Geely Auto chairman Li Shufu told the Chongqing Auto Show on Friday that the company will assess excess capacity across all its units and determine whether to close, suspend, merge, or sell redundant production facilities. The announcement signals a strategic pivot for China’s second-largest carmaker, which has been locked in a fierce domestic battle with BYD while ramping up its international ambitions.

“Geely Auto is determined in its resolve to achieve sound corporate development by concentrating our superior resources on a vertically integrated automotive group,” Li said in a video address posted online. “By doing so, we will transform Geely into a strong and large carmaker with advantages in systemic development, corporate governance and global competitiveness.”

Li did not reveal the number of plants or the scale of excess capacity that could be disposed of. The move comes as China’s automotive industry faces a severe overcapacity problem, with the country’s estimated annual production capacity of around 50 million vehicles far exceeding the 34.5 million units actually produced in 2025, according to CAAM data and JPMorgan estimates.

Geely operates a diverse stable of brands including Zeekr, Lynk & Co, and Galaxy. Its parent company, Zhejiang-based Geely Holding Group, also owns Volvo Cars and holds a stake in Mercedes-Benz Group. Li had already declared in March that Geely would stop building new factories entirely and instead use existing plants, particularly Volvo’s global network, to manufacture vehicles in overseas markets.

The restructuring announcement escalates that strategy from avoiding new construction to actively purging what already exists. It is a concession that the domestic price war, which has compressed margins across China’s automotive industry, is not a sustainable path to profitability.

Geely unseated BYD as mainland China’s largest carmaker in the first quarter of 2026, delivering 709,538 vehicles to BYD’s 700,463. The lead evaporated in April and May as a global energy crisis spurred demand for fully electric vehicles, where BYD holds a structural advantage. BYD sold 1.41 million vehicles globally from January through May, outpacing Geely’s 1.18 million by 19%.

The financial results for 2025 were strong. Net income rose to 16.85 billion yuan ($2.45 billion), and revenue jumped 25% to a record 345.2 billion yuan. Deliveries climbed 39% to 3.02 million units.

The company’s H-shares have advanced 10.1% this year, closing at HK$19.15 on Friday, according to SCMP.

The international expansion is where the growth story is most striking. Overseas sales jumped 158% year on year to 371,354 units in the first five months of 2026, representing nearly a third of total deliveries. Products like the EX5, a $15,300 electric SUV now sold in 35 countries, are driving the export push.

In November 2025, Geely and its parent bought a 26.4% stake in Renault Group’s Brazilian operations, enabling local assembly and sales through the French firm’s infrastructure in South America. The company has also been pushing into Canada, where reduced tariffs on Chinese EVs have opened a new market for its brands.

Li also indicated at the auto event that he had been mulling a new growth strategy and vowed to map out a formal succession plan, without elaborating. The succession question matters because Li, who built Geely from a refrigerator parts company into China’s most internationally connected automaker, remains the driving force behind its strategic direction.

In February, Geely said it would focus on extending driving range and improving charging speeds rather than cutting prices to defend its position in China. The decision to reject the price war distinguishes Geely from competitors who have been slashing sticker prices to maintain volume in a market where domestic brands now control nearly 70% of passenger vehicle sales.

The overcapacity problem is not unique to Geely. China’s overall automotive capacity utilisation stood at roughly 49.5% in 2024, meaning the industry is building roughly twice as many factories as it needs. Li’s willingness to publicly commit to closing plants, rather than simply pausing construction, positions Geely as one of the first major Chinese automakers to acknowledge that rationalisation, not expansion, is the next phase of the industry’s evolution.