China’s car industry earned a profit margin of just 1.4% in September, the lowest in nearly four years, as a prolonged price war and rising material costs squeezed manufacturers, according to official data.
Profit at auto manufacturers fell 22.8% from a year earlier in the first nine months of 2026, the National Bureau of Statistics (NBS) said on Tuesday. It was among the weakest performances of any major industry, even as profit across all large industrial companies rose 15.5%.
The sector’s margin fell to 3.3% for the period, according to an analysis of the NBS data by Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA).
“Costs keep rising faster than revenue,” Cui wrote, describing a typical case of the industry growing sales without growing profit.
In June, the MIIT and SAMR summoned automakers suspected of “irrational” pricing and told them to follow the Price Law and the guidelines.
In August, the Ministry of Commerce, MIIT and SAMR extended the push abroad. Their guidelines on overseas competition told carmakers to set export prices based on cost and to avoid frequent, steep price swings that hurt foreign buyers and brand image.
A shrinking margin
Auto industry revenue rose 2.6% to 8.04 trillion yuan ($1.21 trillion) in the first nine months, while costs rose 3.8% to 7.16 trillion yuan ($1.07 trillion), Cui said. Profit fell to 267.5 billion yuan ($40.1 billion).
September was worse. Profit dropped 68% from a year earlier to 14.2 billion yuan ($2.1 billion) on revenue of 1.04 trillion yuan ($155.6 billion), for a margin of 1.4%.
That was below the previous monthly low of 1.8% in December 2025, Cui said. Margins are usually weak in September, he noted, and this year the month was also hit by heavy pressure on gasoline-car production and sales and by the Mid-Autumn Festival holiday.
The margin has fallen steadily for years. It stood at 9% in 2014 and 7.8% in 2017, before dropping to 4.3% in 2024 and 4.1% in 2025, according to Cui. The margin was 3.6% after the first eight months, when profit was down 16%.
Across the supply chain, revenue per vehicle rose 5.8% to 344,000 yuan ($51,600), while cost per vehicle rose 7% to 306,000 yuan ($45,900), Cui calculated. Gross profit fell 21% to about 11,000 yuan ($1,600) per vehicle. He said the figures double-count parts of the supply chain.
Squeezed from both ends
Cui blamed “fierce price wars” for holding down revenue while the costs of materials, research and development and sales channels remain rigid.
Upstream suppliers are taking a growing share of the industry’s profit. Memory chip prices have soared and lithium carbonate prices have doubled, Cui said. Nonferrous metals companies earned a profit margin of 40.2% in the first nine months.
Profit at makers of computers, communication and other electronic equipment rose 103.8%, driven by artificial intelligence, the NBS said. Profit at nonferrous metal smelters rose 79.7%.
Carmakers’ 3.3% margin trails the 6.7% average for downstream industries, Cui said, and is far below tobacco, alcohol and pharmaceuticals.
“Simply competing on volume can no longer make money,” he wrote. “Carmakers cannot keep relying on price cuts to push volume.”
He said the industry needs to optimize supply chains, control costs more tightly and earn more per vehicle through technology. “If price involution continues, there is still downward pressure on overall industry profitability,” he said.
Weak domestic demand
The margin squeeze comes as domestic demand weakens. Passenger car retail sales fell 28% from a year earlier to 1.618 million in September, the largest monthly decline this year, according to the CPCA. Sales of gasoline cars fell 43%.
The tax break on new energy vehicle (NEV) purchases was cut this year from a full exemption to half.
Vehicle production fell 4% to 23.37 million in the first nine months, but NEV output rose 12% to 12.46 million, a 53% share, according to Cui. Gasoline-car output fell 17%.
What Regulators said
Chinese regulators have stepped up their campaign this year against what they call “involution-style” competition, a term for cutthroat price-cutting.
On October 16, the State Council, chaired by Premier Li Qiang, approved in principle an amendment to the Price Law, the first since it took effect in 1998, and sent it to the National People’s Congress Standing Committee for review. The amendment clarifies the criteria and legal liability for improper pricing practices, the meeting said.
“Low-price disorderly competition must be governed in accordance with laws and regulations,” the meeting said, calling for supporting rules on industry cost investigations and on stopping below-cost dumping.
In September, the National Development and Reform Commission and the State Administration for Market Regulation (SAMR) issued rules on calculating costs in industrial sectors where “low-price disorderly competition” is prominent. Costs will generally be based on each producer’s own costs, the NDRC said.
“Irrational competition remains prominent in some industrial production sectors,” an NDRC official said at the time, warning it could lead to “bad money driving out good.”
Regulators have also targeted carmakers directly. In January, the Ministry of Industry and Information Technology (MIIT), the NDRC and SAMR called in 17 major carmakers and urged them to “resolutely resist disorderly price wars.”
The three agencies said they would step up cost investigations and price monitoring and “seriously deal with” companies that break the rules.
SAMR published price compliance guidelines for the auto industry in February. They warn that selling below cost to push out rivals carries “major legal risk,” as do fake “limited-time” discounts and inflated reference prices.
