China redefines global auto sector with new operating model

China's automotive industry is redefining speed, efficiency, and market leadership through a pioneering operating model, positioning itself as a global driver of innovation amid accelerating disruptions, according to the 2025 AlixPartners Global Automotive Outlook.

The report reveals that Chinese new energy vehicle manufacturers can now bring vehicles to market twice as fast while investing 40 to 50 percent less and achieving a 30 percent cost advantage compared to their global peers.

Chinese brands are expected to capture 67 percent of the domestic market by the end of this year, it estimates.

Statistics from the China Association of Automobile Manufacturers show that from January to May, sales of Chinese-brand passenger cars totaled 7.562 million units, up 26.3 percent year-on-year, accounting for 68.8 percent of total passenger car sales.

The market share marks a 7.5 percentage point increase in market share compared to the same period last year, reaching a historic high.

"China is one of the most competitive NEV markets globally, with intense price wars, rapid innovation, and a strong ecosystem of new entrants pushing the boundaries," said Stephen Dyer, Asia Leader of the Automotive and Industrial Practice at AlixPartners.

"Chinese automakers must focus on building strong brands, investing in autonomous driving and advanced technologies, and localizing operations internationally to sustain growth amid global challenges," said Dyer.

Yet the report forecasts significant consolidation within China's NEV sector. Of the 129 brands active in 2024, only 15 are expected to remain financially viable by 2030, collectively holding 75 percent of the market share.

Encouragingly, some leading NEV players have already achieved full-year profitability, like Li Auto, highlighting the potential for sustainable growth as the sector develops.

While some brands are likely to exit or consolidate, these changes are set to create a more competitive and innovative landscape for China's NEV industry, said the report.

It identifies two key actions that automakers can adapt to navigate the challenges ahead, with the first being fully understanding and capitalizing on the advanced-mobility revolution, including advanced-driver-assistance-systems.

It notes that growth in the global ADAS market is outpacing that of traditional vehicles, and forecasts that it will reach $50 billion by 2030, with China's market share growing to 45 percent.

Also, artificial intelligence is playing a crucial role in accelerating development cycles. It said AI-enabled solutions are cutting design and verification times by up to 20 percent, enabling faster product launches and reducing costs.

More than 40 years have passed since the last revolution of platform-based design and modularization.

The latest revolution will increasingly be led by AI rather than humans, ultimately paving the way for the realization of the truly unmanned factory, said the report.

Zhang Yichao, partner of the Greater China Automotive Practice at AlixPartners, said: "China's 'New Operating Model', driven by partnerships and smart manufacturing, allows automakers to launch vehicles faster and more cost-effectively than ever.

"To succeed, OEMs must embrace AI tools strategically, navigate infrastructure and investment shifts, and transform talent to meet next-generation manufacturing demands."

Geopolitical uncertainties and tariffs are prompting some companies to rethink supply chains. Yet Chinese automakers continue to expand internationally, leveraging their operational agility and cost advantages in a complex global environment.

The reports projects Chinese NEV makers to double their European market share to 10 percent by 2030 through local production and partnerships.

Chinese NEV production in Europe is expected to increase by 800,000 vehicles annually by 2030, while European automakers may reduce capacity by 400,000 units in the same period.

BYD and Chery are building plants in Europe and several others have revealed plans to do so, including Changan and SAIC.

This shift reflects changing competitive dynamics and industry restructuring, said the report, adding that the combination of speed, cost efficiency, innovation, and agility sets a new standard for the future of mobility worldwide.

"Suppliers and OEMs should continue to look to the lessons learned from the winners in the China market for guidance on how to transform at home," said the report.