China’s Merger Control in the Automotive Industry: Characteristics & Practical Observations

[co-author: Ken Dai]

The automotive industry is a critical pillar of China’ s national economy. With an exceptionally long industrial chain - extending upstream to resource development, spanning midstream through component manufacturing and vehicle assembly, and reaching downstream into sales, services, and mobility scenarios, it exerts strong spillover effects on related industries. Currently, under the dual drivers of China’s “carbon peaking and carbon neutrality” strategy and the rapid rise of the digital economy, new energy vehicles (NEVs) and intelligent connected vehicles (ICVs) are developing at pace and the whole industry landscape is undergoing adjustment and restructuring. In this process, mergers and acquisitions (M&As) have become an important means for enterprises to achieve strategic transformation and industrial collaboration.

Merger control is one of the key areas of antitrust regulation in most of jurisdictions. Under China’s Anti-monopoly Law (AML), if the turnover of the undertakings involved in M&As have met the notification thresholds set by the State Council, they shall notify to the State Administration of Market Regulation prior to the closing of the transaction. Given the long value chain, large market scale, and rapid pace of technological change in the automotive industry, while transactions can optimize resource allocation and promote technological progress, they may be under regulatory scrutiny because of risks of eliminating or restricting competition.¹

Against this background, this article conducts a systematic review of China’s merger filing cases in the automotive industry between 2022 and August 2025, helping to shed light on the integration paths of automotive enterprises and broader development trends in the Chinese automotive market, and facilitates an understanding of the priorities and logic of future antitrust review by SAMR.

I. Market Structure & Policy Environment of the Automotive Industry

A. Market Structure: Deep Transformation from “Scale Expansion” to “Structural Upgrading”

At present, China’s automotive industry has entered a new stage characterized by “stable aggregate volume and improved structure.” The core features of this transition can be observed in several respects:

1. Sustained global leadership in overall scale: According to the China Association of Automobile Manufacturers, in 2024, China’s automotive industry continued to demonstrate steady growth, with production reaching 31.28 million units (a year-on-year increase of 3.7%) and sales reaching 31.44 million units (a year-on-year increase of 4.5%). Both output and sales surpassed the 31-million threshold, marking the sixteenth consecutive year that China has ranked first worldwide in automotive output and sales. This scale underscores China’s significant position in the global automotive value chain and provides domestic enterprises with a relatively stable market foundation for technological innovation and business model exploration.
2. New energy vehicles as the core growth engine: In 2024, production and sales of NEVs reached 12.888 million and 12.866 million units, respectively, representing year-on-year increases of 34.4% and 35.5%. Market penetration rate rose to 40.9%, an increase of 9.3 percentage points compared with 2023. This growth momentum has continued in 2025, with NEV penetration rate exceeding 44% in the first half of the year. These figures indicate that electrification has shifted from “optional trend” to “mainstream paradigm”, and it has emerged as a key engine powering the industry’s growth.
3. Accelerated progress in globalization: In terms of international market development, China’s automotive industry has sustained rapid growth. In 2024, automobile exports reached 5.859 million units, representing a year-on-year increase of 19.3%. With Chinese automakers accelerating their strategic presence in key regions such as Southeast Asia, Europe, Africa, and South America, overseas markets have increasingly become a major driver of industrial growth, propelling the globalization of China’s automotive industry to a higher level.
4. Chinese brands leading the restructuring of the market competition: In May 2025, retail sales of Chinese passenger vehicle brands reached 1.26 million units, a year-on-year increase of 29%, raising their market share to 65.2%. Leading traditional automakers such as BYD, Geely, Chery, and Changan have demonstrated strong performance. Some enterprises, by relying on dual technical pathways of “pure electric + plug-in hybrid”, have gradually got advantages in subsectors such as batteries, electric drive systems, and intelligent technologies. Meanwhile, the industry’s competitive landscape is shifting from a price-driven model toward a tech-driven model - centered on battery innovation, electric drive systems, and intelligent capabilities.

B. Policy Environment: Coordination of “Industrial Support” and “Antitrust Regulation”

At the policy level, China’s approach to the development of the automotive industry has combined two guiding orientations: promoting industrial upgrading and safeguarding market competition. This dual framework provides relatively clear boundaries for concentrations of undertakings in the automotive sector.

