In the first half of 2026, China's automotive manufacturing industry delivered a mixed report card. Overall, as of late July, six automakers—Great Wall Motor, Changan Automobile, GAC Group, Seres, BAIC BluePark, and JAC Motors—have released their semi-annual performance forecasts. Only two are profitable, and their profits have been "halved."
Furthermore, data from the National Bureau of Statistics shows that the total profit of the automotive manufacturing industry fell by 19.5% year-on-year, with the average profit margin of vehicle manufacturing dropping to a decade-low of 1.5%. Among 89 A-share listed automakers, only 30% reported positive expectations, while 41 forecasted losses. On the other end of the supply chain, CATL (Contemporary Amperex Technology Co., Limited) (300750) reported a net profit of 43.284 billion yuan in the first half of the year, and battery manufacturers' profits surged against the trend—CATL’s half-year net profit is equivalent to that of three BYDs. Battery makers are counting their money while automakers are crunching the numbers; the degree of divergence in these interim reports exceeds most people's expectations.
In response, the market has begun to ask: where exactly are the profits in the automotive industry migrating?
01. Where Did the Profits Go
Data from the National Bureau of Statistics reveals a clear path of profit migration: in the first half of the year, the operating costs of the automotive manufacturing industry grew by 2.8% year-on-year, significantly higher than the revenue growth rate of 1.8%. With cost growth outpacing revenue growth, profits are naturally squeezed.
The squeeze comes from three directions.
First, raw materials. Lithium carbonate prices remain high, copper prices surged by over 30% year-on-year in the first half of the year, aluminum prices fluctuated at high levels, and memory chip prices are on the rise. The copper usage per NEV (New Energy Vehicle) is three to four times that of a fuel vehicle, significantly driving up the costs of wiring harnesses, motors, and motor control systems. Seres explicitly mentioned the impact of "rising prices of major raw materials such as memory chips, industrial metals, and lithium carbonate" in its announcement; GAC and Changan also specifically cited raw material costs in their announcements.
Second, exchange rates. In the first half of the year, the two-way fluctuation of the RMB exchange rate intensified, which had a particularly severe impact on automakers with a high proportion of overseas sales. Great Wall Motor expects comprehensive exchange losses of about 266 million yuan, with exchange gains decreasing by about 1.759 billion yuan year-on-year; Changan Automobile listed exchange losses as one of the main factors for the decline in net profit; JAC Motors incurred financial expenses of about 140 million yuan due to exchange rate fluctuations, with exchange gains decreasing by about 390 million yuan year-on-year; BYD's financial expenses in the first quarter were 2.1 billion yuan (mainly exchange losses). Rough statistics show that exchange rates alone caused a combined profit reduction of over 6 billion yuan for several leading automakers in the first half of the year.
Third, competition. In the first half of 2026, domestic retail sales of passenger cars plummeted by 20.2% year-on-year, but the pace of new car launches continued to rise—over 500 new models were launched in the first half of the year alone, with more than 130 surviving car brands. A massive influx of new products has led to a cascading price war, and automakers have continued to increase sales investments to maintain market share. Data from the China Association of Automobile Manufacturers (CAAM) shows that the overall industry profit margin has nearly halved from its high of 7.8% in 2017.
On the other end of the supply chain, however, battery manufacturers are experiencing a completely different reality.
CATL's net profit of 43.284 billion yuan in the first half of the year is almost 2.5 times the sum of the first-quarter profits of seven leading automakers: Chery, Geely, BYD, SAIC Motor, Great Wall Motor, Seres, and Changan. Its market share in domestic passenger car installations reached 46.7%, a year-on-year increase of 5.6 percentage points, with its share of ternary power batteries in domestic passenger car installations reaching as high as 75.2%. EVE Energy (300014) expects a net profit attributable to shareholders of 3.13 billion to 3.371 billion yuan in the first half of the year, a year-on-year growth of 95% to 110%. Its sales of power and energy storage batteries in May grew by 83.1% year-on-year, even surpassing CATL and BYD. Gotion High-Tech (002074) expects a net profit attributable to shareholders of 1.2 billion to 1.55 billion yuan, a year-on-year increase of 227% to 323%.
Cui Dongshu, Secretary-General of the Passenger Car Association of the China Automobile Dealers Association (CPCA), summarized the essence in one sentence: battery costs account for about 25% of the vehicle price, and battery technology is evolving towards high charging rates, high specific energy, and solid-state batteries. Mastering core capabilities in power batteries is key for automakers to build long-term competitiveness. "Automakers are working for leading battery manufacturers"—this sentiment has been circulating in the industry for a long time. In the first quarter, CATL's net profit attributable to shareholders was 20.74 billion yuan, while the combined net profit of the seven automakers—Chery, Geely, BYD, SAIC Motor, Great Wall Motor, Seres, and Changan—was only 17.5 billion yuan, less than that of CATL alone.
02. Auto Parts: A Tale of Two Extremes
The divergence in the auto parts sector is even more intense than that of complete vehicles. As of July 22, among the 71 listed companies in the Shenwan Level-II auto parts sector that have disclosed their performance forecasts, 18 expect an increase, 8 expect to turn losses into profits, 14 expect a decline, and 31 forecast losses.
