As the narrative of sheer scale loses its persuasive power in China's new energy passenger vehicle market, a graver question emerges: Where does the industry's true value foundation lie?
At first glance, April sales data suggests everything is trending upward: The retail penetration rate of new energy vehicles (NEVs) in China historically breached the 60% threshold, reaching 61.4%. For every ten new cars sold, more than six are NEVs.
Yet, a set of grim figures is resonating through the industry: Domestic auto sales exceeded 34.4 million units in 2025, yet the overall profit margin of China's auto sector stood at a mere 4.1%.
"It looks like scale is growing, but the industry's overall health is facing challenges," noted Wang Hui, vice president of Avatr Technology, citing data from the China Passenger Car Association (CPCA). By the first two months of 2026, that figure had slipped further to 2.9%.
Latest data shared by Cui Dongshu, secretary-general of the CPCA, shows the auto industry's profit margin dipped to 3.2% in the first quarter of 2026—a recent low. Not only is this significantly lower than the average profit margin of industrial enterprises above a designated size nationwide, but it is also brushing against the operating break-even line for the vast majority of automakers.
When a 61.4% penetration rate collides with a 2.9% profit margin, the result is a fractured industrial landscape: China's auto industry is racing forward in "getting big," yet stumbling in its quest to "get strong."
At the Shenzhen 2026 (4th) Future Automotive Pioneers Conference, these "pioneers" offered some answers—and posed even deeper questions.
Future Automotive Pioneers Conference
Sales Are Up, But Profits Are Down?
Since the start of 2026, China's auto market has presented a picture that seems contradictory yet has become a settled reality.
On one hand, the surge of NEVs appears unstoppable. Data from the CPCA shows that in April 2026, domestic NEV retail sales reached 849,000 units. The penetration rate historically broke through 60% to reach 61.4%—a 9.7-percentage-point jump from the same period in 2025 and a single-month record for the domestic market.
Domestic brands have delivered a particularly standout performance. In April, the NEV penetration rate for domestic brands hit 80.1%, while luxury brands managed only 26.1%. Chinese brands have secured a commanding position in the NEV market.
On the other hand, profit margins for automakers are being compressed aggressively. The slide from 4.1% in 2025 to 2.9% in the first two months of 2026 paints a worrying curve.
Looking at absolute profit, the auto industry's total profit for the first quarter of 2026 was 78.4 billion yuan, an 18% year-on-year decline. Faced with this figure, Wang Hui's assertion at the conference was particularly sharp: "Sales without profit are phantom sales; scale achieved through price wars is false prosperity."
Future Automotive Pioneers Conference
"Selling more to lose more" has evolved from a joke into a harsh reality.
The "price war" is undoubtedly the most direct culprit.
Since 2025, the slogan "electricity is cheaper than oil" has echoed through the industry, with companies following suit in cutting prices—making discounts commonplace. But the root cause lies deeper: when automakers converge on technical routes and product configurations—800V high-voltage platforms, large AI voice models, and end-to-end autonomous driving becoming standard—price becomes the only differentiator, eroding profits layer by layer.
"The perceived difference for users between 700 km and 1,000 km of range is near zero, yet costs rise exponentially," analyzed Xu Jun, senior vice president and COO of Leapmotor. "From 30 TOPS to 1,000 TOPS of computing power, the experience difference is far smaller than the parameter gap."
Future Automotive Pioneers Conference
Based on this, he argues that specifications are merely a basic ticket for entry today, not the deciding factor for victory.
Behind Xu Jun's view lies a trend worth reflecting on: as automotive tech enters a "convergence phase," architectures of central computing plus zone controllers standardize, end-to-end smart driving solutions homogenize, and AI cockpits grow increasingly similar. Building a competitive edge purely through technical specifications is becoming increasingly difficult.
The weight consumers place on brand during purchasing decisions is rising significantly.
William Li, founder of NIO, revealed recent McKinsey survey data: A year or two ago, brand ranked fifth in purchasing factors; now it has risen to second. "I believe it will soon enter first place," he said.
Future Automotive Pioneers Conference
As brands become the deciding factor, China's auto industry is seeing its technological dividend rapidly convert into a brand dividend. Yet reshaping and constructing a brand is far more difficult—and tests one's resolve far more—than simply stacking specifications.
Who Is Trying to Break the Curse of Negative Growth?
Against the backdrop of continuously dipping industry profit margins, not all companies are mired in the struggle of "growing revenue without growing profit."
At this conference, a few brands used solid data to prove a possibility: Chinese brands can not only command higher prices but also restore profits.
