New Energy Vehicles in 2025: Fierce Competition and Gradual Profitability
At the end of 2025, the fierce "price war" in the Chinese new energy vehicle market gradually came to an end. "Anti-involution" became the industry consensus, and the industry basically achieved a crucial leap from "scale priority" to "value supremacy". In addition, the retail penetration rate of new energy vehicles exceeded the critical threshold of 50% for the first time, and the market share of fuel vehicles shrank at an accelerated pace. The curtain on a new round of in-depth reshuffle in the industry is just being pulled open.
Looking back at 2025, the Chinese new energy vehicle market completed a profound transformation and value reconstruction. The industry bid farewell to the "first half" of wild growth and officially entered the "second half" of high-quality development centered on systematic capabilities, a global perspective, and sustainable profitability. These series of changes not only provided strong support for the healthy development of the Chinese new energy vehicle market in 2026 but also released a positive signal that the market has returned to rationality to a certain extent.
01 New energy vehicles cross the 50% watershed
In 2025, the penetration rate of new energy vehicles soared all the way, becoming the most dazzling growth pole in the Chinese automobile market. Data from the Passenger Car Association shows that from January to November 2025, the retail penetration rate of new energy vehicles in the narrow sense of the Chinese passenger car market reached 53.6%, which means that more than half of every 100 new cars sold were new energy vehicles. It is worth mentioning that since March 2025, the penetration rate has remained above the 50% watershed for nine consecutive months, and in November, it even climbed to a high of 59.5%, indicating that "the decline of fuel vehicles and the rise of electric vehicles" is a foregone conclusion. This is also generally regarded by the industry as a crucial milestone for new energy vehicles to move from "policy-driven" to "market-led".
If we look at a longer time frame, the development speed of Chinese new energy vehicles is a miracle in the industry. In 2020, the retail penetration rate of new energy vehicles in the narrow sense of the Chinese passenger car market was only 5.8%. From 2021 to 2024, the penetration rate achieved a step-by-step leap, reaching 14.8%, 27.6%, 35.7%, and 47.6% respectively. It is expected to further climb to 54.0% in 2025. In just five years, new energy vehicles have transformed from niche players in the Chinese automobile market to the mainstream choice for consumers when buying cars.
The soaring penetration rate of new energy vehicles is not accidental. It is the result of the intertwined promotion of multiple factors such as policies, technology, and charging infrastructure.
The national and local governments have consistently supported new energy vehicles. Although the purchase subsidies were completely withdrawn in 2025, the policy of exempting new energy vehicles from vehicle purchase tax was continuously extended, reducing the purchase cost for consumers. At the same time, local governments have introduced policies to relax traffic restrictions and license plate controls, greatly improving the convenience of using new energy vehicles.
The continuous breakthroughs in power battery technology and the continuous improvement of charging infrastructure are the core driving forces for the increase in the penetration rate of new energy vehicles. In 2025, the cruising range of mainstream new energy models generally reached 500 to 700 kilometers, and the cruising range of some high-end new energy models even exceeded 1000 kilometers, greatly alleviating consumers' range anxiety. At the same time, as the coverage of charging infrastructure gradually expands, the convenience of energy replenishment has also been significantly improved. By the end of 2025, the number of charging piles nationwide reached 20 million, a three-kilometer charging circle was basically established in the central urban areas, there were more than 5,000 battery swap stations, and the coverage rate of charging facilities in national highway service areas was about 98%.
The penetration rate of new energy vehicles exceeding the 50% mark in 2025 profoundly reveals the fundamental reshaping of the driving force, consumer preferences, and market pattern of the Chinese automobile industry.
02 The commercialization inflection point of L3-level autonomous driving arrives
The Chinese new energy vehicle market is standing at a new historical starting point, as autonomous driving technology entered a period of full explosion in 2025, especially the commercialization process of L3-level autonomous driving accelerated.
In December 2025, the Ministry of Industry and Information Technology officially announced the access permits for China's first batch of L3-level conditionally autonomous driving vehicles. Two models, Changan Shenlan SL03 and BAIC ARCFOX Alpha S, will conduct on-road pilot projects in designated areas of Chongqing and Beijing respectively. Among them, the Changan Shenlan SL03 can achieve single-lane autonomous driving on highways and urban expressways in specific express sections within Chongqing at a maximum speed of 50 km/h in congested environments; the BAIC ARCFOX Alpha S can achieve the same function on multiple designated sections in Beijing at a maximum speed of 80 km/h. This marks that L3-level autonomous driving has officially entered the stage of "commercial application" from "technical verification".
The approval of L3-level autonomous driving vehicles for on-road use is of immeasurable significance. First, it marks a crucial leap in autonomous driving technology, providing a replicable technical and scale template for the commercialization of high-level autonomous driving, and laying the foundation for large-scale scenario testing for the iteration of L4/L5-level technology; second, it forces upstream suppliers to accelerate algorithm iteration and computing power platform upgrades in response to the high-precision and high-reliability perception and computing requirements of L3-level autonomous driving, thereby promoting the coordinated development of the entire industrial chain.
The improvement of policies and regulations is the key guarantee for promoting the development of the autonomous driving industry. In 2025, the state clarified the strategic positioning and development direction of autonomous driving technology by issuing a series of strategic plans and policy documents. For example, the "Opinions of the State Council on Deeply Implementing the 'Artificial Intelligence +' Initiative" issued in August clearly proposed to "vigorously develop intelligent connected vehicles", listing them as the core category of the new generation of intelligent terminals, and requiring the exploration of a "new model combining unmanned services and manual services", providing policy support for the commercial application of autonomous driving technology; the "Implementation Opinions on Accelerating Scenario Cultivation and Opening to Promote the Large-scale Application of New Scenarios" issued in November listed the full-space unmanned system as one of the key directions for the application scenarios of new fields and new tracks, and clearly proposed to build a development ecosystem of "multi-scenario integration + cross-field collaboration + full-factor guarantee".
