Struggling Survival: The Reasons Behind China's Auto Manufacturers' Difficulties

In a staggering turn of events, nine Chinese automakers have filed for bankruptcy in the first half of 2025. The list includes well-known brands like Zotye, Weltmeister, Brilliance, Borgward, and Aiways, among others.

The root of the crisis can be traced back to over-expansion and financial mismanagement. Chinese automakers have expanded their production capacities beyond reasonable limits, leaving them with insufficient financial reserves to sustain their operations.

The government has taken notice of the crisis and has summoned the CEOs of major Chinese automakers for a crisis meeting. The objective is to discuss the current state of the industry and devise strategies to mitigate the impact on the economy.

The price war among Chinese automakers has intensified in recent years, leading to stock prices plummeting and profit margins shrinking rapidly. Smaller manufacturers are producing at a loss to keep their plants running, exacerbating the financial strain.

The Chinese auto market has been unhealthy for years, with constant growth masking underlying issues. The relentless competition and the pressure to keep up with the market's rapid pace have led to unsustainable practices.

Foreign importers were the first to feel the pinch, and now the price war has reached domestic Chinese brands. Even larger Chinese brands are affected by the price cuts and are seeing their profit margins shrink.

However, this situation could be an opportunity for global players like VW, Mercedes, and others if they can weather the next few years in China. These companies, with their established brands and financial stability, could capitalise on the void left by the struggling Chinese brands.

One notable exception is the Chinese automobile brand BYD, which implemented a price reduction of around one-third in 2025. While this move increased competition and pressure in the market, it also demonstrated the company's commitment to customer affordability and its ability to adapt to changing market conditions.

As the crisis unfolds, it is clear that the Chinese auto industry needs to reassess its strategies and focus on sustainable growth and financial prudence. The future of the industry, and its impact on the economy, hangs in the balance.

Struggling Survival: The Reasons Behind China's Auto Manufacturers' Difficulties