Low Profitability and High Competition in China’s Automotive Industry

China currently has an estimated production capacity of around 55 million vehicles, with only about 50% of that capacity being utilized. Approximately 60% of this capacity is for internal combustion engine (ICE) vehicles.

The Chinese automotive market is highly competitive, and as a result, companies in the region face very low profit margins.

To address two main challenges — excess capacity and the need for more profitable sales — China has shifted its focus outward. Since 2022, China has become the world’s leading vehicle exporter. Roughly 70% of these exports consist of ICE vehicles.

Meanwhile, Turkey’s domestic vehicle production is largely focused on internal combustion and hybrid vehicles. This makes the local industry vulnerable, as increasing imports from China could further damage an already pressured sector.

There are signs suggesting that Turkey may have made concessions during its latest official visit to China, as such an import agreement has now materialized. Whether this was in exchange for investment or other strategic benefits remains unclear.

What raises further concerns is the fact that incentives appear to favor ICE vehicles rather than electric ones. This runs counter to global trends and adds to the pressure. The recent increase of Special Consumption Tax (ÖTV) to 25%on certain vehicles further complicates the situation.