How Can Car Companies Compete for a New «Blue Ocean» in the Sinking Market?

In 2025, China’s automotive industry is undergoing a «sinking revolution.» County and rural areas, once regarded as «marginal markets,» have become a battleground for long – term strategic layouts of automobile enterprises as the growth in first – and second – tier cities slows down. From traditional fuel – vehicle giants to new energy upstarts, and from international brands to local new forces, a comprehensive competition around channel expansion, product innovation, and ecological construction in the sinking market has fully unfolded.

Recently, the report «New Species, New Concepts, New Trends – Insights and Forecasts on New Energy Vehicle Consumption (2024 – 2025)» jointly released by the China Electric Vehicle 100 – Committee and Ries Strategy Consulting shows that in 2024, the sales growth rate of new energy vehicles in third – tier and lower cities reached 63%, 1.6 times that of first – and second – tier cities, accounting for 40% of the new energy vehicle market. In the first quarter of 2025, the sales volume of models below 100,000 yuan climbed to 29.6%, becoming the absolute main force in the market. With the current encouragement of new energy vehicles to enter rural areas, how can automobile enterprises meet the special needs of the county market through differentiated strategies? And how can they cope with the deep – seated challenges in infrastructure, service networks, and consumer perception in sinking cities?

Automobile Enterprises Reshape the Touchpoints in the Sinking Market

Facing the scattered consumer demand in the county market, automobile enterprises have broken the traditional 4S store model and explored more flexible channel strategies. FAW – Volkswagen has compressed the dealership store construction cycle to 36 days through the «separation of factory and store, sharing of workshops» model, signed contracts with 75 new dealers to cover 68 cities and counties, and quickly penetrated the sinking market with a «light – asset» strategy.

Toyota has cooperated with the vertical e – commerce platform «Jiucar GO» and granted the annual exclusive sales right of the Corolla 1.2T model to the platform, achieving precise reach through its county – level resource network. Luxury brands are also not to be outdone: Mercedes – Benz, BMW, and Audi have optimized their channel networks, moved some stores to third – and fourth – tier cities, and launched «mini – showrooms» and mobile service centers to lower the threshold for users to access.

The new energy camp has adopted more aggressive strategies. NIO has launched its sub – brand «Firefly,» with the starting price of its first model at 119,800 yuan, targeting the mainstream range of 100,000 – 200,000 yuan; Li Auto has launched the «Hundred – City Starry Sky Plan» to recruit partners who identify with the brand concept of Li Auto and have high – quality venue resources, aiming to provide users in sinking cities with a high – quality all – around service experience for car purchase and use. This strategy of «lowering the threshold of high – value brands» is not only a response to policy dividends but also a precise positioning for consumer segmentation.

The consumption logic in the sinking market is significantly different from that in first – and second – tier cities. Data from the China Association of Automobile Manufacturers shows that the car – buying budgets of county – level users are concentrated in the range of 100,000 – 200,000 yuan, accounting for more than 60%, and they have higher requirements for battery life, space, and durability. Automobile enterprises meet diversified needs through «dual – track operations of fuel and electric vehicles»: previously, BYD launched a limited – time «fixed – price» promotion, covering 22 models of the Dynasty and Ocean series, with a maximum subsidy of 53,000 yuan, directly stimulating sales growth; Leapmotor has occupied the 150,000 – yuan – level market with its C – series models, with its sales volume doubling year – on – year to 300,000 vehicles in 2024, and plans to launch three new models on the B – platform to enhance its competitiveness.

In terms of technical routes, plug – in hybrid/extended – range vehicles have become the main models to address the shortcoming of rural charging. Data from the China Electric Vehicle 100 – Committee shows that the proportion of plug – in hybrid models in the sinking market reaches 46%, higher than 40% in first – tier cities. Automobile enterprises such as BYD, Geely, Changan, and SAIC have increased the launch of such models. In terms of functional design, more attention is paid to scenario adaptation: Wuling Hongguang MINI has remained the sales champion in the county market due to its flexibility and low usage cost; BYD plans to develop high – chassis models to deal with muddy roads and strengthen the load – carrying capacity of micro – trucks and light – trucks to meet the compound needs of «commuting + production.»

