The Chinese automobile market has made significant progress in the transition to electric vehicles (EVs) since the trend took hold a decade ago. Electrification and smart technologies have gained momentum, especially in the past five years, and lessons from the Chinese market can be extracted for the global automotive transformation. Additional fast-moving trends are influencing the preferences and behaviors of Chinese consumers and even shaping the evolution of the global automotive industry.
McKinsey has followed the evolution of the Chinese auto market closely over the past ten years, conducting annual surveys to gauge consumer sentiment and assess trends. This year’s report, McKinsey China Auto Consumer Insights 2025, highlights the growing importance of technological innovation over price point, the decline of incumbents in a reconfigured landscape, the rise of plug-in hybrids (PHEVs) and extended-range electric vehicles (EREVs), and wider access to technological advances such as autonomous driving (see sidebar, “About the report”).
Competition shifts from price to innovation
China’s automotive market is caught in an escalating price competition, but steep discounts have yielded only marginal sales growth. In contrast, consumers are actively embracing new models and cutting-edge technologies. Going forward, automakers may find more success competing through innovation than through relentless price cuts.
Incumbents are falling behind in a reshuffled landscape
Chinese OEMs have earned consumer recognition in the EV sector through technology innovation. While many incumbent multinational brands are still perceived as premium, some are struggling to convert their legacy appeal into pricing power for EVs. These global players are faced with the challenge of building on the reputation they established during the internal combustion engine (ICE)–only era to meet the needs of today’s smart and electrified automotive market.
Plug-in hybrids and extended-range technologies are gaining popularity
A growing number of EV owners plan to return to ICE technology for their next car because they are dissatisfied with the charging experience. But PHEVs and EREVs are steadily gaining popularity because they offer an easy refueling experience and a practical solution to range anxiety.
Technological democratization leads to scenario-based differentiation
Consumers have become increasingly aware of autonomous driving. They know about the technology’s advanced features, express satisfaction with its performance, and expect to see higher-level automation. As autonomous driving and other smart technologies become more widespread, the trend of “technological democratization” is pushing OEMs to prioritize scenario-based applications as a key differentiator. However, broader adoption in China will require OEMs to educate consumers to ensure that these features are used safely and effectively. The only way to stand out in the game of product personalization is to closely align products with user scenarios and create the most suitable user experience based on different scenarios.
These four market dynamics outline China’s automotive landscape while mirroring consumers’ relentless pursuit of value optimization. The preference for better but cheaper vehicles isn’t exclusive to China but follows universal consumer logic. The success of PHEVs and EREVs will be replicated elsewhere during charging infrastructure transitions.
As the industry accelerates toward 2030, consumer-centric products and strategies will determine which brands survive. China’s market evolution can provide a model for the whole industry, with its automotive narrative unfolding globally at varying paces in different formats. For OEMs, the winning formula is to combine a globalized platform with localized scenarios, because there’s no one-size-fits-all solution in the smart-EV era.