1. Industrial policy guiding for structure upgrading: The New Energy Vehicle Industry Development Plan (2021–2035) explicitly identifies core segments such as batteries, automotive-grade chips, and intelligent driving systems as key targets for technological breakthroughs and further proposes supporting enterprises in expanding scale and enhancing industry concentration through M&As. Subsequently, the Action Plan for Large-Scale Equipment Renewal and Trade-In of Consumer Goods (2024) and the Implementation Rules for Automobile Trade-In Subsidies (2025) have further reinforced demand-side incentives. Through subsidy mechanisms, these policies reduce consumer purchase costs, accelerate the retirement of aging fuel vehicles, and significantly increase the market penetration of NEVs. With the combined effect of supply-side and demand-side measures, the automotive industry has not only gained stronger resilience in both vertical extension and horizontal integration of the value chain but also have been provided with a relatively stable institutional and market environment.
2. Antitrust regulation strictly upholding the baseline: At the same time, the authorities have continuously strengthened compliance constraints on M&As. The 2022 AML introduced the “call in” power for the antitrust authority: even if a transaction does not meet the turnover notification thresholds set by the State Council, SAMR may still require notification if the transaction could have the effect of eliminating or restricting competition. This rule effectively prevents the risk of “small but critical” M&As escaping from scrutiny. The Provisions on Notification Thresholds for Concentrations of Undertakings, implemented in 2024, raised the global and domestic turnover thresholds. This revision narrowed the scope of notifiable transactions, thereby enabling regulatory resources to focus more on larger-scale transactions with potentially significant competitive effects. In addition, the Guidelines on the Review of Horizontal Concentrations of Undertakings issued in 2024 further refined the evaluative framework for horizontal concentration cases, which introduces quantitative indicators such as market share and the Herfindahl–Hirschman Index (HHI), and also emphasize the need to consider multiple factors including entry barriers, potential competitive constraints, and efficiency defenses. These standards and considerations provide enterprises with a more practical reference for assessing the competitive effects of transactions, while enhancing the transparency and predictability of law enforcement.

II. Characteristics of Concentrations in the Automotive Industry over the Past Three Years

From 2022 to August 2025, the SAMR publicized 150 merger control cases in the automobile industry, including 132 under the simplified procedure and 18 under the normal procedure.² Combining transaction types, sector distribution, and regional characteristics, there are mainly 4 features of the concentrations in this industry:

1. A Phased Decline in Numbers Amid Industrial Transformation and Regulatory Pressure

In recent years, the number of concentrations in the automotive industry has shown a trend of “first increasing and then declining.” This shift reflects the evolving dynamics of industrial development and the adjustments of regulatory approach at different stages.

In 2022, the number of such cases reached 62 (52 under the simplified procedure and 10 under the normal procedure), marking the peak of the past three years. This increase was closely tied to the rapid expansion of the NEV industry. Driven by the sharp growth in NEV production and sales, capacity expansion occurred in the power battery segment and its upstream raw materials, leading to a substantial increase in related investment and M&As. More than 80% of transactions were horizontal or vertical concentrations, primarily involving battery manufacturers, materials producers, and OEMs, highlighting the importance placed on supply chain security and stability during the expansion period. At the same time, as the first batch of power batteries reached the end of their lifecycle, concentrations in the battery dismantling and recycling sector emerged for the first time and grew rapidly. These deals not only enhanced resource utilization and raw material security, but also advanced the value chain toward sustainable development.³

In 2023, the growth of the NEV market slowed, industry concentration gradually increased, and the competitive landscape tended to stabilize. The number of merger filing cases fell to 41 (36 under the simplified procedure and 5 under the normal procedure). To some extent, this indicates that the motivation for M&As shifted from “scale expansion” toward “quality enhancement and synergistic integration”.

In 2024, the number of merger filing cases declined further to 27 (26 under the simplified procedure and 1 under the normal procedure). In addition to industrial factors, changes in regulatory policy had a direct impact on this decline. With the significant increase of the turnover thresholds, certain small- and medium-scale transactions are excluded from the scope of mandatory notification.

2. Integration Patterns Highlight the Long Value Chain of the Automotive Industry

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Based on an analysis of the relevant market definition in 119 simplified procedure cases between 2022 and August 2025, the pattern of multi-segment integration in the automotive industry is pronounced. More than half of the cases involved cross-segment transactions, including 34 cases combining “vehicles + components” and 29 cases combining “supporting services + vehicles”. This reflects that enterprises are paying increasing attention to linkages between upstream, downstream, and after-sales service segments, seeking to build a more comprehensive industrial ecosystem.

In light of single relevant market, the component segment accounted for the largest number of cases, with 26 in total. This reflects that vehicle parts, particularly power batteries, electric drive systems and automotive-grade chips play a decisive role in determining vehicle performance and cost. By integrating component resources, enterprises can build more autonomous and controllable supply chains and accelerate the commercialization of new technologies, thereby enhancing overall competitiveness. The supporting services market recorded 17 cases, covering activities such as sales, maintenance & repair, and end-of-life vehicle recycling. The strategic importance of this segment is pronounced when it comes to charging network operation, intelligent driving data services, used-car trading platforms, and maintenance chains, due to the advance of electrification, digitalization, and mobility services. By contrast, there are only 12 cases in the vehicle manufacturing market. This may be attributed to the fact that vehicle manufacturers tend to rely less on direct horizontal mergers and instead favor cross-segment integration with components or supporting services to achieve supply chain synergies and enhance overall competitiveness.

