China’s Auto Sector Shifts as EV Momentum Grows
China is undergoing a sweeping shift in its automotive landscape, with electric vehicles taking the lead while traditional internal combustion engine models retreat. The country’s carmakers are recalibrating production and investment to align with a rapidly changing demand profile, a trend that is reshaping factory utilization and market strategy across the sector.
Data from a Shanghai-based consultancy indicates a dramatic narrowing of the ICE market. In 2023, China produced 17.7 million internal combustion engine cars, a figure that represents about one third of the volume seen in 2017. That decline has left roughly half of the sector’s installed capacity idle—around 25 million units per year out of a potential 50 million—highlighting a structural imbalance between production capabilities and current consumer demand.
The price environment within the Chinese automobile ecosystem intensifies this pressure. Intense price competition is squeezing margins for ICE manufacturers and compressing the profit window for many players. At the same time, major global brands such as Toyota, Volkswagen, and General Motors are contending with a slower ramp in affordable electric vehicles and hybrid models. As a result, these traditional automakers are ceding ground to newer entrants like BYD and Tesla, who are expanding their share in the low-cost and mass-market segments.
Analysts forecast a future in which hundreds of so-called zombie factories could surface in China’s auto market over the coming decade. These facilities, once productive anchors of regional economies, would be pressed by a demand mix that favors electrification and more efficient, software-enabled vehicles. The trend underscores a broader realignment of supply chains, investment priorities, and national industrial policy as China seeks to maintain competitiveness in a global EV race.
In the meantime, macroeconomic and policy developments in Russia are shaping another layer of price dynamics for motor vehicles. Authorities there clarified the factors that constrain price increases, a move that interacts with imports, exchange rates, and consumer demand in a way that influences secondary markets and vehicle affordability. The policy signal arrives amid a separate set of market conditions that have already shown strength in used car sales, reflecting shifting consumer behavior and cost considerations in the regional auto landscape.
Taken together, these developments paint a picture of an automotive world in transition. A growing portion of new-vehicle demand is being captured by electric drivetrains, with the market seeking more affordable, higher-technology options. Traditional ICE production, while still substantial, is contending with a changing cost structure, evolving consumer preferences, and a competitive field that increasingly rewards electrification, efficiency, and software-driven value. Industry observers note that the next few years will likely redefine capacity utilization, brand positioning, and the pace at which the global auto map tilts toward electrification—especially in large economies and industrial hubs where policy and consumer sentiment converge to accelerate change.