Auto Industry Profit Margin Drops Below 2% in December; Li Auto Restructures R&D; New Regulations Take Effect

In December 2025, the profit margin of China's automotive industry plummeted to 1.8%, halving year-on-year, with the full-year average profit margin standing at just 4.1%—significantly below the industrial average. Despite achieving an annual production volume of 34.78 million vehicles and a new energy vehicle (NEV) penetration rate of 48%, the industry faced a stark "revenue growth without profit growth" scenario, highlighting how intense price competition and cost pressures have squeezed profitability across automakers. Li Auto confirmed a restructuring of its R&D system, merging its autonomous driving team into the core software division. Gou Xiaofei will now oversee integrated development of intelligent cockpits and driving systems, accelerating the company’s shift toward a "system-driven" approach. Meanwhile, Aptiv and Eaton have successively announced plans to spin off their electrification-related businesses to focus on high-growth segments. China’s mandatory national standard, “Basic Requirements for Automotive Steering Systems,” will take effect on July 1, establishing safety boundaries for steer-by-wire technology. The IM LS9 Hyper has become the world’s first mass-produced SUV featuring full four-wheel steer-by-wire capability. Nidec has completed two production lines for EMB (Electro-Mechanical Brake) motors, with combined annual capacity exceeding 2.5 million units, significantly advancing the localization of brake-by-wire technology in China.