China's auto industry should shift from administrative to market-driven restructuring, and failing companies should not be kept alive with fiscal support, according to Zhang Yongwei, chairman of the China EV100 research institute (Chebaihui). Speaking at a media briefing ahead of the institute's annual conference, Zhang said that consolidation is a natural part of industry adjustment and that the government should create an environment that allows inefficient players to exit.
"When the industry enters an adjustment period, everyone feels operational difficulties and starts discussing restructuring. Restructuring in any country happens during industry adjustment," Zhang said, according to the Chinese business outlet Jinguan Auto. He pointed to the recent restructuring of Neta Auto, a struggling EV startup, as an example of a more market-oriented approach rather than government-imposed "arranged marriages" between companies.
Market contraction and the push for consolidation
The comments come as China's auto market slows. According to the China Association of Automobile Manufacturers, from January to August 2026, China produced 20.255 million vehicles and sold 20.315 million, both down 3.8% year-on-year. New energy vehicle sales in China reached 7.215 million units, a decline of 10.8%. Zhang noted that the high-growth era is over, and 2026 is expected to be a year of stability rather than rapid expansion.
Zhang estimated that the industry's sustainable scale could be between 35 million and 40 million vehicles annually, with domestic demand needing to hold at around 25 million units. He suggested that automakers could find new growth in rural areas and lower-tier cities by offering more cost-effective models, and called for policies to encourage vehicle usage, such as better charging infrastructure and improved resale value through vehicle health records.
Export growth and overseas risks
Exports have become a key support for the industry. According to the China Passenger Car Association, cumulative exports from January to August 2026 exceeded 6 million units, reaching 6.098 million, up 75.7% year-on-year. Zhang noted that new energy vehicles now account for 50% of exported vehicles, a share that is rising. However, he warned of growing uncertainties in global markets, including geopolitical tensions, tariff barriers, non-tariff restrictions such as technology transfer requirements, and localization demands in Europe and Southeast Asia.
Zhang highlighted the risk of heavy asset investments overseas. "The biggest risk for Chinese automakers going abroad is heavy asset investment," he said, citing policy changes in host countries. He urged companies to comply with local regulations and called for government support to help firms navigate these challenges. He also noted that Europe is the most demanding market, and Chinese automakers need to build after-sales service networks from scratch.
