Price Wars Lose Impact; Tech Competition Becomes Key to Automakers' Breakthrough

On May 12, McKinsey released its "China Automotive Consumer Insights Report 2026." The report reveals that price wars have limited effectiveness in boosting sales: only 22.1% of consumers believe price competition positively influences their car-buying decisions, while 19.2% say it causes them to delay purchases. After offsetting these effects, the net positive impact stands at just 2.9%. Consumers widely express concern about rapid depreciation immediately after purchase—particularly luxury car buyers, who are more inclined to postpone purchases to avoid asset devaluation risks. Meanwhile, the positive influence of new technologies on purchasing decisions continues to grow. In 2025, 31% of consumers said new technologies encouraged them to buy a car, up nearly 8 percentage points from 2024. Conversely, the share of respondents citing overly rapid technological updates as a reason for hesitation declined from 12.5% to 10.3%. After accounting for negative factors, the net positive impact of new technologies reached 20.7%. China’s auto market is currently experiencing a cyclical downturn. According to data from the China Passenger Car Association (CPCA), retail sales of passenger vehicles totaled 5.604 million units in the first four months of 2026, down 18.5% year-over-year. From May 1 to May 10, retail sales amounted to 407,000 units, a 21% decline compared to the same period last year. However, looking ahead, annual passenger vehicle sales in China are projected to stabilize around 24 million units between 2026 and 2035. Notably, 2025 sales already surpassed pre-pandemic 2019 levels, outpacing major global economies. China’s auto market has entered a phase of stock-market competition dominated by replacement and upgrade purchases. Rising numbers of licensed drivers and an increasing share of middle- and high-income households continue to bolster purchasing power. Although the market faces short-term pressure, underlying demand fundamentals remain fundamentally unchanged. The report notes that price wars have fallen into a vicious cycle of “price cuts → consumer hesitation → further price cuts,” making them unsustainable. In contrast, technology-driven competition delivers tangible value and represents a key pathway to breaking this deadlock. In the luxury segment, consumers place particular emphasis on advanced features such as driver-assistance systems, intelligent cabins, unique driving modes (e.g., “crab-walk” and “pivot turn”), and quad-motor powertrains. Since 2026, domestic automakers have launched a wave of large new models centered on cutting-edge technologies as core selling points. While some argue that the premium large-vehicle segment is nearing saturation, domestically branded offerings are generally priced lower than comparable models from traditional luxury brands, creating potential to expand market share and stimulate new demand.