3. Parallel Development of Traditional and Emerging Fields

Traditional sectors, such as vehicle manufacturing and mechanical parts supply, accounted for 50.0% of cases. This indicates that even under the accelerating pace of industrial transformation, traditional segments continue to play an important role. This is closely related to the broad market demand and mature industrial foundation of conventional vehicles and parts. Relevant concentrations were mainly aimed at optimizing capacity structures, adjusting regional layouts, and improving supply chain efficiency, thereby helping to maintain the stability and continuity of industrial operations to some extent.

In parallel, emerging fields also accounted for 50.0%, reflecting a significant trend of industrial transformation and upgrading. Among them, new energy–related cases represented 33%, mainly concentrated in areas such as power batteries, electric drive systems, and charging and swapping infrastructure. Intelligence-related cases accounted for 14%, covering autonomous driving, in-vehicle software, and data services, reflecting the competitive logic of software-defined vehicles. In addition, 2% of cases spanned both new energy and intelligence, and 1% involved other emerging business models, indicating that the boundaries of the future automotive industry are gradually evolving toward greater complexity and diversification.

4. A Global Layout Led by Chinese Market and Supplemented by Oversea Markets

Among the 132 simplified procedure cases, transactions involving Chinese Market accounted for as much as 83%, underscoring the central role of the domestic market for Chinese vehicle manufacturers. This is closely linked to the high degree of completeness of China’s automotive value chain and the strong regional clustering effects. In recent years, regions within China such as the Yangtze River Delta and the Pearl River Delta have developed integrated ecosystems covering raw materials, components, vehicle manufacturing, and sales & service networks. Through vertical or conglomerate integration, enterprises have achieved capacity optimization and resource coordination.

Overseas cases accounted for 17%. Although relatively limited in number, they carry significant strategic importance in terms of functional positioning. Three main directions of market integration can be identified in this field: (1) new energy supply chain deployment, covering power batteries, cathode materials, electric drive systems, and upstream resources such as nickel and cobalt; (2) intelligence, software, and data-related areas, involving IT consulting, smart energy SaaS, in-vehicle electronics, and data services; (3) market and service networks, aimed at improving overseas market channels and operational systems.

This regional pattern not only reflects the dominant role of the Chinese domestic market in industrial consolidation and resource allocation, but also demonstrates how overseas transactions provide essential support in areas such as new energy, intelligent technologies, and market expansion. The coordinated development of domestic and international transactions enables China’s automotive industry to consolidate its foundation at home while progressively deepening its interaction with, and integration into, the global industrial value chain.

III. Regulatory Trends and Corporate Risk Management Tips

A. Trends of Merger Control in Automotive Industry

First, notification thresholds and procedures become more refined. In 2024, the State Council revised the Provisions on Notification Thresholds for Concentrations of Undertakings, significantly raising the turnover thresholds, thereby exempting certain small and medium-sized transactions from mandatory notification. This adjustment enables regulatory resources to be focused on transactions with substantial impact on industry structure. At the same time, Article 26(2) of the AML⁴ preserves call in power to review concentrations below the thresholds. In the automotive sector, this provision has practical significance. For instance, in the aftermarket, if mergers involving regional repair services or used-car trading platforms lead to a significant increase in local market concentration or create exclusionary effects, they may still be subject to review even when the transactions do not meet the mandatory notification thresholds.

Second, the enforcement logic is increasingly aligned with industrial policy. Given the long and complex automotive value chain, and the interweaving of traditional and emerging segments, SAMR no longer confines its review to market share and market concentration alone. Instead, the officials integrate national strategic objectives into their assessments. In the field of new energy, transactions involving critical segments are scrutinized primarily for their impact on supply chain autonomy and the achievement of green transition goals. In the intelligent connected vehicle sector, concentrations related to automotive-grade chips, in-vehicle operating systems, and data services are evaluated for their potential effects on technological innovation, data security, and platform interoperability. This demonstrates a shift in regulatory logic from static structural analysis toward a multidimensional balance of competition, innovation, and security.

Finally, cross-border mergers face heightened compliance complexity. In recent years, Chinese automotive enterprises have significantly increased cross-border transactions in areas such as power battery resources, intelligent technology cooperation, and global channel networks. These transactions must not only satisfy China’s domestic review requirements but also confront the overlapping pressures of multi-jurisdictional compliance requirements. For example, since 2023, the European Union has implemented the Foreign Subsidies Regulation (FSR), which subjects government supports in foreign acquisitions to strict scrutiny; Emerging markets such as Southeast Asia are likewise accelerating the establishment and refinement of their own merger control regimes. This means that as Chinese automotive enterprises pursue “going global” strategies, they must simultaneously comply with multiple regulatory frameworks.

