly integrate it with other existing Chinese technologies, such as WeChat and AliPay applications, which consumers value.
According to Xiao Feng, an analyst at investment management firm CLSA, this means most foreign automakers could be pushed out of the Chinese car market by 2030. With the exception of a few major players like Tesla, Toyota, and Volkswagen (VW), imported products will struggle to compete on both features and EV technology.
Despite the rapid adoption of EVs and PHEVs, China's passenger car market in 2025 saw its slowest growth in three years, increasing by only 4% to a total of 23,7 million vehicles.
Meanwhile, EV sales were boosted by local subsidies, with 2025 incentives reaching up to 2,900 USD when consumers traded in old vehicles for EVs or PHEVs. Approximately 11,5 million vehicles were sold through the trade-in incentive program, although in december, new car sales reportedly dropped by 14% as some localities exhausted their budgets for these incentives.
It is reported that Beijing will consider cutting subsidies in 2026. Simultaneously, fierce domestic competition continues to affect both local and foreign brands, with many rivals seemingly engaged in a price war.
A study conducted by the China Automobile Dealers Association revealed that only 30% of dealerships remained profitable in the first half of 2025, with 75% of those surveyed admitting they sold at least some vehicles below cost.
The year 2025 saw Mitsubishi's withdrawal from the Chinese market, as the company decided to cease all production and sales operations, while JLR also experienced a significant reduction in its product offerings. VW halted car production at its Nanjing factory.
Even Tesla, arguably the strongest foreign automaker, saw its sales decline by about 5% while losing the title of the world's best-selling EV to BYD.
However, with China being the largest market, many other brands are choosing to restructure rather than completely abandon it. Toyota is building a new Lexus EV manufacturing plant in Shanghai, VW is poised to launch a series of China-specific models, and GM will offer all products with EV or PHEV options.
My Anh (according to WSJ)
