The disruptive development of automobiles can be divided into two stages: new energy vehicles (NEVs) and new-form vehicles. Currently, NEVs have become relatively mature, while the foundational conditions for the second stage are not yet in place, meaning new-form vehicles are still far from realization.

The core functions of new-form vehicles are still being developed and evolved. NEVs, on the other hand, are seeking differentiation primarily in non-core features, such as configurations like refrigerators, TVs, and sofas, sporty exteriors, and feature-rich cabin entertainment systems. Additionally, due to the high unit price of automobiles, their long service life, and the large existing market of fuel-powered vehicles, completely replacing fuel-powered cars with NEVs will take a long time. Coupled with the fact that the automobile market is saturated—with most sales coming from replacements and upgrades—price cuts have become the easiest strategy for NEV automakers to boost sales.

However, low prices lacking cost support cannot be sustained in the long run. Greater transformations in the automotive industry will occur in the future stage of new-form vehicles, which requires automakers to invest in R&D and lay out plans for the future to ensure they remain qualified to participate when that stage arrives. Price competition among automakers leads to short-term profit declines or even losses, and in the long term, it undermines R&D investment and future competitiveness.

This article analyzes the two stages of future automotive industry development and the conditions required for the transition from the first to the second stage, aiming to provide direction for automakers to plan for the future.

Cross-Industry Disruption and Self-Disruption

First, let’s introduce two concepts: cross-industry disruption and self-disruption. Disruption refers to challenges to an existing industry (or category) with significant sales volume. In the mature phase of an industry, challengers from inside or outside the industry change the industry landscape by creating value through different rules, leading to a shift in dominance.

The key lies in “different rules.” If a disruptor satisfies existing consumer demands with a different product form, we call it cross-industry disruption. Such disruptions often stem from technological advancements, and the disruptors are typically enterprises from outside the industry. Their success depends on whether they better or more cost-effectively meet consumers’ existing needs.

If a disruptor guides existing products toward new customer values or cuts out old products to create new ones, we call it self-disruption. Self-disruption represents an extension or transformation of the original industry; disruptors are usually from within the industry, and while it does not lethally impact the original industry, it allows disruptors to gain greater room for growth.

Currently, the substitution of NEVs for traditional fuel-powered vehicles is the first stage of disruption, manifesting at the energy level. It primarily changes the powertrain of automobiles, but NEVs remain essentially automobiles. This wave of disruption is cross-industry, mainly driven by entrants from outside the automotive industry altering the industry landscape. The success of this disruption hinges on whether NEVs better meet consumers’ mobility needs or satisfy these needs at lower costs.

In the second stage of disruption, NEVs will take on more diverse forms. Automobiles will transcend their role as mere transportation tools, extending their reach into other industries; or, empowered by autonomous driving technology, vehicle operating systems, and software, they will spawn more intelligent application scenarios; or, they will transform their physical forms into various new types of activity spaces; or, they may even take on forms beyond our current imagination.

We collectively refer to vehicles in this stage as new-form vehicles. This wave of disruption is self-driven by the automotive industry itself. It will not only expand the boundaries of the automotive industry but also profoundly impact the entire industrial chain and related sectors, while changing people’s work and lifestyle.

Stage One of Disruptive Development: New Energy Vehicles

New energy vehicles (NEVs) refer to vehicles that use unconventional fuels as power sources (or use conventional fuels with new power devices), integrating advanced technologies in power control and drive to form a new technical system with novel structures.

NEVs primarily include four categories: hybrid electric vehicles (HEVs), pure electric vehicles (BEVs, including solar-powered vehicles), fuel cell electric vehicles (FCEVs), and other new energy vehicles. Unconventional fuels refer to those other than gasoline and diesel.