B. Legal Risk Management of M&As in the Automotive Sector

As a flagship product of the modern industrial system, the automobile has long been regarded as the “crown jewel” of manufacturing. In recent years, with rapid technological iteration - particularly the swift development of new energy vehicles - market competition has become increasingly intense. Likewise, merger control practice has also evolved rapidly. Drawing on observations of both Chinese and international antitrust enforcement, the authors put forward the following risk management tips as for M&As in the automotive sector.

1. Compliance boundaries of supply chain security and vertical integration: The automotive industry has a long value chain, where upstream resource control directly affects downstream vehicle production capacity. M&A transactions which may restrict competitors’ access to raw materials or limit their ability to expand customer channels would attract regulatory scrutiny. To mitigate such risks, enterprises should treat supply chain security as a core consideration at the transaction design stage and explicitly define in the documentation the reasonable scope of vertical cooperation, avoiding exclusivity arrangements. In practice, contractual provisions such as “non-discriminatory supply” and “fair access conditions” can be adopted.
2. Technological collaboration and data governance: With the acceleration of the “software-defined vehicle” paradigm, the arena of competition in the automotive industry is shifting from traditional vehicle manufacturing to intelligent connected domains, centered on automotive-grade chips, operating systems, and vehicle-networking platforms. Where concentrations involve such segments, SAMR often focus on their potential impact on innovation incentives and data security. In this context, enterprises may establish a “dual firewall” in their filings: on the one hand, provide a technological collaboration plan demonstrating how the transaction will promote technological progress and diversified supply; on the other hand, establish and refine a data governance framework covering tiered data management, interface compatibility rules, cross-entity data sharing arrangements, and privacy protection measures.
3. Multi-jurisdictional compliance coordination and risk mitigation: The challenges of cross-border M&A often do not lie in review within a single jurisdiction, but rather in the potential divergences or even conflicts that may arise during parallel reviews across multiple jurisdictions, particularly with respect to information disclosure, market definition, and competitive effects assessment. In recent years, regulatory upgrades in certain countries have subjected automotive enterprises pursuing “going global” strategies to multiple layers of scrutiny - not only antitrust review, but also subsidy review and industrial security review. In this context, enterprises are advised to establish multi-jurisdictional compliance coordination mechanisms. These may include internal consistency checks, third-party assessments, or pre-filing consultations to ensure coherence across filing materials, while also introduce the influence of non-competition factors such as foreign subsidies and industrial security. For transactions with high regulatory uncertainty, structural safeguards such as “staggered closings” or “conditional remedy clauses” may be embedded into the deal framework, thereby preserving flexibility to accommodate divergent review timelines or requirements across jurisdictions and reducing overall transaction risk.
4. Forward-looking monitoring of market share in emerging industries: In emerging sectors such as battery charging and swapping infrastructure and smart mobility services, SAMR have so far taken a relatively lenient stance. However, once regional dominance is established, subsequent M&As are more likely to trigger heightened scrutiny.⁵ To address this, enterprises should establish internal competition monitoring mechanisms at the early stage of expansion, regularly tracking indicators such as market share, entry barriers, and substitutability. Where necessary, third-party market competition assessments may be commissioned to help demonstrate that the market remains open. In merger filings, the notifying party may also, depending on the specifics of the transaction, consider offering behavioral commitments - such as interface compatibility, reasonable pricing, or non-exclusive access - in order to proactively alleviate regulatory concerns.

Notes List:

1. The automobile manufacturing sector, as an important subdivision of the manufacturing industry, accounts for a relatively high proportion of merger filing cases within manufacturing. See China Annual Report on Antitrust Enforcement (2023), p.24. At the same time, given the prominent role of the automobile industry in social and economic development, antitrust enforcement authorities have also paid close attention to monopoly risks in automobile distribution. See China Annual Report on Antitrust Enforcement (2024), p.12.
2. The case statistics are based on official public sources of simplified and normal procedure merger cases, filtered by titles containing the keyword “automobile”. Due to limitations in the scope of statistics, the results may contain certain deviations. The related conclusions are provided only for reference in trend analysis.
3. See China Annual Report on Antitrust Enforcement (2022), p.52
4. Which stipulates that even if a concentration does not meet the notification thresholds set by the State Council, if there is evidence that it has, or may have, the effect of eliminating or restricting competition, the SAMR may still require notification.
5. See China Annual Report on Antitrust Enforcement (2024), p.44