China’s auto industry profit fell 16% year over year to 253.4 billion yuan ($37.7 billion) in the first eight months of 2026, as costs grew faster than revenue and pushed the sector’s sales profit margin down to 3.6%.
August alone brought some relief, however, with monthly profit rising 24% year over year to 37.1 billion yuan ($5.5 billion) and the margin improving to 4.0%.
Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), set out the figures in an analysis published on Monday, based on National Bureau of Statistics (NBS) data for industrial enterprises above designated size.
Revenue rose 2.9% to 7.0062 trillion yuan ($1.04 trillion) in the January through August period, while costs climbed 4% to 6.237 trillion yuan ($929.1 billion).
Vehicle production fell 3% to 20.31 million units.
“The auto industry faced the double pressure of rising costs and weak demand, and its profitability was poor,” Cui wrote, noting the analysis reflects his personal views.
He described the situation as “a typical case of ‘revenue growth without profit growth.'”
August Offers Temporary Relief
August revenue grew 4.2% to 928.1 billion yuan ($138.2 billion), while costs increased 5.3% to 831.3 billion yuan ($123.8 billion).
Production totaled 2.7 million vehicles.
August’s margin compared with 3.4% a year earlier and 2.4% in July.
Cui cautioned against reading the month as a recovery, describing the gain as “more an improvement from the ebbing of seasonal promotions than a fundamental turnaround.”
August is typically a weak month for auto profitability, he said, adding that combustion-engine vehicle production improved slightly during the month.
Cumulative results nonetheless improved on the prior reading. Through July, industry revenue had climbed 2.7% year over year while profits fell 20%, with the margin at 3.6%.
Squeezed From Both Ends
Cui said automakers face cost pressure at both ends of their supply chains.
Memory chip and other electronic component prices rose sharply, while non-ferrous metal costs also climbed.
Lithium carbonate prices doubled and bulk commodity prices stayed high over the period, according to the analysis.
On a per-vehicle basis, revenue across the auto supply chain reached 345,000 yuan ($51,400), up 5.5%.
Cost per vehicle rose 6.7% to 307,000 yuan ($45,700).
Taxes and fees per vehicle fell 2.6% to 25,000 yuan ($3,700), and gross profit per vehicle across the chain dropped 5.1% to 12,000 yuan ($1,800).
Per-vehicle figures include double counting along the supply chain and do not represent transaction prices.
Upstream industries captured much of the value.
Mining profits rose 35% in the first eight months, with non-ferrous metals posting a 40.5% margin and petroleum reaching 31.8%.
Computer and communications equipment makers lifted profits 110% on the back of the chip upcycle, while automakers, as downstream buyers of chips and metals, absorbed the cost increases, Cui said.
Autos’ 3.6% margin trails the 6.6% average across downstream industries and sits far below tobacco, alcoholic beverages and pharmaceuticals.
Individual automakers have flagged similar pressure.
Nio founder and CEO William Li said in July that rising raw material prices had added nearly 20,000 yuan ($3,000) to the production cost of each ES8.
Price War Persists
Cui identified price competition as the root cause, arguing that aggressive discounting suppresses revenue while raw material, research and development, and distribution costs remain rigid.
Local governments pushed the ‘Two New’ policies, covering large-scale equipment renewal and consumer-goods trade-ins, to stimulate domestic demand in 2026.
Improvement in the auto sector clearly lagged other consumer goods, according to Cui.
He also cited surging oil prices, pressure from upstream suppliers during Beijing’s campaign against “involution,” and consumers holding off on car purchases.
Carmakers “cannot keep relying on price cuts to move volume,” Cui wrote, calling for supply-chain optimization, tighter cost control and technology premiums to lift per-vehicle returns.
“If price ‘involution’ continues, the industry’s overall profitability faces further downward pressure,” he added.
NEVs Reach 61% of Output
New energy vehicles (NEVs) gained share as combustion-engine output contracted.
NEV production rose 11% to 10.59 million units in the first eight months, a penetration rate of 52%. Combustion-engine vehicle production fell 15% to 9.72 million units.
In August, NEV output increased 22% to 1.65 million units, accounting for 61% of total production. Combustion-engine output dropped 26% to 1.05 million units.
NEV penetration stood at 48% in 2025, 42% in 2024 and 31% in 2023, according to Cui’s analysis.
Margins at Multi-Year Lows
Auto industry margins have fallen steadily from 7.8% in 2017, dropping to 4.3% in 2024 and 4.1% in 2025. Monthly margins hit a low of 1.8% in December 2025.
Full-year 2025 revenue reached 11.18 trillion yuan ($1.67 trillion), up 7.1%, while profit totaled 461 billion yuan ($68.7 billion), a 0.6% increase from 2024.
Margins have stayed below 4% on a cumulative basis throughout 2026.
First-quarter profit slumped 18% year over year to 78.4 billion yuan ($11.7 billion), with the margin at 3.2%.
The margin reached 3.4% in the first four months, as revenue rose 1.1%, costs climbed 2% and profits fell 17%.
Vehicle manufacturers alone fared worse.
Vehicle manufacturing’s margin fell to a record low of 1.5% in the first five months of 2026, with its profit down 43% year over year, Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers (CAAM), said in July.
Domestic demand also weakened in the first half, with only eight of the 20 largest passenger vehicle brands posting year-over-year wholesale growth.
Beijing is also scaling back policy support.
Plug-in hybrid and range-extended passenger cars, new energy commercial vehicles and energy-saving vehicles will lose their vehicle and vessel tax breaks from January 1, 2027, while pure electric passenger cars remain outside the tax, the Ministry of Finance said in July.
New energy vehicle buyers have paid a 5% purchase tax since January 1, after a full exemption was halved.
Across all industries, profits at enterprises above designated size rose 16% to about 5.3 trillion yuan ($789.5 billion) in the first eight months, with manufacturing profits up 17%.
