Fu Weigang: Specialized Supply Chains and Diverse Capital Delayed China's Automotive 'Ford Moment'
Columnist Fu Weigang analyzes why the Chinese NEV industry has not rapidly formed an oligopoly. He argues that core technologies have shifted from OEMs to specialized suppliers, lowering entry barriers, while VC, PE, and local government capital alleviate financing constraints. Future consolidation may not mirror US history; the key is whether firms can achieve sustainable returns without external subsidies.
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Following his previous article on why the 'Ford Moment' hasn't occurred in China, Fu Weigang, a researcher at the Shanghai Institute of Finance and Law, explores why the Chinese new energy vehicle (NEV) industry hasn't quickly consolidated into a few dominant players despite intense competition. Traditional industrial organization theory suggests auto manufacturing is a scale-economy industry requiring massive fixed investments. However, although the top ten manufacturers held about 75.8% market share in 2025, competitive positions remain fluid, and new entrants continue to emerge.
Fu proposes that the organization of core automotive technology has changed. In the internal combustion era, engines were developed internally by major manufacturers, making it difficult for new entrants to access comparable powertrain technology. In the NEV era, battery packs form a large-scale, specialized supply market serving many competing OEMs. This allows new entrants to procure competitive core technology without developing it independently.
This shift leads to a partial separation of economies of scale. The scale economy of OEMs is no longer fully tied to that of component suppliers. According to SNE Research, CATL and BYD account for over half of the global battery market, showing high concentration upstream, while downstream manufacturing remains fragmented. Upstream concentration and downstream dispersion are two results of the same division-of-labor mechanism: suppliers gain scale advantages by serving many clients, which in turn lowers entry barriers for new OEMs.