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- China Builds 2x More Cars Than It Can Sell (China Market Update 2025)
China Builds 2x More Cars Than It Can Sell (China Market Update 2025)
Philipp Raasch
September 26, 2025
Welcome to Issue #86 of The German Autopreneur!
China can build twice as many cars as it sells. That's not a typo. That's the new reality.
55.6 million production capacity vs. 27.6 million actual sales. These numbers explain the brutal price war that's turning the entire automotive industry upside down.
The Chinese government calls this "Neijuan". Pointless self-destruction through extreme competition.
Today, I'm giving you an update on China's auto market in September 2025. With all the numbers you need to know.
NEVs Beat Combustion Cars for 6 Months Straight
China calls EVs, hybrids, and range extenders "New Energy Vehicles" (NEVs). And NEVs have hit the tipping point. They've outsold gas cars for six straight months.
NEV market share in China:
August: 54.6% (record high)
January-August: 51%
Deliveries (year-over-year):
NEV: +36.7%
Combustion: -1.9%
NEV market share reaches record levels (rt)
By August, China sold 9.6 million NEVs. That's +2.6 million compared to last year. Combustion car sales dropped by 220,000 units.
Pure EVs (BEVs) are growing faster than plug-in hybrids (PHEVs). BEVs now capture 65% of NEV sales. PHEVs dropped to 35%.
The market is maturing. Customers increasingly choose pure EVs.
Chinese Brands Conquer Their Home Market
Market share breakdown:
Chinese brands: 68.8%
Foreign brands: Only 31.2%
Foreign brands have lost one-third of their market share since 2020.
Foreign brands have lost 1/3 since 2020 (am)
Chinese brands are driving all the growth. Sales jumped 23.9% year-over-year.
Only 4 brands make it into both NEV and combustion top-10 lists. All are Chinese: Geely, Chery, Chang'an, and SAIC.
Top 10 brands - combustion engines (ICE) vs. NEV (am)
Foreign Manufacturers Keep Losing in China
Performance by region (January-August):
German OEMs: -6.2%
Japanese: -5.0%
US: -1.1%
Tesla is the only foreign NEV brand that still matters. But even Tesla is struggling. Sales dropped 6.9%.
Exports from Giga Shanghai have also hit new lows.
China Exports More Cars Than Ever
Export records:
August: 611,000 exported vehicles
January-August: +13.8% more exports
NEV exports: +103.6% (4th straight month over 100% growth)
China exports reach record levels thanks to BYD (am)
20% of all cars produced in China go abroad. That's 4x more than in 2020. NEVs make up 35.7% of all the exports.
Their main destinations? Mexico, UAE, and Russia.
Countries are fighting back with trade barriers. China's response? "Glocalization." Instead of just exporting, they're building local factories:
BYD: Hungary, Turkey, Thailand, Brazil
Chery: Spain
SAIC: India
Xpeng: Austria (at Magna)
This way they avoid tariffs. Create local jobs. And increase consumer acceptance.
The Game of Chicken
It comes down to who blinks first.
The Chinese government calls it "Neijuan". Pointless self-destruction through extreme competition.
Average prices have fallen 21% since 2021. From $31,000 to $24,000.
Average prices fall drastically (rt)
The core problem: Overcapacity
Production capacity: 55.6 million cars per year
Actual sales: 27.6 million cars
China can build twice as many cars as it sells. That's exactly what fuels the price war.
Capacity vs. utilization shows massive overcapacity (rt)
Manufacturers are now stuck in a dilemma:
Don't cut prices? Lose market share
Cut prices? Make losses
But market share counts more than short-term profits.
The last man standing, will survive this war. Everyone hopes competitors give up first.
Local governments make it worse. They support unprofitable manufacturers with subsidies to protect jobs. This keeps zombie companies alive.
The exact number is disputed. Some say 130, others count differently.
Everyone agrees there are too many players:
• BYD's Stella Li: "100 manufacturers must exit. Even 20 are still too many."
• Xpeng's CEO He Xiaopeng: "Only 10 automakers will survive globally. Just 5 in China."
• AlixPartners: Of 129 NEV brands, only 15 will remain by 2030.
Even market leader BYD feels the pressure:
Q2 net profit: -30%
2 months of falling production (first time since 2020)
Sales target cut by 16% to 4.6 million
But consolidation will take years. Don’t expect a quick cleanup.
My Take
China is defining the New Auto World Order.
What happens in China no longer stays in China. Overcapacity, price wars, and "China Speed" are going global.
This is the battle between old and new business models. Between Western and Chinese approaches. The irony? This battle won't be decided in China or the West. But in emerging markets.
What's happening now divides the world into 3 areas:
China leads. They used to depend on Western partners. Now they set the rules. Software and digital ecosystems determine who wins. Everything moves at "China Speed."
The West struggles. Europe and the US are fighting to keep up. Traditional automakers can't match the new pace. They're losing relevance in the new auto world.
Emerging markets decide everything. This is where the real battle happens. Where either Western or Chinese approaches win globally. The reality? China is nearly unbeatable there. They're cheaper and faster. The prediction: Chinese brands will own these markets by 2030.
The big picture: The auto world no longer looks at Germany or the US for direction. China sets the standard. And exports them globally through emerging markets.
What this means for traditional automakers:
Survive in China until consolidation is over
Defend market share in Europe and the US
Catch up on software - it'll be decisive everywhere
Fight for emerging markets – the volume segment is nearly lost there. But we have an asset: The brand name and the "Made in Germany" badge.
From a German perspective: We've basically lost the volume game in emerging markets. But we still have something powerful: our brands and "Made in Germany." This premium positioning still means a lot there. The key is building a strategy around it.
Outlook: Starting 2026, China will reduce EV subsidies. Q4/25 will see exploding NEV sales. Q1/26 will see sharp declines. This could accelerate market cleanup.
That's all for today.
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Until next week,
— Philipp
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