Cui Dongshu of the China Passenger Car Association: Three imbalances have appeared in the Chinese car market.

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Author | Zhou Zhiyu

On May 29, Cui Dongshu, Secretary-General of the China Passenger Car Association, presented a set of data at the Future Auto Pioneer Conference: In January this year, the penetration rate of new energy vehicles in China was 38%; by April, it had reached 61.4%.

In three months, it jumped by 23 percentage points.

In the past, the penetration rate would usually surge in the second half of the year, but this year it broke the 60% mark in the first half, a historic first. However, this is not because new energy vehicles are selling particularly well—they are under pressure this year as well. The real reason is that fuel vehicle sales are plunging, with a decline of 37%, falling even faster than new energy vehicles. Cui Dongshu said in an interview, “It’s just a matter of who runs faster.”

An immediate catalyst is oil prices. The blockade of the Strait of Hormuz pushed up international oil prices, prompting consumers to switch from oil to electric at a faster rate. Fuel vehicle companies have responded half a beat slower, with their technological iterations unable to keep up with market changes.

This is just one of several imbalances in China’s auto market this year.

In terms of market share, domestic brands this year account for 80% of the domestic market, leaving joint venture brands with only 14%.

Both ends have already been occupied by electric vehicles. The A00 class is 100% electrified, and new energy accounts for 66% of C-class cars, with only A-class cars still hovering around 50%. Entry-level and high-end have turned the page; the middle ground is still in transition.

Domestic brands are no longer synonymous with “low price.” Cui Dongshu pointed out that the price ceiling used to be 200,000 yuan, but now it’s common to see cars priced at 400,000 yuan, and Huawei’s Zunjie S800 sells for up to 800,000 yuan. In the market above 400,000 yuan, domestic brands have taken 50% of the share. The premium is supported not by the battery or electric drive—where differences are minimal—but by the gap in intelligent cockpit and intelligent driving experience. Cui Dongshu believes, “In the future, there will be no concept of luxury cars, only high-end cars.”

On the one hand, market share brings premium. On the other, profits are hemorrhaging.

In the first quarter, the net profit margin of the auto industry was 3.2%, while around 2015 it was about 9%. In the past ten years, it has dropped from 9% to 3%. The direction of profits is clear—upstream. In Cui Dongshu’s own words, “The era of whole vehicle dominance has been replaced by upstream dominance.”

The net profit margin in mining this year soared to 40%, and the battery industry’s profits are also significantly higher than for whole vehicles. Whether it’s raw materials or intelligent chips and algorithms, profits are concentrated upstream. Car manufacturers are caught up in price wars, while upstream suppliers' profit margins are actually rising.

Car buyers are also becoming differentiated. The income of non-private sectors is about twice that of private enterprises, and the high-income group supports the high-end market, but overall willingness to buy cars has not increased. Cui Dongshu emphasized that consumers do not buy “the cheaper, the better,” but rather prefer to buy more expensive and smarter cars within their means. Price wars cannot drive up total sales.

The best reflection of this year’s car market situation is the extent to which the Passenger Car Association has revised its own forecasts.

In January 2026, the prediction was an annual domestic sales decline of 1%. By May, this number was revised to a decline of 11%. Cui Dongshu himself said, “Historically rare.”

Exports are the only offset. The export expectation was raised from an increase of 18% at the beginning of the year to 50%, with hopes of exceeding 10 million units this year. After these two offsets, the annual total volume is roughly zero growth.

Joint venture car companies are not all losers in exports. Cui Dongshu mentioned that Hyundai-Kia is using China as a globalization base, with overseas sales accounting for 60% of its domestic production; Ford is also profitable, relying on China’s cost advantage plus brand premium. “It looks like there’s a lot of pressure, but actually life is pretty comfortable.”

Cui Dongshu remains optimistic about the medium and long term. Electrification has significantly lowered the cost structure of automobiles, turning engines into motors, allowing prices to continue to decline, making cars affordable for consumers in more markets. In his view, it’s only a matter of five years for China’s automobile output to go from 35 million units to 40 or even 50 million units, accounting for 40% to 50% of the global market.

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