Western carmakers’ real problem isn’t too many models — it’s too much legacy baggage

That is only half the story. Model ranges have certainly become bloated, but they are not the root cause of the crisis. The deeper problem is that Western manufacturers are trying to support combustion-engine, hybrid and electric-car businesses simultaneously, along with vast factory networks, management structures that have ossified over decades and dozens of brands whose products often differ more on the price list than beneath the skin.

China’s advantage is not that its manufacturers offer fewer cars. It is that they can create more apparently distinct products from a smaller pool of genuinely different hardware and software. That speed comes at a cost, however, and much of the bill will eventually arrive on the used-car market.

## Volkswagen is not the exception, only the clearest example

Volkswagen Group plans to cut its model range aggressively. Chief executive Oliver Blume has spoken of a cost disadvantage of roughly 20 per cent compared with rivals and of sweeping reductions to the product portfolio. Tens of thousands of further job cuts and lower production capacity are also under discussion. Group sales fell by 8.6 per cent in the second quarter of 2026 and by 36.6 per cent in China. Reuters has reported on the background to Volkswagen’s restructuring.

Dropping a model means more than deleting a name from the price list. Every car brings its own body panels, suppliers, tooling, certification, software versions, spare parts, marketing and technician training, as well as a commitment to provide parts and service support for at least a decade. When one group sells essentially the same size of SUV under five brands, it multiplies not only its sales opportunities but also its complexity.

The number of models is not even the greatest burden. More damaging is the proliferation of variants beneath them. A single car may be offered with several engines, front- or four-wheel drive, manual and automatic transmissions, a plug-in hybrid, a fully electric version, dozens of trim levels and different specifications for Europe, China and North America. In a brochure, that looks like freedom of choice. In a factory, it is a logistical migraine.

For decades, the system worked because European cars sold well both at home and in China. Europe’s market is now growing only slowly, Chinese customers increasingly prefer domestic brands and manufacturing capacity remains far above demand. An empty factory is expensive even when no unnecessary model is rolling off its production line.

## The West is effectively building three types of car at once

The transition period is the heaviest burden on European manufacturers. The combustion-engined car has not yet disappeared, the electric car cannot profitably replace it in every segment, and the hybrid has become an expensive bridge between two technological worlds.

A large carmaker must therefore develop petrol engines, diesels, hybrid transmissions, electric drive motors, batteries, charging systems, new electronic architectures and software at the same time. It must also satisfy different emissions, safety and data-protection rules across multiple markets. In effect, one corporate cost base is being asked to support three car industries.

The pace of electrification was misjudged in many places. Carmakers invested in EV production capacity, only to find that uneven demand growth forced them to keep older powertrains alive as well. Over the past year, the world’s largest manufacturers have taken tens of billions of dollars in write-downs as they reassessed their electric strategies. This is not proof that the electric car has failed. It is evidence that the industry built too much too soon and assumed the transition would follow a far straighter path.

Nor are all Western manufacturers struggling equally. Some companies with smaller, more clearly differentiated ranges are coping better than giant groups in which five brands compete for the same customers. The crisis is therefore not an unavoidable consequence of geography. It is primarily a problem of large, slow-moving organisations.

## Chinese manufacturers do not offer fewer models — they replace them faster

The idea that Chinese manufacturers succeed because they maintain small model ranges does not survive closer examination. Between 2023 and 2025, around 388 new or substantially updated passenger-car models were expected to reach the Chinese market, 82 per cent of them either electric cars or plug-in hybrids. [Arthur D. Little’s review](https://www.adlittle.com/tr-en/insights/viewpoints/china-speed) describes a market in which the number of models and sub-brands is growing much faster than in Europe.

The key distinction is between visible variety and hidden complexity. A Chinese group may offer ten different names and body styles while using the same battery chemistry, electric motor, display, control units, software layer and underlying platform across them all. A European manufacturer may appear to offer only five models, yet conceal several generations of electronics and a collection of poorly compatible supplier systems beneath the surface.

According to McKinsey, China’s newer EV manufacturers can take a car from concept to market in around 24 months, compared with 40–50 months or more for traditional carmakers. Chinese companies carry out roughly 65 per cent of testing virtually, while the figure elsewhere is typically 40–50 per cent. They make greater use of standardised components, centralised electronics, in-house software development and over-the-air updates.

