The recent 2025 China Chongqing Auto Forum marked a pivotal moment. Key leaders from major Chinese OEMs voiced strong frustrations with “involution (内卷, nèijuǎn)” and collectively called for an “anti-involution” movement. For a global audience, involution describes a relentless, zero-sum internal competition—a vicious cycle of price wars and feature-stacking with diminishing returns for everyone involved.
This declaration is far more than a few corporate complaints; it reflects a deep reckoning with the fundamental challenges facing China’s automotive market and its future direction. As the classic Chinese saying goes, “When immortals fight, mortals suffer” (神仙打架，凡人遭殃). This conflict has profound implications for the entire market, especially for Tier 1 suppliers like us.
1. The Limits of “Involution”: A Painful Realization
As noted in our previous analyses, the Chinese auto market’s extreme competition—its involution—has been a double-edged sword. It fueled the incredible “China Speed” and drove rapid technological innovation. As Bosch diagnosed, it led to a paradoxical outcome: while the industry’s average profit margins fell, local brands saw their market share and exports explode.
However, a consensus is now forming that this model has reached its breaking point.
- Eroding Profitability: The endless price war is severely undermining the financial health of OEMs. The near-bankruptcy of EV startup Neta and the staggering cumulative losses of premium EV maker NIO are stark reminders of how dangerous “profitless volume” can be. When OEMs state that “there is no more room for prices to fall,” they are signaling that this financial pressure has become unbearable.
- Diminishing Brand Value: A strategy built solely on slashing prices and excessively stacking features is unsustainable. In the long run, it damages brand image and erodes consumer trust. The growing criticism of practices condemned as “slashing user value” (割用户) simply to “pad sales numbers” (刷销量) indicates a shift in consumer mindset. Buyers are no longer swayed by simple “value for money” alone; they are now prioritizing quality, service, and corporate integrity—a maturation process seen in developed markets worldwide.
- Disrupting the Industrial Ecosystem: The hyper-competition among OEMs transfers immense pressure onto the entire supply chain. The critique that “this is not healthy competition” is rooted in the reality that OEMs are creating “hidden debts” through practices like delayed payments to suppliers. This ultimately harms the health of the entire industry. The Chinese government’s recent mandate to shorten OEM payment terms to 60 days is a direct attempt to preemptively mitigate these supply chain risks.
2. What the “Anti-Involution” Movement Signifies
The “anti-involution” declaration from the forum signals that Chinese OEMs are finally looking to transition from quantitative growth to qualitative, sustainable competition.
- A Focus on the Long-Term: The question posed at the forum—”Will we make good products that last, or will we just make a quick buck for a year or two and leave a mess?”—reveals a desire to shift focus from short-term sales figures to long-term brand value, technological prowess, and user experience. This echoes the product development philosophy of global OEMs, where a typical two-year development cycle is standard, reflecting the belief that investment in technology and quality ultimately wins market trust.
- A Push for Industry Self-Regulation: The call to make “honesty and quality the foundation of the market” is a direct response to the market’s opaque and unethical practices. This includes schemes like the “0km used car” fraud, where vehicles were registered to claim subsidies and then sold as new. This is a clear attempt to self-regulate, aiming to build a more transparent and trustworthy market environment conducive to healthy, long-term competition.
- Pivoting to Technology and Value Competition: With price wars hitting a wall, the next logical frontier is competition based on technological strength and product “value.” Xiaomi’s strategy for its SU7 is a prime example. By focusing on a single, well-defined model and aiming for higher margins, Xiaomi is demonstrating a path toward “value-based competition.” For Tier 1 suppliers providing high-value technologies like infotainment, telematics, cameras, and software, this is a highly positive signal.
3. The Tier 1 Supplier’s View: Navigating the Changing Tides
This “anti-involution” trend sends critical signals to Tier 1 suppliers like us.
- OEM Financial Health: Efforts by OEMs to escape the price war quagmire and secure profitability will, in the long term, contribute to a more stable supply chain and greater transparency in payments. This reduces the risk of a “domino effect” of defaults, akin to a ‘second Evergrande’ crisis in the auto sector, which would be catastrophic for suppliers.
- The Rising Importance of Technology and Quality: If OEMs pivot from prioritizing “price” to “quality” and “technology,” it creates a significant opportunity for our core product lines (Infotainment, Telematics, Cameras, Software). They will increasingly seek partners who offer technological superiority and reliable quality, rather than just the lowest-cost components.
- Accelerated Market Consolidation: If the “anti-involution” movement takes hold, financially weak or technologically deficient OEMs will likely be weeded out of the hyper-competitive market at an accelerated pace. This means a shift in our customer portfolio is inevitable. We must meticulously observe which OEMs are positioned to survive and lead the market in the long run.
Conclusion: A New Chapter for China’s Auto Market
The “anti-involution” declaration at the Chongqing Forum is a clear sign that China’s auto market is standing at a crucial turning point, attempting to move beyond sheer volume and enter a phase of qualitative maturation.
While this transition may bring short-term chaos and uncertainty, it also opens the door to a new era of opportunity—one where technology, quality, and sustainable business models become the true differentiators. As a key player in this ecosystem, we must meticulously monitor these currents, continuously analyzing their impact to strategically navigate the road ahead.