Just after the National Day holiday, a chorus of price hikes has swept across the automotive supply chain. Rubber prices have hit a nine-year high, tire manufacturers have issued consecutive price hike notices, and leading plastic producers raised their quotes on the first working day after the holiday. From chips to lithium salts, and from copper and aluminum to carbon black, there is hardly a single cost item that has remained unchanged.
The auto industry, which has grown accustomed to "trading price for volume" in recent years, has once again been pushed into a corner by a bill of price hikes across the entire supply chain. Where exactly this cost pressure comes from, and where it will lead the industry, has become a critical question for the entire sector.
Post-Holiday Resumption: Price Hike Notices Arrive First
Upon resuming work after the National Day holiday, what arrived even earlier than new orders were price hike notices from suppliers. Multiple automotive supporting sectors adjusted prices simultaneously after the holiday, pushing the cost issue back into the spotlight for an auto industry already mired in stock competition.
Tires were the first to sound the alarm. According to CCTV Finance, as of the close on October 8, the price of the main rubber contract on the Shanghai Futures Exchange stood at CNY 20,145 per ton, accumulating a year-to-date increase of over 28% and reaching a nine-year high.
Natural rubber is the most core raw material for tires; any fluctuation in rubber prices immediately puts downstream players on high alert.
CCTV Finance also disclosed that since September alone, over 60 tire companies have collectively issued more than 70 price hike notices, covering all categories including all-steel tires, semi-steel tires, and off-the-road tires, with price adjustments generally ranging from 2% to 5%.
This is not the first round this year. As early as April and May, more than 80 tire companies had already adjusted prices collectively, with increases ranging from 2% to 10%.
The precedent is not far off; the previous round of price hikes this year was transmitted all the way to the retail end.
According to Jiemian News, which visited multiple distributors in May 2026, prices for economy tires were generally raised by CNY 30 to CNY 50, while mid-to-high-end products saw increases mostly between CNY 100 and CNY 200, with some specific specifications even higher. The overall terminal price increase was about 5% to 10%, covering multinational brands such as Michelin, Goodyear, and Bridgestone, as well as domestic leading brands like Linglong and Triangle.
However, at present, the new round of price hikes remains mainly at the manufacturer and channel levels, and has not yet been directly passed on to car owners.
Large car maintenance platforms still have some buffer room; some have promised price protection for dozens of days. Coupled with local government consumption subsidies, considerable discounts can still be seen on some tires during the promotional season.
However, store operators are well aware that if upstream prices continue to rise, this buffer at the terminal end will only become thinner and thinner.
What has pushed tires onto the price hike track is the simultaneous increase in several major raw materials.
This year, natural rubber, carbon black, synthetic rubber, and various chemical auxiliary materials have generally trended upward, with carbon black experiencing the most fierce increase. Since raw materials account for over 70% of tire production costs, the simultaneous rise in several main materials leaves companies with almost no room to maneuver.
Take carbon black as an example. Affected by reduced coke production and fluctuations in the petrochemical chain, the week-on-week increase in carbon black prices once exceeded 30% in September, with a cumulative monthly increase of about 45%. In September, international carbon black producer Cabot raised the price of specialty carbon black by CNY 5,800 per ton.
Furthermore, the Association of Natural Rubber Producing Countries predicts that in 2026, global natural rubber production will be about 15.32 million tons, while consumption will reach 15.6 million tons, resulting in a supply-demand gap of approximately 280,000 tons, which has widened compared to the previous year.
Aging trees in major producing countries, the spread of diseases, and drought in producing areas mean that supply contraction is not a short-term phenomenon.
Just as tire companies collectively issued notices, the plastics sector also pressed the price hike button. On October 8, the first working day after the holiday, domestic modified plastics leader Kingfa Science & Technology issued a customer contact letter, announcing price adjustments for multiple products.
Modified PA6 increased by CNY 2,500 per ton; modified PP, PE, PA66, and PBT rose by CNY 2,000 per ton; modified ABS, PS, and PC went up by CNY 1,500 per ton; and even modified PVC was raised by CNY 1,000 per ton. Export orders quoted in US dollars were simultaneously increased by USD 150 to USD 400.