The recovery in the commercial vehicle track is the most solid "ballast." In the first half of 2026, domestic commercial vehicle sales reached 2.297 million units, a year-on-year increase of 8.3%, of which heavy-duty truck sales were 661,000 units, a sharp year-on-year increase of 22.6%. FAW Jiefang (000800) expects a net profit attributable to shareholders of 270 million to 320 million yuan in the first half of the year, a year-on-year growth of 1274% to 1528%, with overseas market layout and product structure optimization as the core drivers. Yuandong Transmission (002406) expects a net profit of 95 million to 115 million yuan, a year-on-year growth of 74% to 110%, driven by the continued increase in demand for drive shaft supporting parts.
Deep binding with the NEV supply chain is another "profit code." As the capacity for new energy passenger car seats continues to be released, Jifeng Automotive (603997) expects a net profit of 332 million to 398 million yuan, a year-on-year growth of 116% to 159%, and a quarter-on-quarter growth of 52% to 102% in the second quarter. Baolong Automotive (603197) expects a net profit of 246 million to 300 million yuan, a year-on-year growth of 83% to 123%. Relying on the dual empowerment of supplying new energy components and the humanoid robot structural parts business, Ningbo Huaxiang Electronic (002048) expects a net profit of 610 million to 690 million yuan, successfully turning losses into profits.
Globalized production capacity layout is equally indispensable. Benefiting from the production capacity increase and efficiency improvement of the second phase project in Cambodia, General Science Technology (601500) expects a net profit of 138 million to 178 million yuan, a year-on-year growth of 115% to 177%. Commercial vehicle exports reached 664,000 units in the first half of the year, a substantial year-on-year increase of 32.5%, directly driving the increase in overseas orders for the upstream supply chain.
On the other end of the spectrum, small and medium-sized manufacturers clinging to the traditional fuel vehicle track with weak bargaining power are experiencing widespread losses. Huada Technology (603358) recorded its first phased loss in the first half of the year, expecting a loss of 63 million to 126 million yuan. Rising prices of copper and aluminum main materials are continuously compressing gross profit margins, and the fuel vehicle parts business still accounts for over 50%. Wencan Group (603348) expects a loss of 180 million to 240 million yuan, as rising raw material costs overlap with declining supporting orders for domestic traditional fuel vehicle models. Low value-added segments such as die-casting parts and basic stamping parts are becoming the first to be squeezed out in this round of reshuffling.
Notably, facing the dilemma of being "at the mercy of market fluctuations," some parts companies are relying on their accumulation in precision manufacturing and thermal management technology to transform into emerging tracks such as robotics and data center liquid cooling. Joyson Electronics (600699) released core robot components such as dexterous hands, electronic skin, and embodied intelligent brains at WAIC 2026 (World Artificial Intelligence Conference 2026), and its controller products have been mass-produced and supplied to leading robot companies. Ningbo Huaxiang's quadruped robots have begun mass production and delivery, with PEEK joint modules applied in mass-produced products. Syngen Technology (603007) has laid out the field of data center immersion liquid cooling and has reached cooperation with some operators. The leap from "auto parts suppliers" to "high-end intelligent manufacturing platforms" is becoming a realistic path for industrial companies to find a second growth curve.
03. Signals of a Turning Point
Facing the industry dilemma of continuously declining profits, some changes are quietly taking place.
The most conspicuous is the policy signal of "anti-involution." The national level continues to promote anti-involution efforts. Cui Dongshu judges that "in the future, more automakers will aim to become international giants, and automakers building batteries will inevitably accelerate, and automakers' profitability is expected to gradually improve." Changan, Chery, and other automakers have successively stated that they want to bid farewell to the "scale-only mindset" of purely pursuing sales volume and pursue higher-quality growth and sustainable profitability. Great Wall Motor has always emphasized high-quality development, and recently He Xiaopeng also publicly stated "not chasing quantity" and not blindly sacrificing brand texture to compromise long-term value.
Going global is seen as the most important breakthrough. The export volumes of Great Wall Motor and Changan Automobile now account for over 50% of their total sales, transforming from a supplement to sales to half of their business. BYD's overseas sales in the first half of the year reached 789,400 units, with European registrations increasing by over 100% year-on-year. Its Hungary factory is expected to commence production within the year, and its fleet of 8 roll-on/roll-off ships has an annual capacity of over one million units. The significance of tapping into overseas markets lies not only in opening new channels for sales growth but also in the higher product premium and profit margins in overseas markets.
Vertical integration is regarded as the ultimate defense line. BYD's fully autonomous and controllable chain from power batteries and IGBT chips to complete vehicle manufacturing has enabled it to suffer a much smaller structural impact from this round of raw material price increases compared to the industry average. The self-supply rate of self-developed and self-produced power semiconductors exceeds 90%, and general chips such as MCU (Microcontroller Unit) have locked in prices through large-scale long-term contracts, with price increases far below the industry's scattered procurement levels. "Automakers building batteries will inevitably accelerate"—behind this judgment lies a deep expectation of the redistribution of power in the supply chain.
In the first half of 2026, China's automotive industry underwent a rare profit stress test. Among 89 A-share listed automakers, only 30% reported positive expectations, and 41 forecasted losses, with the average profit margin of vehicle manufacturing dropping to a decade-low of 1.5%. But behind this cold report card, the direction of industrial structure adjustment is already clear: profits are migrating from the vehicle manufacturing segment to the power battery and core components segments; competitiveness is migrating from scale expansion to technological barriers and globalized layout; and growth momentum is switching from domestic price wars to overseas market expansion.
This is not a decline of an industry, but a necessary path for an industry to reshape its value chain amidst labor pains. The companies that can traverse the cycle will undoubtedly be the few that master core technologies, possess global markets, and have cost pricing power. As for the majority of players still struggling in the quagmire of price wars, the window of time left for them is narrowing.
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