Hybrid electric vehicles mainly include mild hybrids, plug-in hybrids, and range-extended electric vehicles. These all extend driving range by using alternative energy sources when battery power is insufficient. Pure electric vehicles and fuel cell vehicles are truly powered by batteries supplying electricity to motors for propulsion, representing fundamentally different structures from traditional internal combustion engine vehicles. Due to high costs and safety concerns, hydrogen fuel cell vehicles currently hold a small market share. Thus, subsequent discussions will focus primarily on pure electric vehicles.

Like fuel-powered vehicles, NEVs remain transportation tools, but they represent a technological revolution. Compared to fuel-powered vehicles, NEVs offer the following advantages:

​​Stronger Power and Better Driving Experience​​: Hundred-kilometer acceleration time is a key metric for selecting fuel-powered vehicles and a major premium factor for luxury models. It is common to find NEVs under RMB 300,000 with 0–100 km/h acceleration times of 3–4 seconds, comparable to the acceleration of sports cars from the fuel-powered era.

​​Higher Energy Conversion Efficiency and Lower Usage Costs​​: Fuel-powered vehicles convert only 20%–45% of gasoline (or diesel) energy into driving force, whereas electric vehicles achieve over 80% energy conversion efficiency. Additionally, electric vehicles recover energy during braking, further improving efficiency. The per-kilometer fuel cost of electric vehicles is 1/10 to 1/5 that of fuel-powered vehicles.

​​Lower Environmental Pollution​​: NEVs draw energy from electricity, which can come from clean sources like wind and solar. In such cases, NEVs produce almost no tailpipe emissions. Even when electricity is generated from fossil fuels like crude oil or coal, the higher energy conversion efficiency of pure electric vehicles results in less than one-third the gas emissions of fuel-powered vehicles per kilometer.

​​Simpler Structure and Lower Maintenance Costs​​: The core structure of fuel-powered vehicles includes powertrains, fuel systems, and transmission systems, comprising around 30,000 components. Pure electric vehicles primarily consist of batteries, motors, and electronic controls (the “three-electric” system), with far fewer components (around 10,000), reducing usage and maintenance costs. Without engines, exhaust pipes, or drive shafts, electric vehicles also operate more quietly.

​​Superior Response for Intelligent Operations​​: Pure electric vehicles enable advanced autonomous driving and complex intelligent functions. While basic intelligence (including low-level辅助驾驶, connected vehicles, and in-cabin infotainment) can also be implemented in fuel-powered vehicles, achieving high-level autonomous driving or complex intelligence in fuel-powered vehicles requires costly retrofits. Moreover, the mechanical nature of fuel-powered engines makes it difficult for AI to control their operations reliably, precisely, or responsively. Electric vehicles, designed with intelligence in mind from the start, allow direct data transmission from onboard systems to the three-electric components, enabling timely responses and precise control. Additionally, fuel-powered vehicles have small batteries that cannot support the high power demands of complex intelligent systems.

Progress in the First Stage

After reaching a peak in 2017, sales of fuel-powered vehicles have declined rapidly, accelerating in recent years. NEV sales began growing rapidly in 2021, with an average annual growth rate exceeding 35%. They also drove an increase in total automobile sales, surpassing the 2017 peak of 30.094 million units in 2023.

On the other hand, quasi-new-form vehicles equipped with various levels of assisted driving and smart applications are continuously entering the market, indicating overlapping phases of the first and second disruptions.

From the perspective of market penetration, the substitution of NEVs for fuel-powered vehicles is progressing smoothly, with NEV market share rising rapidly since 2021 to 44.3% in the first half of 2025. While advancements in batteries and NEV technology are the primary drivers, national subsidy policies and preferential license plate policies have also acted as accelerators.

For a new technology product, attracting early adopters is relatively easy, but capturing the mainstream market requires meeting stricter criteria.

According to the theory of user innovation adoption cycles, early buyers consist mainly of technology enthusiasts and visionaries who embrace new products out of curiosity or a desire for novel value. Mainstream users, however, are pragmatists who prioritize the maturity of supporting infrastructure, convenience of use and services, and proven reliability. They value cost-performance (the ratio of benefits to price) more than early adopters.

