Geely, a China’s second-largest carmaker, has halted plans for new manufacturing plants, according to industry experts.

This decision aims to address global overcapacity in the automotive sector and respond to ongoing price competition.

Chinese car manufacturers have introduced record discounts, with rates increased from 8.3% to 16.8% in April 2024, as reported by JPMorgan Chase in May 2025.

Analysts believe that reducing production capacity could alleviate inventory pressures and stabilize the automotive market.

Geely, which operates brands including Zeekr, Lynk, and Galaxy, reported increases sales and profit. The company delivered 2.18 million vehicles in 2024, marking a 32% rise from the previous year.

Electric vehicle (EV) sales surged by 92% to over 888,000 units. Geely’s net profit reached 8.5 billion yuan (US$1.2 billion) last year, reflecting a 52% year-on-year growth.

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🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s overcapacity crisis reveals the perils of rapid EV expansion

The severe discount war in China’s auto industry, with price cuts reaching a record 16.8% in April, highlights the dangers of unchecked production expansion in a maturing market.

Only half of China’s massive EV production capacity of 20 million units was utilized in 2024, according to Goldman Sachs data, creating unsustainable market conditions 1.

This overcapacity extends beyond China, with vehicle sales dropping significantly in Europe. For example, Germany’s annual sales fell from 3.6 million in 2019 to 2.8 million, suggesting a global industry adjustment is underway 2.

The market correction is particularly challenging for pure EV manufacturers who lack the diversified portfolio that companies like Geely have developed through their “multi-energy” approach of offering various powertrains 3.

Chinese automakers’ aggressive discounting strategy to clear inventory directly impacts profitability, creating pressure to find alternative growth paths as domestic competition intensifies.

2️⃣ Export-led growth emerges as Chinese automakers’ solution to domestic saturation

Chinese automakers are pivoting toward international markets as a strategic response to domestic overcapacity, with EVs now representing 33% of China’s total vehicle exports in early 2025, up from 25% in previous years.

Geely’s international sales surged 53% to reach 403,923 units in 2024, with the company expanding its global footprint to over 80 countries and establishing approximately 900 sales locations worldwide—a 69% increase from the previous year 3.

This export-focused strategy aligns with JPMorgan’s analysis that international sales could enhance profitability as Chinese EVs command higher margins overseas than in the fiercely competitive domestic market.

Geely’s approach of building factories in Indonesia, Vietnam, and other regions reflects a commitment to localized manufacturing that addresses both market access needs and potential trade barriers 4.

The European Union Chamber of Commerce notes increasing demand for Chinese EV technology in Europe but expects greater localization requirements, suggesting Chinese manufacturers will need to bring entire supply chains rather than just assembly operations to succeed internationally.

3️⃣ Contrasting strategies emerge as automakers navigate industry transformation

Geely’s decision to halt new plant construction while utilizing existing global capacity (such as Renault’s Brazilian facility) represents a disciplined approach that contrasts with competitors who continue expanding despite market warnings.

The company has strategically avoided new investments in overcapacity regions, instead focusing on partnerships and flexible production arrangements that mitigate risk in an uncertain global environment 2.

This strategy has contributed to Geely’s strong financial performance, with the company reporting a 52% increase in underlying net profit to 8.5 billion yuan in 2024 despite challenging market conditions.

Hybrid vehicles are gaining momentum as a transition technology, with their sales growth outpacing pure EVs in recent months and offering consumers a more economical option with a payback period estimated at just over three years 1.

The divergent approaches among Chinese automakers highlight the industry’s uncertainty about the pace of EV adoption, with Geely’s balanced multi-energy strategy potentially offering more resilience than pure EV manufacturers facing both domestic saturation and international trade barriers.

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