At almost the same time, another industry leader, Dawn Polymer, also issued a notice to raise prices across its entire product line, including thermoplastic elastomers, modified plastics, masterbatch, degradable materials, and copolyesters, with increases ranging from CNY 1,500 to CNY 3,000 per ton.
The reasons given in the two notices are highly consistent: geopolitical disruptions have kept international oil prices at high levels for a long time, leading to simultaneous increases in petrochemical raw materials, chemical auxiliaries, energy, and processing costs. Internal absorption within the companies has reached its limit.
Tires and modified plastics belong to different segments of the automotive supply chain, but behind them lies the same petrochemical industry chain, and both sent out price hike signals simultaneously after the National Day holiday.
They collectively outline a fact: this round of cost increases is no longer a solo advance by a single raw material, but a systemic pressure on the entire supply chain. To understand why this price hike has come so fiercely, one must rewind the timeline to the beginning of this year.
Everything is Rising, Chips Become the "Most Fierce Link"
"There are several aspects to the price hikes this year, such as the price increases in memory chips, as well as raw materials like lithium, aluminum, and copper. The conflict between the US and Iran has driven up oil-related prices. Plastic pellets, including many tire manufacturers, are raising prices, and costs have risen quite a bit." This was the summary given by William Li, founder, chairman, and CEO of NIO, during a public exchange in late April this year.
This statement reveals the main trend of automotive costs in 2026.
The turning point in the petrochemical chain occurred at the end of February, when geopolitical conflicts in the Middle East suddenly escalated. International oil prices surged rapidly and transmitted down the industry chain, causing prices of synthetic rubber, carbon black, and plastic pellets to rise accordingly.
If the rise in plastics and rubber still carries the color of cost-push and sentiment amplification, the rebound in power battery raw materials is even more direct.
In mid-2025, battery-grade lithium carbonate was still at a low of about CNY 75,000 per ton, after which it rebounded all the way. In February 2026, futures prices first stood at CNY 170,000, and in mid-May, spot prices surged to around CNY 200,000 per ton, with futures briefly approaching CNY 210,000, more than doubling the previous low.
Subsequently, prices corrected rapidly. Although there was a brief rebound to CNY 150,000 in August, around the National Day holiday, prices still returned to about CNY 120,000 per ton. However, compared to the previous "freezing point," the cost pressure remains significant.
Power batteries account for 30% to 50% of the cost of a new energy vehicle (NEV). Lithium carbonate, known as "white oil," sees its every price fluctuation transmitted directly from battery manufacturers to the procurement lists of automakers.
Another layer of added cost comes from policy. Starting September 1, mature battery products such as lithium-ion batteries resumed being subject to a 2% consumption tax, and this rate will rise to 4% in 2027, officially ending the years-long "tax-free dividend" for batteries.
However, for high-level autonomous driving vehicles, what truly causes "pain" for automakers is not lithium, but memory chips.
With the explosion of generative AI (Artificial Intelligence), the global demand for high-bandwidth memory in data centers is virtually limitless.
Driven by profits, storage giants such as Samsung, SK Hynix, and Micron have shifted their capacity towards AI servers. The capacity for automotive-grade memory has been severely squeezed. Since these three companies monopolize over 90% of the global storage capacity, the supply-demand balance has suddenly tipped.
According to data from TrendForce, in the first quarter of 2026, global conventional DRAM contract prices rose by 90% to 95% quarter-on-quarter, and NAND flash memory contract prices increased by 55% to 60%, with the upward trend continuing in the second quarter. CCTV Finance reported that from March to June 2026, the procurement price of automotive-grade memory increased by about 180%.
This round of market boom ignited by AI has lasted for over a year, which is completely different from previous cycles driven by mobile phones and PCs that came and went quickly.
