(Yicai) July 6 -- Despite China's automotive production and sales maintaining strong growth, enhancing competitiveness and brand strength through overseas expansion and technological innovation remain key to the success of the Chinese automotive industry, experts said at the 2025 China Auto Forum.

Nearly 2,000 industry experts participated in the 2025 China Auto Forum, which was held in Shanghai from July 10 to 12. Hosted by the China Association of Automobile Manufacturers, the forum was themed 'Enhance Quality, Embrace Innovation, and Win the Future With Intelligence.'

China's auto production and sales rose 3.7 percent and 4.5 percent to 31.28 million and 31.44 million units, respectively, last year from the year before, remaining above the 30 million threshold for the second consecutive year, according to data from the CAAM.

New energy vehicle production and sales surged 34 percent and 36 percent to 12.89 million and 12.87 million units, respectively, in the period. This year, NEV sales are expected to reach 16 million units, with a market share potentially exceeding 50 percent. This compares with a global average of below 20 percent.

Despite the positive numbers, data from the National Bureau of Statistics showed that the average profit margin of Chinese carmakers was 4.3 percent last year and 3.9 percent in the first quarter of this year, showing eroding financial conditions. Moreover, a recent AlixPartners report indicated that among China's 129 NEV brands with sales last year, only 15 are expected to maintain financial viability by 2030.

"Under the current financing conditions, automakers with a gross margin below 15 percent can no longer cover operational expenses," said Wang De'an, chief automotive industry analyst at Ping An Securities.

In addition, Chinese brands still lag behind overseas competitors in brand recognition. According to data from Kantar BrandZ, Chinese carmakers scored only 43 points in terms of 'mindshare,' compared with 73 points and 68 points for German and Japanese peers, respectively.

The mindshare ranking was calculated based on how often a brand comes to mind when consumers think about a product category, in this case, automobiles.

Overseas Market Expansion

Given the tough challenges Chinese carmakers face in the domestic market, multiple experts mentioned expanding into overseas markets as one of their key suggestions for sustained development.

"We must seek incremental growth from major foreign automotive markets, overseas localized production, and NEV exports," said Wu Songquan, chief expert at the China Automotive Technology and Research Center.

For the first point, Wu explained that there are over 60 million cars in overseas markets, leaving room for Chinese automakers to expand their presence there.

For the second one, he noted that of the six million Chinese cars sold globally last year, only 10 percent were made outside China. This compares with overseas localized production rates of around 60 percent for German and Japanese automakers. Therefore, Chinese car brands should start investing in overseas production bases to better penetrate the local markets.

China's car exports may peak in the next five years and then enter a long-term transition period toward overseas localized production, similar to what happened to Japan's, Wu said.

He took Russia, China's largest auto export destination last year, as an example. Chinese carmakers' direct exports to Russia plunged 30 percent to 40 percent this year, mainly because of the unforeseen worsening of local market conditions. Meanwhile, their shares in markets where they own knock-down assembly plants, such as Kazakhstan and Uzbekistan, remained stable as such business model can help them better respond to challenges.

For the third incremental growth point, Wu noted that the NEV penetration rate in overseas markets is below 20 percent, creating huge potential for Chinese electric cars to thrive.

From a profitability perspective, overseas localized operations often outperform domestic businesses, Wu said, citing BYD, Geely Holding Group, and Great Wall Motors, which achieved overseas sales of over 400,000 units each last year.

Once Chinese automakers achieve large-scale overseas production, component exports will also inevitably increase, according to Wu. Last year, China's auto parts exports reached a total value of about USD150 billion, accounting for more than 10 percent of the global automotive parts trade.

The financing pattern of Chinese automakers is also adapting to this new internationalization trend. In fact, major equity financing by BYD, Xiaomi Auto, and Seres Group in the first half of this year designated the proceeds for overseas capacity expansion or distribution networks. In comparison, major Chinese electric vehicle firms mostly used financing proceedings to fuel their domestic expansion in 2020 and 2021.

BMW has been adopting a two-way supply chain localization, said Sean Green, president and chief executive officer of BMW Group Region China. In fact, the German automaker not only cultivates its supply chain in China but also assists Chinese suppliers in expanding overseas investments to become integral parts of its global supply chain.

For example, Chinese battery giants Contemporary Amperex Technology and Eve Energy have become BMW's high-voltage battery suppliers in both China and Europe.

"The open cooperation of China's automotive supply chain on a global scale brings transformation opportunities to local automotive industries and benefits local communities," said Fu Bingfeng, executive vice president and secretary-general of the CAAM.

"China's automotive supply chain will collaborate with leading and emerging countries globally to drive the global automotive industry toward greater intelligence, environmental friendliness, and efficiency, becoming an important guarantee for global supply chain security," Fu added.

Technology Innovation

Technological advancement, along with high-end products, should be the primary differentiation factor among carmakers, not price competition, according to industry heads.

Intelligent driving has reached a critical inflection point, according to Chen Liming, president of Chinese autonomous driving firm Horizon Robotics.

Based on government strategic planning, the promotion of navigate-on-autopilot functions on vehicles priced below CNY150,000 (USD20,920), and growing consumer demand, Horizon believes the inflection point for advanced intelligent driving assistance has arrived, with rapid growth expected soon, Chen said.

Horizon's Vision Mamba algorithm improves computational speed by 2.8 times compared to data-efficient image transformers while reducing graphics processing unit resource usage by 87 percent, he added.

Large language models are revolutionizing intelligent cockpits, said Wang Lei, director of the Beijing Automotive Research Institute. "Enhanced by LLMs, intelligent connected vehicles will continue to evolve, focusing on consumer internet services in 2025-2026 and advancing toward full-vehicle intelligent spaces with integrated perception by 2027-2028."

Last year, Chinese carmaker BAIC Motor built an LLM platform for intelligent cockpits, which attracted over 73 million user interactions by June this year, demonstrating strong user engagement, Wang noted.

SAIC Motor's solid-state batteries are expected to enter mass production by 2027, said Pan Jiming, director of the Shanghai-based automotive giant's planning department. With an energy density of over 400 watt-hours per kilogram, these solid-state batteries will significantly improve vehicle range, he added.

"Developing high-quality products will become the foundation of automakers' revenue-generating capacity," Wang De'an from Ping An Securities said. "It may be a mandatory requirement rather than an option because, while economy vehicles can easily achieve scale effects, their sustainability may not be optimal."

Having more premium products helps improve average selling prices and gross margins, Wang De'an noted. For example, the gross profit margin of Aito, the premium EV brand co-developed by Seres and Huawei Technologies, was 26 percent last year, and that of Xiaomi Auto was 23.2 percent in the first quarter of this year, both exceeding that of Toyota.

The top five brands in China by autos on the market -- Volkswagen, Toyota, Honda, Nissan, and Buick -- have about 100 million vehicles in use, with a service life of about eight years, and most of them are about to enter the replacement cycle. This gives "golden opportunities" to premium car brands, Wang De'an believes.

"The true competitive advantage ultimately depends on value creation, so automakers should focus on technological innovation, product quality, user experience, and brand culture all at once," Fu said.

"NEVs cannot merely be judged in terms of quantity but must also become quality benchmarks," Fu noted. "Only when the market shifts from price-driven to value-driven can Chinese cars truly be the future."

Editor: Futura Costaglione