Eight Traditional Automakers Lose Production Licenses in 2026 as Industry Shakeout Accelerates

In June 2026, the Ministry of Industry and Information Technology (MIIT) officially removed the whole-vehicle production qualifications of eight automakers—including FAW Xiali and Brilliance Auto’s domestic brand—from its official list in Announcement No. 408 and permanently froze these licenses. These companies have already halted factory operations and sealed their production lines, effectively exiting the market both legally and industrially. From January to May 2026, retail sales of passenger vehicles in China fell by 19.5% year-on-year. Despite a price war that has persisted for nearly two years, no major automaker had experienced a sudden collapse as of mid-June. The eight disqualified companies once enjoyed periods of glory: FAW Xiali led China’s sedan sales for 18 consecutive years; Zotye sold 330,000 vehicles in 2016; Leopaard specialized in rugged off-road SUVs and served government fleets; Lifan transitioned from motorcycles into car manufacturing; Brilliance Auto leveraged its partnership with BMW; Hawtai’s Santa Fe model exceeded annual sales of 10,000 units; BAIC Yinxiang’s sub-brand Weiwang sold a combined 600,000 units of the S2 and S3 models over three years; and Haima once held an 85% share in the compact MPV segment, selling over 220,000 vehicles in 2016. However, these companies generally lacked core technological capabilities. Zotye’s R&D expenditure in 2024 was only RMB 5.7 million, down 86.97% year-on-year. Haima and Brilliance each spent just over RMB 1 billion on R&D during the same period, while BYD invested a staggering RMB 57.978 billion in R&D in 2025. Prolonged technological hollowing left them unable to adapt to the shift toward electrification and intelligent driving or meet China’s stringent National VI-b emission standards. Some also suffered from resource dispersion and reputational damage due to diversifying into non-core businesses, resulting in low residual values for used cars and disrupted after-sales parts supply. Under dual pressures—the MIIT’s newly established exit mechanism and sustained market downturn—these companies ultimately lost their production licenses. Some of their manufacturing facilities and technical teams have since been acquired and reactivated by other automakers. Currently, no large-scale collapses have occurred among new-energy vehicle startups, primarily because most high-risk players were already eliminated in earlier stages. Surviving firms typically possess scale advantages, technological moats, or strong financial backing. Additionally, many automakers have adopted conservative strategies, tightly controlling capacity and costs. Nevertheless, the industry’s average profit margin has dropped to just 3.2%, with most automakers operating at a loss, raising serious doubts about long-term sustainability. The exit of these eight traditional automakers marks the end of China’s “wild west” era in automotive manufacturing—but industry consolidation continues. Weak demand, chronic overcapacity, difficulties in transitioning away from internal combustion engines, and shrinking market shares of joint-venture brands have collectively placed immense pressure on small and medium-sized suppliers lacking core technologies and on vehicle brands selling fewer than 30,000 units per month.