[McKinsey’s analysis](https://www.mckinsey.com/capabilities/operations/our-insights/automotive-product-development-accelerating-to-new-horizons) shows that this speed does not come from one cheaper component, but from a fundamentally different development process.

Chinese companies also make decisions more quickly. A project is not passed around for months between the brand, group management, regional operations, the factory, trade unions and ten different suppliers. When a model misses its targets, it is updated quickly, discounted or replaced with a new name.

A Western manufacturer usually tries to rescue a failing project because too much time, money and reputation have already been invested in it. A Chinese manufacturer behaves more like a consumer-electronics company: last year’s product existed to help sell this year’s.

## Chinese efficiency comes with enormous waste

An important qualification is needed here. China’s best carmakers are extremely efficient, but the Chinese motor industry as a whole is anything but a lean machine. It is a brutal testing ground in which capital is burned, surplus factories are built and brands are created even though most will not survive.

AlixPartners estimated that 129 brands were selling electric cars and plug-in hybrids in China in 2025, but that only 15 might remain financially viable by 2030. Average capacity utilisation at Chinese car plants fell to around 50 per cent, while only a handful of listed EV manufacturers had achieved a full-year profit. [The forecast reported by Reuters](https://www.reuters.com/business/autos-transportation/only-15-electric-vehicle-brands-china-will-survive-by-2030-alixpartners-says-2025-07-03/) makes clear that China’s model is no flawless industrial miracle.

China’s advantage is that the waste is spread across many companies. Dozens lose money and disappear, while a handful of winners take the market. Inside a large European group, the same struggle takes place on a single balance sheet. A loss-making factory, model or brand cannot simply be allowed to fail when jobs, politics and decades of commitments are at stake.

What the rest of the world sees from China is therefore largely the survivors. Behind them lie written-off investments, empty factories, central and local government support and a collection of brands whose badges will be forgotten before their cars reach the scrapyard.

## The used-car wave has not arrived yet, but it is building

By the end of 2025, China already had 43.97 million new-energy vehicles — electric cars, plug-in hybrids and hydrogen vehicles — on its roads. Their number increased by 12.57 million in a single year. [Figures from China’s National Bureau of Statistics](https://www.stats.gov.cn/english/PressRelease/202602/t20260228_1962661.html) show just how young most of the country’s electrified vehicle fleet remains.

Around 20 million used cars were sold in China in 2025, yet electric cars and plug-in hybrids accounted for only 1.6 million of them, or 7.9 per cent. Sales of used NEVs rose by 29 per cent in the first four months of 2026, but their share remained below nine per cent. In the new-car market, they already account for around half of sales, and at times more.

That gap tells almost the entire story. Tens of millions of cars sold over the past few years have not yet reached the age at which they would normally be replaced. When they begin arriving on the used market in volume between 2027 and 2029, supply will grow far faster than it has so far.

That does not necessarily mean the used-EV market will collapse. It does mean there will be a sharp redistribution of value.

## Cutting the new-car price makes the old one cheaper too

A used car’s value does not depend only on its condition. It also depends on the price of an equivalent new car. If a manufacturer cuts the price of a new model by 15 per cent, or offers a larger battery, faster charging and better driver-assistance systems for the same money, the previous version loses value immediately — even though its owner has not driven a single additional kilometre.

This is where China’s rapid model cycle becomes uncomfortable for consumers. A two-year-old car may not be technically obsolete, yet a newer model has already appeared with faster charging, greater range and a lower price because of the latest round of discounting. The older car can compete mainly on price.

Chinese used-market data from 2025 already showed wide differences between brands. Cars from stronger Chinese manufacturers retained slightly more than half their value after three years, while several EV brands retained only around 40–45 per cent. Values fall particularly hard when the manufacturer is in financial trouble or its dealer and service network begins to disappear.

Buying an electric car means buying more than metal, a battery and electric motors. It also means buying continued access to an app, cloud services, remote updates, diagnostics, digital keys and support for driver-assistance systems. If the manufacturer disappears, a perfectly driveable car can become a digital orphan.

## A cheap used electric car is not necessarily bad news

Falling prices hurt the first owner, the leasing company and the manufacturer’s reputation, but they help the next buyer. A three- or four-year-old electric car can become an extremely affordable urban vehicle for someone who would never buy a new one. Technologically outdated does not mean unusable.

