CINEVE | China's New Energy Vehicle Market Faces a New Challenge as Oversupply Drives Homogeneous Competition

On July 16, six major brands—Li Auto, Xpeng, IM Motors, Wuling, Leapmotor, and Wey—launched a total of seven new models within a span of just two and a half hours, covering a price range from 120,000 to 350,000 yuan. This flurry of new model launches stands in stark contrast to the grim reality reflected in profit statements. Data released by the China Association of Automobile Manufacturers (CAAM) at the China Auto Forum on July 22 revealed that while over 500 new models hit the market in the first half of the year, the industry's profit margin fell to 3.4%, with the vehicle manufacturing segment seeing a margin of just 1.5%. With new models constantly rolling out yet profits dwindling, where exactly does the problem lie?

1. New Models Flood the Market, and Homogenization Has Become a Common Industry Reality

In the first half of this year, China’s domestic auto market saw the launch of 630 new models, annual updates, and facelifted versions, averaging more than three new vehicles per day. However, behind this explosive growth in numbers lies a sharp decline in product differentiation. Highly similar exterior designs have caused many new models to fall into a state of “visual confusion,” making it increasingly difficult for consumers to distinguish between them.

In the era of electric vehicles, technology routes have become highly standardized. To reduce aerodynamic drag and improve driving range, many EVs adopt streamlined front-end designs with lowered noses, fastback-style rear profiles, and the removal of traditional front grilles. This standardized design approach has been widely adopted by automakers around the world. As technology solutions become more unified, vehicle designs naturally become increasingly similar.

The standardization of supply chains is further accelerating this trend. During the era of internal combustion engine vehicles, self-developed engines and transmissions were key tools for automakers to build differentiation. These technologies involved high technical barriers and complex tuning processes, resulting in products with unique characteristics from each manufacturer. However, after the shift toward electrification, nearly 70% of vehicle components now come from common modular platforms. By making minor adjustments to a shared chassis and electric powertrain solution, manufacturers can quickly launch multiple new models. Among the more than 130 automotive brands currently available on the market, most models are built on similar supply chain systems, using the same suppliers and comparable technical solutions. As a result, the products presented to consumers naturally show a high degree of similarity.

2. Full-Range Product Strategies Create a Trap, Continuously Diluting Innovation Capability

Many automakers today are pursuing a “large and comprehensive” product strategy, aiming to build a complete product portfolio that covers every segment. Their goal is to span the entire market, from small city cars priced at tens of thousands of yuan to mid-size and large SUVs costing hundreds of thousands of yuan, attempting to capture customers across all price ranges and vehicle categories. It has become increasingly common for a single automaker to operate three or four brands, with each brand launching five or six models. When consumers visit the product pages of either emerging EV companies or traditional automakers, they often see a complete lineup structured around “entry-level – mid-range – premium – flagship” models.

The problem with this strategy is not the number of products, but the lack of focus. Every company has limited R&D budgets and technical resources. When investment is spread across multiple product lines, the resources allocated to each individual model become extremely limited. Without sufficient funding for fundamental technology development and enough engineering capability to refine user experience details, it becomes difficult to build technical barriers that competitors cannot easily replicate. As a result, competition within the industry is increasingly focused on superficial factors. Screen size, driving range figures, and seat functions have become major selling points. Automakers continue to compete by comparing specifications, yet the actual differences consumers experience behind the wheel are becoming smaller and smaller. With nearly identical strategies and product approaches, companies can only rely on continuous price cuts to attract customers, causing profit margins across the entire industry chain to become increasingly compressed.

More importantly, this “large and comprehensive” product strategy creates a self-reinforcing cycle. Once a product portfolio has been established, it becomes extremely difficult to scale it back, as each product line represents existing market commitments and channel investments. Reducing product offerings means losing market share, while further expansion leads to even greater profit dilution. Many automakers are not unaware of these problems; rather, they have become constrained by their own strategic frameworks. The less differentiated their products become, the more they rely on expanding product numbers to cover the market. However, the more models they launch, the more their resources are dispersed, making it even harder to create true differentiation.

3. From Competing on Specifications to Competing on Differentiation, Market Segmentation Is Taking Shape

Homogeneous competition may appear intense and dynamic, but history has repeatedly shown that this path is difficult to sustain in the long run. From motorcycles to color TVs and then to smartphones, many industries have gone through similar cycles of excessive competition and product homogenization. In the end, the companies that survived were those that proactively transformed their strategies and built competitive barriers through technology, usage scenarios, and brand value.

What the industry needs is not more “similar” new vehicles, but truly differentiated products. Many brands have already recognized this trend and started to streamline their product portfolios, focusing on specific user groups and developing deeper expertise in targeted markets. Some companies continue to improve energy replenishment efficiency, some create differentiation through superior space and user experiences, while others find their own opportunities by focusing on specific application scenarios. Although it is still too early to determine which companies will ultimately emerge as winners, the underlying logic remains the same: instead of following competitors on tracks where others already have advantages, companies should aim to become leaders in areas where they have unique strengths.

A large number of homogeneous vehicle models entering the market will only intensify industry competition and continuously squeeze the profit margins of both upstream and downstream players. Blindly expanding full-range product portfolios will only disperse R&D resources and slow down the pace of technological innovation. For consumers, when facing a market filled with new vehicles that “look almost the same,” asking one more question — “What makes this vehicle different from others?” — may be more valuable than simply focusing on price. For the industry, escaping from the trap of homogenization requires not more new vehicles, but more truly differentiated ones.