A NEV market penetration rate exceeding 40% indicates that mainstream users have begun purchasing NEVs. However, NEVs still have drawbacks that affect consumer choices:

Battery range now rivals that of fuel-powered vehicles, but charging times remain long, and battery swap stations are in their infancy, making charging less convenient than refueling—especially for long-distance travel. Real-world range is also affected by weather; cold conditions reduce battery capacity, leading to shorter actual ranges than advertised.

Battery-related safety concerns also deter some users from switching to NEVs. The “digital anxiety” caused by software-controlled braking further undermines trust.

High-level autonomous driving and complex intelligent functions have not yet reached commercial viability. The autonomous driving and smart features currently available in electric vehicles are not fundamentally different from those in fuel-powered vehicles, leaving users with insufficient incentive to upgrade.

The automotive market is saturated, with most sales coming from replacements and upgrades. Given the high unit price and long service life of automobiles, the large existing fleet of fuel-powered vehicles (270 million units by the end of 2024, accounting for 76% of passenger vehicles) will further slow the transition to NEVs. Fuel-powered vehicles will coexist with NEVs for an extended period.

“Price wars” may accelerate NEV penetration and substitution, but they also squeeze corporate profits, affecting R&D investment and future competitiveness. Automakers must balance short-term survival with long-term strategic planning.

Stage Two of Disruptive Development: New-Form Vehicles

As NEVs mature—particularly with sufficient computing power (requiring larger batteries) and the realization of autonomous driving—the essence of automobiles will transform. Their core value will extend beyond transportation, giving rise to diverse new forms that extend their reach into other industries. We refer to these as new-form vehicles.

New-form vehicles will possess sensing, communication, and computing capabilities, and will be capable of autonomous movement. They will function as intelligent terminals that can sense, connect, communicate, and move autonomously. Equipped with large-capacity batteries, they can also serve as energy storage terminals. With ample onboard power, they can support new functionalities; with sensing and computing abilities, they can collect and analyze driving and in-cabin data; with communication capabilities, they can interact with other terminals; and with autonomous driving, they free up drivers, enabling greater remote control.

New-form vehicles will create new intelligent application scenarios. As mobile energy storage terminals with large capacities, they could act as distributed energy storage units. Connected to power grids via communication, they could help balance electricity usage—charging during off-peak hours and feeding power back to the grid during peaks. A fleet of 300 million 65 kWh NEVs could store nearly one day’s worth of residential electricity consumption in China.

Once full autonomy is achieved, travel will be transformed. With no need for human drivers, vehicle utilization rates will soar, and road safety will improve dramatically. Over 90% of traffic accidents are caused by human error. Unlike humans, vehicles do not tire, and autonomous systems respond in milliseconds—far faster than human reaction times—while also predicting and mitigating potential hazards.

With vehicle-to-everything (V2X) connectivity and communication capabilities, new-form vehicles will change how they are used and applied. They could interact with urban infrastructure—such as traffic lights, parking lots, charging stations, and other vehicles—enabling conveniences like pre-booking parking spots, arriving directly into empty spaces, optimizing red-light timing to reduce congestion, and reserving charging stations in advance to minimize waiting.

Cloud-based information will interact in real time with traveling vehicles, allowing traffic authorities to monitor conditions. By sending commands, vehicles could adjust routes autonomously, improving overall traffic flow.

Vehicle usage will become more flexible: people could summon cars for outings, shopping, or hiking without needing to retrieve them from parking lots.

New-form vehicles may evolve into new types of activity spaces. With full autonomy, traditional steering wheels, pedals, and brakes could be eliminated, allowing flexible interior layouts. In-trip activities—work, entertainment, or rest—will be central to design, transforming the cabin into a mobile smart living space: a conference room, classroom, chess room, cinema, or gaming lounge.

New, unimaginable forms may also emerge. Before the iPhone, 3G networks and smartphones with apps already existed, but physical keypads and small screens limited software usability. The iPhone revolutionized interaction with its glass touchscreen and multi-touch technology, simplifying app access. More importantly, it introduced a new ecosystem—an independent OS, App Store, and third-party developers—enabling endless app upgrades and functionality changes. This spurred the smartphone era.

