Auto Industry Profit Margin Drops to 3.4% in First Five Months Amid Rising Costs and Market Pressures

From January to May this year, China's automotive industry generated revenue of RMB 4,209.6 billion, up 1.4% year-on-year; costs during the same period reached RMB 3,739.7 billion, rising 2.3% year-on-year; and profits totaled RMB 144 billion, down 20% year-on-year. The industry’s overall profit margin stood at 3.4%, significantly lower than the average 6.1% for downstream manufacturing sectors during the same period. The profit decline was primarily driven by rising prices of upstream raw materials. Lithium carbonate prices doubled year-on-year, while prices of non-ferrous metals and petroleum-related raw materials continued to climb, pushing up the cost of power batteries. Most automakers have not built their own battery production capacity, making it difficult to mitigate these cost pressures. At the same time, weak market demand led to a total vehicle output of 12.28 million units in the first five months, down 5% year-on-year. Although new energy vehicle (NEV) sales saw modest growth, internal combustion engine (ICE) vehicle production declined markedly. Intense price competition at the retail level further limited automakers’ ability to pass on higher costs through price increases. On a per-vehicle basis, average revenue per vehicle rose slightly, but average costs and taxes increased even more sharply, resulting in a 16.2% year-on-year decline in gross profit per vehicle. In contrast to the profit contraction seen in downstream equipment manufacturing sectors like automobiles, upstream segments such as electronics and non-ferrous metals posted substantial profit growth, highlighting pronounced divergence across the industrial chain.