Domestic Auto Manufacturing Average Profit Margin Drops to 1.5% in H1 2026, Hitting a Decade Low

In the first half of 2026, the average profit margin in China's vehicle manufacturing sector stood at 1.5%, the lowest level in the past decade. From 2023 to 2026, the industry’s profit margin declined steadily from 5% to 1.5%, significantly below the average profitability of 6.1% for large-scale industrial enterprises nationwide during the same period. For a new vehicle priced at RMB 200,000, automakers’ net profit is only about RMB 3,000. The primary drivers behind this shrinking profit margin include: - China’s auto market has entered a phase of saturated competition, prompting automakers to aggressively cut prices—both in the internal combustion engine (ICE) segment and among premium new energy vehicles—to gain market share; - Soaring costs of upstream raw materials and key components, with prices of lithium carbonate, copper, aluminum, and automotive-grade memory chips rebounding sharply, adding RMB 4,000 to RMB 14,000 to the per-vehicle manufacturing cost from batteries and chips alone; - Sustained high investment in R&D for electrification and intelligent technologies, with leading automakers spending tens of billions of yuan annually on research and development; - Severe overcapacity across the industry, with total domestic vehicle production capacity exceeding 40 million units, while annual domestic demand remains below 22 million units, resulting in an average capacity utilization rate under 70%. Against this backdrop, profits across the automotive value chain are increasingly concentrated in upstream segments such as batteries and chips, leaving vehicle assembly as the least profitable link.