New technologies not only optimize existing functions but, more critically, integrate with industries to create new functions, applications, and scenarios. The fusion of the internet and mobile phones gave birth to smartphones and mobile internet, enabling anytime, anywhere communication, work, and shopping. What might the fusion of the internet, intelligence, and automobiles bring? The physical forms and industrial ecosystems of new-form vehicles could well exceed our current imagination.

New-form vehicles will also spawn new industries and business models. Technological change brings new entrants, but its greater impact lies in transforming industrial structures. Widespread autonomous driving will alter travel and lifestyle patterns. Data shows that U.S. vehicles were utilized only 5% of the time in 2018. Autonomous driving will drastically increase utilization, making private car ownership economically unviable for many. Shared mobility will become a more practical option: people may no longer buy private cars but instead access vehicles through shared systems, or purchase a car and rent it out during idle hours.

Increased utilization and reduced vehicle ownership will decrease the need for urban parking spaces, reshaping cityscapes. As cars become mobile smart living spaces, fixed-location work, education, and daily life may give way to mobile alternatives. Some may even abandon homeownership, opting for affordable “car homes” and adopting a nomadic lifestyle.

New-form vehicles will profoundly impact the automotive industrial chain. Traditional fuel-powered vehicle supply chains centered on engines and transmissions will shift to focus on motors, batteries, and software for autonomous driving and operating systems—often called the “soul” of future vehicles. This will also transform after-sales and repair markets, where battery and software inspection and maintenance capabilities will become core competencies.

Seizing Opportunities in the Second Stage of Disruption

New-form vehicles require abundant power to support extensive computing, intelligent applications, and in-cabin electricity demands—with full autonomy as a prerequisite. To prepare for this future, automakers should focus on the following areas:

​​Sufficient Power and Strong Computing Capabilities Are Foundational​​: Current EV batteries meet daily range needs, but full autonomy, additional intelligent functions, and rich in-cabin features will demand larger batteries, faster charging, and significantly enhanced computing power to process and analyze the vast data generated by sensing, communication, autonomous driving, and cloud interactions in real time.

​​Autonomous Driving Is a Prerequisite​​: Only with full autonomy will fundamental changes in vehicle usage occur, enabling transformative interior layouts and making new-form vehicles feasible.

True intelligence requires: (1) decoupling hardware and software, allowing software to “iterate and evolve” so that performance upgrades no longer depend on adding physical modules; (2) enabling real-time data interaction across modules to reduce hardware redundancy; and (3) centralizing computing power, where information from all sensors is integrated to make unified decisions and coordinate actuator operations.

The electronic and electrical (EE) architecture determines the upper limit of a vehicle’s intelligent capabilities. Distributed architectures are limited to Level 2+辅助驾驶; higher autonomy demands more advanced architectures. Automotive EE architectures are evolving from distributed to domain-controlled, then to centralized, to support smarter, more connected, and networked vehicles. Industry experts predict this transition to a “centralized computing + regional control” architecture may take 5–10 years, leading some to call the current era “the starting point of automotive intelligence.” The arrival of new-form vehicles will thus be a prolonged process.

Operating systems and application software will be core competitive battlegrounds. A mobile, connected, and autonomous vehicle will become the next massive mobile smart terminal and data platform, spurring a new ecosystem involving content providers and users. Who will dominate the operating system and popular applications will be central to this ecosystem—mirroring the evolution of computers and smartphones, though new-form vehicles may develop unique models.

Automobiles are already seen as the next major mobile smart terminal after smartphones, but new-form vehicles offer opportunities for innovation across dimensions: spatial utilization, usage scenarios, industrial structures, and supply chains. To seize these opportunities, automakers must choose strategic angles, invest in R&D, plan ahead, break free from conventional thinking, and unleash creativity.