In addition, in 2025, for the first time at the regulatory level, the responsibility division mechanism of L3-level autonomous driving, which is "mainly the responsibility of the system and supplemented by the driver's takeover", was clearly defined, and a three-level supervision system of "national access + local pilot + corporate self-discipline" was simultaneously established, breaking the biggest bottleneck that has long hindered the commercialization of high-level autonomous driving.
03 Automobile enterprises solve the profit problem
In 2025, when the Chinese new energy vehicle market was advancing by leaps and bounds, profitability remained a severe test for most automobile enterprises. It is also the key to whether they can achieve sustainable development and gain a firm foothold in the fierce competition.
According to data from the China Association of Automobile Manufacturers, in the first 11 months of 2025, the sales volume of new energy vehicles was 14.78 million, a year-on-year increase of 31.2%. However, the growth in "quantity" was not fully translated into an increase in "profit". In the first three quarters of 2025, 14 listed automobile enterprises, including BYD, Great Wall Motors, Changan Automobile, and Li Auto, presented a report of "increasing revenue but not increasing profit": the total revenue exceeded 2.07 trillion yuan, a significant year-on-year increase, but the net profit was only 36.4 billion yuan, and the overall net profit margin fell to a record low of 1.76%. In addition, half of the 14 listed enterprises were in a loss state.
In 2025, most automobile enterprises no longer simply competed in the "value war" but turned to differentiated competition in dimensions such as technological innovation, intelligent upgrading, and service value-added. The logic of industry competition gradually shifted from "trading price for volume" to "value creation".
The paths for automobile enterprises to achieve "value creation" can be roughly divided into three aspects: First, build differentiated competitiveness and reduce costs and increase efficiency through core technology breakthroughs. For example, models equipped with high-level technologies such as 800V high-voltage platforms, solid-state batteries, and urban NOA generally have high premium capabilities. Full-stack self-developed technologies such as BYD's "Heavenly God's Eye" intelligent driving system and Huawei's ADS 3.0 have significantly reduced the cost of external technology procurement; Second, break through globally to open up a "second growth curve". For example, in the third quarter of 2025, the gross profit margin of BYD's overseas market (27.3%) was significantly higher than that of the domestic market (17.7%), and the profit per vehicle overseas was about 2 to 3 times that of the domestic market. Overseas business has become an important source of profit contribution; Third, focus on niche markets and precisely match high-value demands. For example, Li Auto mainly focuses on family users and precisely meets the demand of multi-child families for large-space models through models such as Li ONE and Li L9. At the same time, Li Auto also adopts the extended-range technology route, which solves consumers' range anxiety, resulting in a continuous increase in sales volume and highlighting the scale effect, laying the foundation for profitability.
In short, the core logic for automobile enterprises to solve the profit problem in 2025 is to shift from "competing on price and scale" to "competing on technology, scenarios, and globalization". By building barriers with technology, obtaining increments globally, and mining value through scenarios, some automobile enterprises have taken the lead in achieving profitability, promoting the Chinese new energy vehicle market to move from "scale leadership" to "value leadership".
04 Automobile enterprises accelerate global layout
In 2025, Chinese automobile enterprises' globalization entered the 2.0 era of going global, centered on production capacity implementation, market deep cultivation, and technological collaboration, and achieved a crucial leap from "product output" to "capability output".
According to data from the China Association of Automobile Manufacturers, in the first 11 months of 2025, the total export volume of Chinese automobiles was 6.343 million, a year-on-year increase of 18.7%. Among them, the export volume of new energy vehicles was 2.315 million, a year-on-year increase of 102.9%, becoming the absolute main force.
Behind the strong growth in the total export volume of Chinese automobiles is the simultaneous acceleration of the global layout of the entire industrial chain, that is, an upgrade from simple product manufacturing and trade to a "provider of technical solutions". To cope with global trade barriers and reduce logistics costs, many automobile enterprises have established production bases in core export markets such as Mexico, the United Arab Emirates, and Thailand to achieve local manufacturing and assembly of complete vehicles; core upstream suppliers of batteries, motors, and electronic controls have also followed the pace of automobile enterprises to "go global" and set up R & D centers and production factories overseas to ensure the local supply of core components.
The year 2025 marks that the globalization of the Chinese automobile industry has entered a new stage. By exporting technology to enhance the voice of the industrial chain, this not only improves the global competitiveness of Chinese automobiles but also promotes the diversification of the global automobile supply chain pattern. In 2026, Chinese automobile enterprises' enthusiasm for going global remains undiminished. Recently, Changan Automobile, Geely Automobile, Seres Group, Li Auto, and XPeng Motors have all announced their future plans to go global, accelerating their global layout.
In 2026, the Chinese new energy vehicle market is expected to continue its growth trend, with sales volume expected to exceed 20 million and the penetration rate expected to climb above 57%. In addition, power battery technology will continue to make breakthroughs. New battery technologies such as solid-state batteries and sodium-ion batteries may further reduce costs and improve performance, achieving more extensive applications. Autonomous driving technology will move towards L4 level, and more L3-level autonomous driving vehicles will be approved for on-road use, bringing a more intelligent and convenient travel experience to consumers. At the same time, Chinese new energy vehicles will further enhance their global competitiveness and occupy a core position in the wave of global automobile industry transformation.
This article is from the WeChat official account “DoNews” (ID: ilovedonews), author: Zhang Yu, published by 36Kr with authorization.