- Global vehicle demand expected to fall in 2026, with China down 10%, the U.S down 3%, and the EU down 1%
- China expected to see modest recovery and gradual growth ahead, while U.S. and European markets stagnate
- Chinese automakers projected to export nearly 10 million
vehicles in 2026, up from 7.1 million in 2025
Chinese-brand vehicles projected to reach 16% market share in Europe by 2030, following 25% sales increase this year - 7 of current 30 Chinese NEV OEMs will break even by 2030; Industry consolidation to accelerate as weaker ones exit or become acquired
SHANGHAI (June 30, 2026) – The 23rd annual AlixPartners Global Automotive Outlook projects vehicle demand to decline across major markets in 2026, including China and the U.S., reflecting softer consumer demand and continued industry uncertainty.
In China, sales fell 18% in the first five months of 2026, driven by a slowing economy and the gradual withdrawal of certain new energy vehicle (NEV) purchase subsidies. AlixPartners forecasts total light-vehicle sales to decline 10% this year to 24.6 million before recovering gradually to 26.2 million by 2030.
Despite an anticipated recovery in volumes over the coming years, China's automotive industry remains locked in a prolonged period of intense competition. The more significant story is not the near-term fluctuation in sales, but the structural transformation reshaping the market.
As more NEV brands enter the market, industry capacity continues to expand while plant utilization remains under pressure, creating mounting financial strain, particularly for smaller players. While some manufacturers have improved their financial status through higher volumes, even traditionally profitable players have seen margins come under pressure. According to the Outlook, only three of China's 30 NEV-focused automakers achieved full-year profitability in 2025. AlixPartners projects that only seven of the 30 Chinese NEV-dedicated OEMs present in the market in 2025 will break even by 2030.
Against this backdrop, industry consolidation is expected to accelerate over the coming years, with weaker manufacturers exiting the market or becoming acquisition targets, including for foreign investors.
"Instead of a simple cycle of expansion and contraction, what we are really seeing in China is a deeper restructuring of how value is created and captured. Capacity has expanded faster than demand can absorb it, and differentiation in NEVs is becoming harder to sustain as technologies mature and converge," said Dr.Stephen Dyer, Asia-Pacific Leader of the automotive and industrial practice at AlixPartners.
"As a result, profitability is no longer driven by scale, but increasingly by how efficiently companies are organized, how quickly they adapt product cycles, and how effectively they integrate design, engineering and commercialization. We expect a widening gap between winners and the rest of the industry, with consolidation becoming a structural outcome rather than a cyclical one."
The other consequence of the market’s hyper-competitive ‘involution’ is driving Chinese automakers to seek growth in new markets. The Outlook projects exports will reach nearly 10 million in 2026, up from 7.1 million in 2025. However, exports represent only the first stage of international expansion, with localized manufacturing expected to become the longer-term goal. Between these stages, automakers are likely to rely on technology licensing, contract manufacturing and joint ventures to establish a presence in more protected markets.
Chinese automakers continue to benefit from significantly faster product development cycles, enabling more rapid model refreshes and technology deployment than global peers. As the sector matures, China has added eight companies to the world’s Top 100 automotive suppliers with a total of twenty-five, surpassing the U.S. to become the third-largest supplier base globally. Many Chinese suppliers are delivering double-digit growth in categories where the broader global supplier market is contracting, while maintaining healthy returns on capital employed.
AlixPartners also projects Chinese-brand vehicles projected to reach 16% market share in Europe by 2030, including Russia. Sales are expected to rise 25% this year to 2.3 million units, with particularly strong growth in Germany and France.
The report also identifies approximately 2.5 million units of underutilized annual manufacturing capacity across European plants, creating opportunities for Chinese automakers seeking local production. Several Chinese OEMs have already expressed interest in leveraging existing facilities and are increasingly partnering with local companies to navigate complex regulatory and operational environments.
Nevertheless, overseas expansion remains challenging. Chinese automakers face a widening set of barriers beyond tariffs, including investment restrictions, ownership requirements, technology controls and data security regulations across multiple markets.
“The industry’s future will not be defined by whether sales rise or fall in a given year, but by how quickly automakers adapt to a market being reshaped by shifting consumer demand, technological disruption and geopolitical uncertainty,” said Yichao Zhang, Partner of the Greater China Automotive Practice at AlixPartners. “Chinese automakers' competitive edge is no longer just about EV technology. It is increasingly built on speed, cost competitiveness and organizational agility, particularly in the development of intelligent connected vehicles. These strengths position them well to compete globally, even as EV growth overseas becomes more measured.”
Looking ahead, the Outlook highlights the industry’s next major technological shift—from software-defined vehicles (SDVs) to AI-defined vehicles (AI-DVs). Unlike SDVs, which rely primarily on over-the-air updates, AI-defined vehicles continuously learn, adapt, and optimize performance throughout their lifecycle. Beyond enabling more intelligent vehicles, AI-DVs have the potential to significantly improve product development efficiency, reduce engineering costs and accelerate innovation across the automotive value chain.
“The next round of competition will be shaped by two challenges,” added Yichao Zhang. “The first is building adjacent-industry capabilities. For AI-defined vehicles, success will hinge on data, model and localized supply chain strength. The second is execution on the ground. As global expansion becomes structural, the real test lies in turning ambition into delivery through partnerships that may look very different from those of decades past.”