A mid-to-high-end smart car requires 4 to 16 DRAMs and 2 to 6 NANDs; the higher the level of intelligence, the greater the usage. UBS estimates that the price increase in memory alone has pushed up the per-vehicle cost of high-level autonomous driving models by CNY 3,000 to CNY 7,000, even exceeding the impact of power battery price fluctuations, making it the most significant uncontrollable cost for automakers at present.
On high-level autonomous driving models, memory chip costs can account for 8% to 20% of the vehicle's selling price.
The pressure is evident in corporate financial reports. According to disclosures by NIO's management during the semi-annual earnings call, the company's per-vehicle cost in the second quarter of 2026 increased by about CNY 14,000 compared to the end of 2025, equivalent to an additional CNY 1.5 billion in costs for the quarter. Of this, memory price increases accounted for about CNY 10,000, battery costs rose by about CNY 3,000 to CNY 4,000, and the rest came from bulk commodities such as copper and aluminum.
This breakdown reflects the cost structure of high-intelligence configuration models like those of NIO and does not represent the industry average. William Li expects that in the second half of the year, the company's per-vehicle cost will cumulatively increase by CNY 16,000 to CNY 17,000 compared to the end of 2025.
Base metals have also not been absent. Since 2026, copper prices have firmly stood at the threshold of CNY 100,000 per ton, and aluminum prices have broken through CNY 25,000. In the first half of the year, the average price of LME copper rose by about 40% year-on-year, and the average domestic spot copper price increased by 26% year-on-year.
Building a mid-size electric vehicle requires approximately 200 kilograms of aluminum and 80 kilograms of copper; these two items alone have pushed up the per-vehicle cost by about CNY 1,800.
Institutions such as HSBC and UBS estimate that with the combination of lithium, chips, and metals, the comprehensive cost increase for a mid-size smart electric vehicle is about CNY 6,000 to CNY 14,000. This range is an estimate covering the industry average, which differs from the actual breakdown caliber of a single enterprise like NIO that leans towards high-end models; the two do not overlap.
With costs rising across the board, terminal prices cannot be raised, squeezing profit margins from both ends.
The latest data from the China Passenger Car Association (CPCA) shows that from January to August 2026, the profit of the auto industry was CNY 253.4 billion, a year-on-year decrease of 16%. The sales profit margin was only 3.6%, while the average profit margin of downstream industries was about 6.5%. Going further back, from January to May, the industry's sales profit margin once dropped as low as 3.4%, with the vehicle manufacturing segment at only 1.5%, hitting a nearly ten-year low.
Navigating the Cycle: The Supply Chain Competes on "Resilience"
When price hikes become the norm, the most concerning question for the industry follows: Is this round of cost increases merely a phase, or a medium-to-long-term trend?
Memory chips clearly belong to the latter. Goldman Sachs estimates that in 2026, the supply-demand gaps for global DRAM, NAND flash memory, and HBM will be approximately 4.9%, 4.2%, and 5.1% respectively, all at their highest levels since 2011.
Channel research by institutions such as Bank of America shows that in the third quarter, the average price of most DRAM products still rose by 20% to 30% quarter-on-quarter. In the fourth quarter, conventional DRAM is expected to rise by another 10% to 15%, with slight differences in the caliber of different institutions. Large cloud providers have even signed contracts in advance, accepting procurement prices for the first quarter of 2027 that are higher than those in the fourth quarter of this year.
Institutions such as CITIC Securities judge that, driven by AI demand, memory storage is still in the early-to-mid stage of a super prosperity cycle. Supply shortages will last at least until 2027, and substantial relief may not come until the concentrated release of new capacity in 2028.
Lithium carbonate, on the other hand, exhibits the characteristics of "high-level oscillation and upward shift of the center." Industry analysts predict that in 2026, lithium prices will be hard to return to the low levels of mid-2025, and the price center is expected to operate in the range of CNY 120,000 to CNY 180,000 per ton.
Demand is still growing, and the upstream resists low prices. The "floor" of battery costs is obviously higher than in the past, and it is unrealistic to expect costs to automatically return to previous levels.
Since there is no room to retreat, automakers and the supply chain can only take the initiative to change. Practices over the past half-year have outlined several clear response paths.
