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China’s electric-vehicle market is entering a “historic turning point,” as automakers shift from a prolonged price war toward an AI-driven feature race. After years of compressing profits to offer lower prices and larger batteries, Chinese EV makers are increasingly using artificial intelligence—ranging from in-car assistants to intelligent driving assistance—as a new source of differentiation in a saturated market.
For years, Chinese EV manufacturers have competed by cutting prices to gain market share. But as the ability to reduce prices further narrows and consumers wait for even lower offers, companies are looking for value beyond cost.
Stephen Dyer, CEO of AlixPartners Asia, said the competition has evolved into a “feature war” centered on cockpit technology. Rather than focusing primarily on range per charge, automakers are layering AI capabilities into vehicles, reflecting demand from younger and tech-oriented consumers who increasingly expect cars to connect and function like smartphones.
At the Beijing auto show, AI models from major technology groups were prominently featured. ByteDance’s Volcano Engine cloud platform has introduced Doubao, which is now available across more than 50 car brands and 145 models.
Chozan data cited in the report shows Doubao is the most widely used AI chatbot in China, with more than 155 million weekly active users as of early this year. The report also states that more than 7 million vehicles on the road integrate Doubao, underscoring ByteDance’s scale in automotive partnerships.
Western automakers are also integrating the technology to compete in China. Models mentioned include the Mercedes-Benz GLC Electric, SAIC Audi E7X, and SAIC Volkswagen ID ERA 9X, which have begun integrating Doubao. Fermín Soneira, CEO of the Audi-SAIC collaboration, said over-the-air (OTA) updates allow faster deployment of new features to keep pace with market changes.
Alibaba has also moved into automotive AI by embedding its Qwen model into BYD and Volkswagen joint ventures. The system enables drivers to carry out complex tasks by voice, including ordering food, booking hotels, buying tickets, and tracking orders. The report says Alibaba’s AI runs on Nvidia’s dedicated chips and can operate stably even with limited network connectivity.
Tu Le, CEO of Sino Auto Insights, offered a more cautious view, arguing that AI should function in the background to support user experience rather than serve mainly as a marketing feature. He also said rapid diffusion of AI technology makes it difficult for automakers to sustain long-term differentiation.
Dyer of AlixPartners echoed that concern, noting that much of the technology is likely to converge. He pointed to the competitive landscape among China’s top-selling EVs, saying that among the 20 best-selling models, those priced from 100,000 yuan (about $14,645) and above offer broadly similar driver-assistance and in-car entertainment features.
Dyer said: “With technology, they will race and continue racing because diffusion is so rapid that you can never sustain a differentiated technology for long.”
With in-car AI features potentially becoming standardized, the report says Chinese firms may compete more on “experiences outside the car,” similar to how luxury brands offer exclusive lifestyle services.
Nio was cited as an example. The company has invested heavily in an exclusive “clubhouse” system and privileged customer services, alongside premium interior materials. Despite cost pressures, the report says this approach appears to be working, noting that Nio’s ES8 reached 100,000 units in 215 days—a record in the luxury segment above 400,000 yuan.
While the battle is concentrated in China, the report argues that global consumers may benefit as features that are becoming standard on mainstream Chinese cars are likely to spread to Western markets. It concludes that the AI arms race is reshaping China’s auto industry and redefining expectations for vehicles more broadly.
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