Agglomeration economy created by industrial agglomeration can vitalize the industry. This paper studies the degree of agglomeration of auto industry in China from the industry and enterprise level respectively by using the data from 2005 to 2015 and analyses the current situation of China's auto industry agglomeration with EG index comprehensive. It finds that the overall situation of automobile industry cluster in China is not optimistic, which is mainly reflected on geographic decentralization resulted from the policy factors. Therefore, suggestions on optimizing disposition of automobile industry in China are put forward from the perspective of the governments’ coordinating planning industry.