The most direct response is to use long-term agreements to turn uncertain prices into certain costs.
Overseas, General Motors and Ford signed long-term agreements with Micron in July, locking in automotive memory supply in advance.
Domestically, Changan signed a five-year deepened cooperation agreement with CATL at the beginning of the year. Leapmotor, through an annual framework agreement, locked in camera and radar assemblies with a scale not exceeding CNY 1.1 billion. Long-term orders have become the most direct tool to hedge against price hikes.
Beyond locking in prices, more automakers are beginning to re-examine the security of their supply systems.
Battery supply is shifting from "single-source supply" to "main supply plus diversified backup." More and more models are introducing second and third cell suppliers during facelifts, or producing battery packs themselves through joint ventures. This not only presses down costs and diversifies risks but also puts the initiative of supply chain security back in their own hands. Introducing multi-tier suppliers and bargaining in competition is becoming an industry consensus.
Supply chain adjustments are also happening at the material level. Under high copper prices, "aluminum replacing copper" has been picked up again by component companies. When aluminum prices rise, some companies re-evaluate the "steel replacing aluminum" solution, while more companies digest the pressure by optimizing designs, adjusting configurations, and reconstructing cost structures.
The exemption of consumption tax for new technologies such as sodium-ion and solid-state batteries has also objectively pressed the fast-forward button for material substitution and mass production of new technologies. Behind this is a refined contest of engineering capabilities and cost control.
A more fundamental solution points towards the independent and controllable mastery of core technologies.
Industry data shows that in the first half of 2026, the domestic substitution rate of automotive-grade chips in China has broken through about 35%, an increase of over 10 percentage points compared to two years ago. However, over90% of the domestic share is concentrated in mid-to-low-end power chips and general-purpose MCUs (Microcontroller Units). The domestic substitution rate for high-end computing SoCs (Systems on Chip) and high-safety MCUs remains below 5%, which is the true pain point of this round of "chokehold."
Under pressure, the verification and implementation of domestic automotive-grade chips have significantly accelerated. A group of design companies is accelerating breakthroughs in autonomous driving, cockpits, and memory. Some overseas automakers have also announced plans to build their own semiconductor factories. Although full industry chain independence is difficult and takes a long time, the direction is beyond doubt.
Futures hedging, inventory optimization, and deploying part of the capacity to lower-cost overseas bases have also become realistic choices for companies.
Notably, under the heavy pressure of costs, industry differentiation is intensifying.
In 2026, the auto market as a whole has entered a stage of stock competition. Domestic demand is under pressure, but exports have become a rare growth pole and profit buffer. From January to August, NEV (New Energy Vehicle) exports reached 3.435 million units, a year-on-year increase of about 1.2 times. The average export price of NEVs was about USD 29,800. Goldman Sachs estimates that the profit margin of overseas business is overall about 40% higher than that of the domestic market, through which some cost pressure is diverted overseas. However, tariff barriers in Europe and the US are also raising the threshold for going global.
BYD's gross profit margin for its automobile and related businesses rose against the trend by 1.98 percentage points to 22.33% in the first half of the year. Although Xiaomi Auto's gross profit margin fell from 26.4% to 19.2% in the second quarter, it still ranks among the top in the industry. Vertical integration, economies of scale, and premiumization are becoming the confidence for leading companies to hedge against price hikes. For companies that already have thin profits, high debt, and insufficient product competitiveness, any cost fluctuation could become an unbearable burden.
The elimination race will not pause because of price hikes; instead, it may accelerate due to the raised cost threshold.
From a longer-term perspective, this round of full-chain price hikes is not necessarily all bad.
It is prompting the industry to re-examine the mere "price involution" and shift more attention to the real hard skills of technology, efficiency, and supply chain management. However, how fast this transition can proceed remains to be verified by time.
As price hike notices fly in time and again, what is truly being re-evaluated is the pricing power and supply chain control of enterprises.
The cost curve is replacing the sales leaderboard as the new watershed for the industry. Only companies that can push costs to the extreme and forge resilience into their supply chains will be qualified to talk about the next cycle.