The focus of competition in China's electric vehicle (EV) market is moving from price cuts to artificial intelligence, Morgan Stanley analysts said. Tim Hsiao, head of Greater China auto research at the firm, noted carmakers are seeking new ways to manage weakening demand amid tighter regulations.
This strategic pivot comes as the industry faces a saturated market and regulatory pressures, pushing manufacturers to differentiate on technology rather than price. The shift toward AI could reshape consumer expectations and industry dynamics in the world's largest EV market.
According to Morgan Stanley, the push into AI is expected to bring models with Level 3 (L3) conditionally autonomous driving capability to market. Such systems allow hands-off driving under specific conditions, representing a significant technical leap from current assisted-driving features.
The move toward AI-driven competition could accelerate the rollout of advanced autonomous features, potentially altering the competitive landscape. Smaller players without robust AI capabilities may struggle to keep pace, while consumers could benefit from safer, more intelligent vehicles.
Hsiao's comments suggest that winning through AI innovation may prove more sustainable than the price wars that have squeezed margins across the industry.