Demand for used electric cars in China has grown in 2026, while prices in some segments have recovered from earlier lows. That suggests the market can absorb the cars when their prices reflect their real usefulness. The problem is not the car itself, but the gap between the first owner’s expectations and the next buyer’s willingness to pay.

The same effect is already visible in Europe. Weak EV residual values have forced leasing companies to raise monthly payments, extend contracts and cycle the same cars through more than one lease. Residual-value risk does not disappear: it moves from the buyer to the leasing company, bank or manufacturer and eventually finds its way back into the price of the car. [Reuters described the pressure on Europe’s leasing market in 2024](https://www.reuters.com/business/autos-transportation/leasing-model-behind-europes-ev-drive-risk-breakdown-2024-08-13/).

## China will export more used cars

Exports provide one pressure-release valve. Chinese overproduction has already created a practice in which new or almost undriven cars were registered and then shipped abroad as used vehicles. The manufacturer could record a sale, the dealer cleared inventory and the car travelled through grey-market channels to Russia, Central Asia, the Middle East or elsewhere.

Chinese authorities have begun restricting exports of these so-called zero-mileage used cars. From 2026, exporters of vehicles less than 180 days old must, among other things, demonstrate that manufacturer-backed aftersales support is available. [Reuters reported on the new restrictions](https://www.reuters.com/world/asia-pacific/china-tighten-oversight-new-cars-exported-used-vehicles-2025-11-14/).

Exports of genuinely used Chinese cars will nevertheless continue to grow. The domestic second-hand market may not be able to absorb the coming volume at reasonable prices, while buyers elsewhere may still see a two- or three-year-old Chinese EV as a substantial technological upgrade.

Europe cannot absorb that volume as easily. Type approval, software, connectivity, charging standards, tariffs, spare parts and manufacturer liability all stand in the way. A low price alone does not solve the problem if local diagnostic support is unavailable or replacement body panels cannot be sourced after a crash.

## China’s used-car market will split into distinct tiers

The Chinese used-car market is unlikely to face one large, uniform price crash. A sharp division into tiers is more probable.

Mass-market models from BYD, Geely, Chery, SAIC and other major groups will find buyers because spare parts, servicing and software support will remain available. Their prices may still fall quickly, but the cars should remain relatively liquid.

The second group will consist of cars from small or defunct brands. Their values may collapse even when the battery and chassis remain in good condition. Buyers will not know who guarantees the software, where collision-repair parts can be sourced or whether the manufacturer’s servers will still be running in five years.

A third group will contain technically distinctive luxury models that were expensive when new but attract too few used buyers. Their depreciation could be particularly severe: the purchase price falls, but repairs, tyres, air suspension and electronics remain priced at luxury-car levels.

The market will force manufacturers to offer approved-used programmes, battery-health certificates, longer warranties and guaranteed buy-backs. Long-term brand survival will matter again too. Once a new-car buyer starts asking whether the manufacturer will still exist in five years, a large display and a free karaoke app will no longer be enough.

## Europe should not copy China’s speed blindly

Western carmakers do need to reduce their model ranges. There is no sense in keeping almost identical cars alive under five brands or spending billions on configurations ordered by only a handful of customers. The number of platforms, control units, software versions and powertrains also needs to fall.

Deleting models alone, however, will not turn a slow-moving group into a fast one. If the development process, management chain and factory network remain unchanged, customers will simply be choosing from a smaller selection of cars that still arrived late.

Europe should learn from China’s standardisation, component reuse, virtual testing, centralised electronics and faster decision-making. It should not learn to accept that a car can become as dated in 18 months as a previous-generation smartphone.

A car must continue to work after its app has fallen out of fashion, and it must remain repairable long after its successor has been unveiled. Long-term usability, spare-parts availability and predictable residual values could become strengths for European manufacturers — provided they can still build the car at a competitive price.

The Western motor industry’s problem is therefore not simply that it has too many models. It has too many factories, layers of management, technical architectures and historical obligations for a smaller sales base to support.

China’s system is faster, but not necessarily more economical. The West writes down its factories and organisations too slowly. China writes down the value of its customers’ cars too quickly. Both models will have to change, because losses cannot be hidden indefinitely in either redundancies or the falling price of last year’s car.