China's auto aftermarket: The next big investment story？

An off-road vehicle awaits modification at a workshop in Hangzhou. [Photo: Zhong Jie]

For decades, China's auto industry has been measured by one number: How many cars did it sell? But as the world's largest auto market matures, that metric is becoming less important. The next growth story may begin only after a vehicle leaves the showroom.

That helps explain why Chinese authorities in June rolled out a series of measures to support the automotive aftermarket, with vehicle modification among the biggest beneficiaries. The reforms are about more than giving enthusiasts greater freedom to customize their cars. They reflect a broader shift in China's economic thinking—from expanding ownership to creating more value from existing assets.

The timing is hardly accidental. China now has more than 370 million vehicles on its roads, and over half of its passenger cars are more than seven years old. After years of explosive expansion, the auto market is entering a mature phase. Future growth will rely less on first-time buyers and increasingly on services such as maintenance, upgrades, customization and lifestyle experiences.

That shift is already changing consumer behavior. Zhong Jie, who runs an off-road vehicle modification shop in Hangzhou, says customers have been eagerly awaiting the new policies. As camping, road trips and outdoor recreation gain popularity, many drivers are looking for vehicles that reflect how they actually live rather than simply how they commute.

The demand, in other words, has been there all along. What held the industry back was regulation.

For years, many vehicle modifications existed in a legal gray area. Consumers worried about inspections, insurance and resale. Businesses hesitated to invest in products and services whose regulatory status remained uncertain.

The government's cautious approach reflected a long-standing priority: safety before commercial expansion. The latest policies attempt to resolve that tension. Clearer standards reduce uncertainty, encouraging businesses to innovate and giving consumers greater confidence to personalize their vehicles within a transparent regulatory framework. Industry forecasts suggest the sector could maintain annual growth of around 20 percent under the new policy environment.

The implications reach well beyond modification shops. In mature automotive markets such as the United States, Japan and Germany, vehicle modification supports an entire ecosystem that includes manufacturers, designers, service providers, motorsports, camping, tourism and digital services. Economic value comes not only from upgraded vehicles, but from the industries and communities built around them.

China remains at an early stage of that transition. Vehicle modification penetration is still below 5 percent, leaving considerable room for growth.

Early signs of that ecosystem are already emerging. V1 Auto World Tianjin, for example, combines a professional racing circuit with shopping, dining and leisure facilities. Enthusiasts come for the driving experience, while families contribute to spending across retail, hospitality and tourism. Automotive culture, in this sense, is becoming part of the broader experience economy.

Of course, a trillion-yuan industry is far from guaranteed. Much depends on how effectively the new policies are implemented. Technical standards remain uneven, qualified workshops are limited, and shortages of skilled technicians persist. Insurance products, safety oversight and consumer education must also evolve alongside the industry.

Consumer attitudes may take even longer to change. For many Chinese households, a car remains one of their largest purchases, making owners understandably cautious about major modifications. A mature aftermarket requires not only better regulations, but also stronger consumer confidence.

Yet the direction is becoming increasingly clear.

For years, China's automotive success was built on manufacturing more vehicles. The next chapter may be defined by something different: creating more value from the hundreds of millions already on the road. If that transition succeeds, the automotive aftermarket may become not merely a niche business, but one of China's next major growth engines.

Jiang Tao, reporter
CGTN Radio