资本和人口流动振兴小城镇汽车市场（英）

Insights on Small Town Car Market (2025)TengYi Research InstituteCapital Inflow & Population Backflow Revitalize the Small Town Car MarketAuthorsDirector/Chief Analystzhoulijun1@yiche.comLijun ZhouIndustry Analystgaoying1@yiche.comYing GaoIndustry Analystshibenya@yiche.comBenya ShiOver the past two decades or so, China’s small town passenger vehicle market experienced dramatic fluctuations. Between 2007 and 2017, tier 3-5 cities witnessed rapid growth, with annual end-user sales surging from under 2 million units to nearly 12 million, and corresponding market share rising from below 40% to close to 50%, catapulting the small town car market into a new mainstream segment comparable to its big city counterpart. This surge provided fertile ground for domestic brands such as Geely, Great Wall Motor, Chery, Chang’an and BYD, while also creating new growth frontiers for international players including VW, Toyota, Honda, Nissan, Buick and Hyundai. In response, carmakers across the board intensified their “market penetration” strategies in lower-tier cities; however, beginning in 2018, the small town car market underwent a sharp reversal. End-user sales dropped swiftly below 10 million units and eventually dipped under 8.5 million, as market share quickly reverted back to just over 40%. During this downturn, brands heavily reliant on the small town car market suffered significant setbacks – many saw their sales halved or worse, with some nearly vanishing from the market altogether. The once-aggressive “go-downstream” strategy of carmakers was effectively stalled; then, 2023–2024 marked a strong rebound: end-user sales approached the 10-million-unit threshold once again, and as of Q1 2025, its market share recovered to 44.66%; The sudden resurgence of the small town car market carries significant strategic implications for most carmakers. In Q1 2025, between 55% and 65% of total vehicle sales for Geely, Wuling, Chery, Chang’an, Nissan, Haval and JETOUR came from small towns. For BYD, VW and Honda, small towns contributed approximately 50% of their total sales. The outcome of the “small town battle” in 2025–2026 will be a key determinant in the ongoing race for market leadership between Geely and BYD. While luxury and emerging brands – such as Mercedes-Benz, Audi, BMW, Tesla, Li Auto, XPeng, and Xiaomi – currently derive a smaller proportion of their sales from small towns, they are all actively seeking to deepen market penetration in lower-tier regions. As such, none can afford to overlook the strategic opportunities presented by this new wave of small town market growth; The unexpected resurgence of the small town car market is set to disrupt the established strategies of many carmakers. Between 2017 and 2022, in response to the broader trend of urbanization in China’s car market, leading carmakers such as BYD, Geely, Chery, Great Wall Motor and Chang’an decisively launched“high-end” strategies. These initiatives were often prioritized at the highest lev