In the industry’s view, the regional market battle is a continuation of the full competition in the new energy vehicle market. Third – and fourth – tier cities have a wider customer base than first – and second – tier cities and are an important incremental market for China’s new energy vehicles in the future.

The Contradiction in Breaking Through the Sinking Market: Infrastructure and Consumer Perception

Although policies are promoting the extension of charging networks to counties, the practical contradictions are still prominent. As of April 2025, the coverage rate of charging piles in rural areas is less than 5%, and the satisfaction of users in third – tier and lower cities with energy replenishment is 10% lower than that in first – and second – tier cities. Li Bin, the chairman of NIO, admitted that the construction of the energy replenishment system in the sinking market is a «huge issue» that requires balancing the grid’s carrying capacity and user needs. In addition, county – level maintenance outlets are scarce, the service radius generally exceeds 50 kilometers, and there is a lack of professional technicians, resulting in longer response times for faults.

At the same time, consumers in the sinking market have a «pragmatic» characteristic in brand perception. The report of the China Electric Vehicle 100 – Committee mentioned that 70% of county – level consumers list «cost – effectiveness» as the primary factor in car purchase, and replacement and upgrade purchases are the main forms of car purchase, especially the replacement demand is greater; consumers in the sinking market are more affected by automobile policies than those in first – and second – tier cities, especially non – car – owning users are most strongly stimulated by policy incentives, and they have a lower acceptance of «brand premium» than urban users. However, this «preference for low prices» is changing subtly: with the continuous penetration of the policy of new energy vehicles entering rural areas, the attention of sinking users to intelligent driving and Internet of Vehicles functions is increasing.

At the same time, the financial penetration rate in the county market is much lower than that in first – and second – tier cities. Automobile enterprises need to develop financial products suitable for farmers’ income cycles, such as «separation of vehicle and battery» leasing and agricultural discounted loans. ZEEKR and Xiaomi have jointly launched a «zero – down – payment + low – interest installment» plan with local banks through the «Business Partner Program,» reducing the car – buying threshold to a level that can be borne by groups with a monthly income of 3,000 yuan. At the same time, building a closed – loop ecosystem of «sales – service – recycling» has become the key.

NIO is promoting the «county – to – county battery swapping» plan, aiming to cover 90% of counties within 3 years; Li Auto has required in the cooperation terms that the power capacity of super – charging stations must be ≥500 kilowatts, promoting the pre – construction of infrastructure; Tmall and JD.com provide online car selection and offline car pick – up services through county – level service stations; Tuhu Car Care solves the maintenance problem with the help of 1,600 county – level stores. At the talent level, vocational colleges have set up targeted classes for new energy vehicle maintenance to train local technical forces and solve the pain points of «three – electric» maintenance.

The battle in the sinking market is essentially a verification of the future growth logic of China’s automotive industry. At the policy level, the «Notice on Carrying out the 2025 New Energy Vehicle Campaign in Rural Areas» has expanded the vehicle model catalog to 124 models and included international brands such as Tesla for the first time, marking a shift in the policy focus from «subsidy stimulation» to «ecological construction.» On August 13, the Ministry of Finance, the People’s Bank of China, and the National Administration of Financial Regulation jointly issued the «Implementation Plan for the Fiscal Interest Subsidy Policy for Personal Consumption Loans,» using fiscal funds directly to pay part of the interest for eligible personal consumption loans. Moreover, the policy is clearly designed, such as emphasizing that the loan needs to be «actually used for consumption,» and the handling institutions need to be able to identify consumption transaction information (car loans are directly paid to the dealer’s account) to ensure that the funds are accurately directed to the real economy. It also specifically mentions that key areas of consumption such as household cars with a single – loan amount of 50,000 yuan and above will be given preferential support. In addition, setting an annual cumulative interest subsidy cap for individuals also prevents arbitrage behavior to a certain extent.

At the market level, automobile enterprises need to abandon the «one – shot deal» mindset and achieve win – win results for multiple parties through «co – construction of infrastructure, sharing of service networks, and mining of data value.» It can be predicted that in the new blue ocean of the sinking market, the winner will depend on who can build local service capabilities at a lower cost and who can transform the county market from a «sales volume increment» to a «brand loyalty incubator.»

Image Source: CCTV News

This article is from the WeChat public account «Automotive Market Insights», author: Yang Shuo, published by 36Kr with authorization.