Nearly 70 Models Cut Prices in Q1 2026; NEV Average Price Drops by ¥38,000, Squeezing Automaker Profits

Since the beginning of 2026, China's auto market has continued its price war, with nearly 70 models slashing prices simultaneously. Among them, new energy vehicles (NEVs) saw an average price reduction of RMB 38,000, with the average pre-discount price of discounted NEVs at RMB 275,000—representing a 13.7% decline. For fuel-powered vehicles, the average pre-discount price of discounted models stood at RMB 258,000, down 14.3%. This wave of price cuts has now persisted for three consecutive years, with premium and joint-venture brands offering substantial discounts, forcing domestic brands to follow suit and intensifying market competition. The industry’s profitability has come under parallel pressure. From January to February 2026, the overall profit margin of the automotive sector stood at just 2.9%, a sharp drop from 8% in 2017 and far below the 39.4% margin in the nonferrous metals sector and approximately 30% in the oil industry during the same period. Automakers have become the segment hardest hit by profit compression across the entire supply chain. Some automakers reported that battery and chip costs now account for over 50% of the total cost of smart electric vehicles, exacerbating supply chain cost pressures and making it difficult to maintain supply-demand equilibrium. While battery makers like CATL have posted five consecutive years of robust net profit growth, vehicle manufacturers—even those achieving higher sales volumes—have generally experienced declining profits despite rising sales.