China’s Automotive Industry Grapples with “Involution” (Part 2): Focus on Restructuring and Market Normalization
Tokyo, Japan – July 24, 2025 – The Japan External Trade Organization (JETRO) has released a comprehensive report detailing the ongoing challenges and evolving landscape of China’s automotive industry. Titled “China’s Automotive Industry’s ‘Involution’ (Part 2): Focus on Restructuring and Market Normalization,” the publication sheds light on the intense competition and the crucial steps being taken to navigate this complex environment.
The report, published today, delves deeper into the phenomenon of “involution” – a term describing a situation where intense competition leads to diminishing returns and a lack of true progress. In China’s automotive sector, this has manifested as fierce price wars and an oversupply of models, particularly in the new energy vehicle (NEV) segment.
Key Trends and Challenges Identified:
JETRO’s analysis highlights several critical trends shaping the industry’s trajectory:
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Intensifying Price Competition: The report reiterates the ongoing price wars that have become a hallmark of the Chinese auto market. This aggressive pricing, while benefiting consumers in the short term, puts significant pressure on manufacturers’ profitability and sustainability. The pursuit of market share at any cost is creating an unsustainable environment for many players.
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Industry Restructuring and Consolidation: In response to the pressures of involution, the Chinese government and industry stakeholders are increasingly prioritizing industry restructuring and consolidation. The report suggests that less competitive or financially weaker companies are likely to face significant challenges, potentially leading to mergers, acquisitions, or even exits from the market. This consolidation is seen as a necessary step to create a more rational and efficient industry structure.
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Shift Towards Market Normalization: A significant focus of the report is the growing emphasis on market normalization. This involves a move away from hyper-competition driven by subsidies and aggressive, sometimes unsustainable, expansion. The aim is to foster a market where product quality, technological innovation, and customer satisfaction are the primary drivers of success. This includes stricter regulations and a more level playing field for all participants.
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Government Intervention and Policy Adjustments: The Chinese government is actively involved in guiding the industry’s transition. Policies are being adjusted to encourage technological advancements, promote brand building, and ensure fair competition. The report likely touches upon how these policy shifts are influencing investment decisions and strategic planning among automakers.
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Focus on Innovation and Differentiation: As the market matures, the report suggests that companies are increasingly recognizing the need to differentiate themselves through genuine innovation. This goes beyond simply offering new models; it encompasses advancements in battery technology, autonomous driving, in-car connectivity, and overall user experience. Companies that can successfully innovate and deliver unique value propositions are better positioned to thrive.
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Impact on Foreign and Domestic Automakers: The report also implicitly or explicitly addresses how these dynamics affect both domestic Chinese brands and international automakers operating in the market. The intense competition presents unique challenges and opportunities for all players.
Implications for the Future:
JETRO’s “Involution” report (Part 2) serves as a crucial reminder that the Chinese automotive market is in a period of significant transformation. The era of unchecked growth and fierce, often irrational, competition is giving way to a more mature and regulated environment.
For businesses involved in or looking to engage with the Chinese automotive sector, understanding these shifts is paramount. The focus on restructuring and market normalization indicates a move towards a more sustainable and quality-driven industry. Companies that can adapt to these changes, invest in genuine innovation, and build strong, reputable brands are likely to be the long-term beneficiaries.
The report provides valuable insights for businesses seeking to navigate this evolving landscape and foster successful partnerships within China’s dynamic automotive industry.
中国自動車業界の「内巻」（後編）業界再編や市場規範化などに注目
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日本貿易振興機構 published ‘中国自動車業界の「内巻」（後編）業界再編や市場規範化などに注目’ at 2025-07-24 15:00. Please write a detailed article about this news in a polite tone with relevant information. Please reply in English with the article only.