Why Is China Betting on the Automotive Aftermarket?

China has been the world’s largest automobile market for 17 consecutive years, accounting for 35.6% of global auto sales in 2025. However, it now faces challenges: domestic demand for traditional internal combustion engine (ICE) vehicles continues to contract, while electric vehicle (EV) sales are slowing due to reduced government subsidies. As a result, China’s auto sales have been in decline since late 2025 and are projected to fall by 11% in 2026.

In response, the Chinese government has been increasingly focusing on the automotive aftermarket, which still offers substantial room for growth. In 2025, the size of China’s vehicle repair and maintenance industry was estimated at USD 169 billion, smaller than the U.S. market of USD 435 billion despite China having roughly 70-80 million more registered vehicles. Recognizing this opportunity, on June 23, 2026, China’s Ministry of Commerce and eight other government agencies issued the “Measures to Foster and Expand Consumption in the Automotive Market,” outlining initiatives to accelerate growth in the sector.

Highlights of the New Policy

The Measures focuses on boosting growth in six key segments: vehicle modification, recreational vehicle (RV) camping, motor sports, car rentals, classic cars and supply of auto repair and insurance services.

Among these, vehicle modification represents one of the most underpenetrated growth opportunities. Fewer than 5% of vehicles in China undergo modification, compared with around 28% in the United States. To unlock this potential, the Measures aims to address long-standing regulatory lag and restrictive approval frameworks through clearer classification management, technical standards and compliance requirements.

China’s nascent RV sector presents another significant opportunity. In 2025, China recorded only 23,616 RV sales, compared with 342,220 in the United States. However, sales grew by an impressive 22.6% year-over-year, signaling rising consumer demand. At the same time, China accounts for about 30% of global RV parts production. To stimulate domestic RV demand and production, the policy expands RV usage scenarios and aims to improve infrastructure and services. However, it explicitly leans toward developing “core technologies” and industrial clusters for domestic RV brands, potentially strengthening local competition for foreign RV manufacturers.

Finally, the Measures singles out motorsports as an emerging but increasingly important growth segment. The domestic success of international series such as Formula 1 and emerging EV racing has significantly raised public awareness and participation. To build on this, the policy aims to further strengthen the domestic motorsports ecosystem through talent and local racing brands cultivation, as well as event commercialization to promote automotive culture and regional tourism. Although the Measures favors the development of domestic motorsports, China’s shortage of globally established motorsport intellectual property (IP) and mature service models suggests market opportunities for foreign companies.

Why Now?

Several market and policy factors have made the automotive aftermarket a strategic priority for the Chinese government. One of the key reasons is the surging demand for automotive maintenance and parts manufacturing in China. Over 50% of China’s passenger vehicles are more than seven years old, approaching or exceeding the typical warranty period for major vehicle components. The aging vehicle base is increasing demand for out-of-warranty maintenance.

Moreover, the automotive aftermarket has potential to expand domestic spending and boost employment. Compared with vehicle sales, the automotive aftermarket has shorter consumption chains, more stable demand and higher transaction frequency. Traditional ICE vehicles require frequent inspections and maintenance, while the first large wave of EVs sold between 2016 and 2018 is expected to enter battery replacement cycles this year. These recurring service needs are expected to contribute to China’s automotive aftermarket consumption, which is estimated to reach about USD 250 billion this year.

The aftermarket expansion also aligns with China’s broader push toward manufacturing servitization. China’s 15th Five-Year Plan (2026-2030) highlights deeper integration between advanced manufacturing and modern services. The Measures reflects this transition by trying to connect car manufacturing and car servicing to other downstream activities to enable mutual reinforcement between the two.

Challenges Ahead

Despite the comprehensive scope, implementation of the Measures is likely to encounter several challenges. Firstly, many tools proposed in the new policy rely on the establishment of new standards, certification systems and regulatory frameworks. As industries need time to adapt to new requirements, this may create compliance complexity and transitional inconsistencies after implementation.

Additionally, while the Measures emphasizes expansions in infrastructure, consumption scenarios and industry capacity, demand growth may not keep pace with supply-side investment, especially in emerging industries and events that take time to accumulate an audience. Finally, as most of the proposed measures depend on local governments for implementation, differences in fiscal capacity, resource access and policy execution could result in inconsistent implementation outcomes across Chinese regions.

Considerations for Multinational Corporations

The Measures presents opportunities for foreign companies in a number of areas:

• High-value and high-potential service segments, such as EV battery diagnostics, Advanced Driver Assistance Systems (ADAS) calibration, predictive maintenance and digital lifecycle management, present significant growth opportunities.
• RV sales and automotive tourism are emerging as a new automotive ecosystem, stimulating demand for localized compact RV models, tailored insurance products for RV rentals and campgrounds third-party liability insurance.
• The growing commercialization of motorsports through pilot cities is fostering a market expansion for driving academies, membership programs, sponsorship partnerships with local motorsport IPs and fan-focused experiences, including exhibitions and virtual racing events.

The blog post was written by Yikai Ma, an intern in APCO’s Shanghai office.