Xiang Xingchu, chairman of JAC Motors, disclosed in his speech that since its launch in May 2025, the Zunjie S800 has delivered over 18,500 units, topping the sales chart for luxury sedans priced above 700,000 yuan for eight consecutive months.
Future Automotive Pioneers Conference
From a price bracket perspective, the fact that million-yuan Chinese luxury cars can consistently outperform century-old luxury brands was almost unimaginable five years ago.
Xiang attributes this to the strategic choice of "redefining luxury through technology": "The Zunjie brand isn't simply copying the development path of traditional luxury cars, but rewriting the narrative of ultra-luxury automotive brands through technological innovation."
NIO represents another path worth examining.
On June 1, NIO released its latest delivery figures: 37,705 vehicles in May, a 62.3% year-on-year increase and a 28.4% month-on-month rise, setting a new single-month record for the brand.
The main NIO brand delivered 20,013 units, up 50.8% year-on-year. The family-oriented ONVO brand performed particularly well, delivering 12,029 units—a 91.5% year-on-year increase and a 124.8% month-on-month jump. The new firefly brand delivered 5,663 units, up 53.9%.
From January to May this year, NIO's cumulative deliveries reached 150,526 units, a 68.7% increase. With this, NIO's historical cumulative deliveries officially exceeded 1.14 million, reaching 1,148,118 units.
On the financial front, NIO's total revenue for the first quarter was 25.53 billion yuan, up 112.2% year-on-year, exceeding the upper limit of its previous guidance of 24.48 billion to 25.18 billion yuan. Total gross profit came in at 4.86 billion yuan, rising 428.4%. The company's comprehensive gross margin reached 19.0%, a four-year high. Vehicle gross margin was 18.8%, growing quarter-on-quarter for four straight periods and also reaching a four-year high. Other sales gross margin stood at 20.6%, reaching the highest level in four years.
Regarding net loss, the first quarter saw a narrowing to 332.1 million yuan, a significant reduction from the 6.75 billion yuan net loss in the same period last year. By the end of Q1, NIO's cash reserve had risen to 48.2 billion yuan, with positive operating cash flow for three consecutive quarters.
In the first quarter of 2026, the average transaction price (ASP) of the NIO brand reached 390,000 yuan—50,000 yuan higher than BMW and 130,000 yuan higher than Audi.
Behind this price gap lies a qualitative shift in brand premium capability.
Similarly, data shows the average transaction price for all models under Harmony Intelligent Mobility Alliance has stabilized at 390,000 yuan, ranking first among Chinese automotive brands for consecutive months and occasionally surpassing traditional luxury brands.
Among specific brands, AITO's ASP reached a high of 409,000 yuan. Its flagship model, the AITO M9, has delivered over 280,000 units, ranking first in luxury SUVs in the 500,000-yuan class for 21 consecutive months. The Zunjie brand, positioned in the ultra-luxury market, is also performing strongly; its first model, the Zunjie S800, is priced between 708,000 and 1.018 million yuan. It has delivered over 17,000 units in 11 months, remaining at the top of the ultra-luxury sedan segment above 700,000 yuan for eight months, with monthly sales even exceeding the combined sales of several traditional top-tier luxury sedans.
Future Automotive Pioneers Conference
That these brands can buck the trend during the price war is no accident: the logic involves deep understanding of user value rather than piling on materials, significant investment in new tech to create premiums, systemic capabilities in manufacturing and supply chain, and deep collaboration with partners like Huawei to achieve technological leadership.
Yet, a deeper analysis of these brands' financial performance raises a thought-provoking question: Will the existence of these high-price, high-margin brands alter the trajectory of the Chinese auto industry's profit margins as a whole?
The answer may not be optimistic. Although the Zunjie S800, NIO ES8/ES9, and AITO M9 have achieved strong results in their respective price brackets, their share of total industry sales remains limited.
In other words, the "localized breakout" of high-end models has yet to reverse the "global dilemma" of the entire industry.
For most domestic brands, the average model price is still below 150,000 yuan, and the main battlefield of the price war continues to persist intensely in the low-to-mid-end market.
When the majority of players are still struggling on the loss line, a few successful high-end brands cannot support the profitability level of the entire industry.
The true test of China's transition from "big" to "strong" lies not in the ability to produce one or two products that rival the Mercedes-Benz S-Class, but in achieving high-quality value creation universally across all categories and price segments.
Mercedes Slumps 27% in China: Can Chinese Automakers Succeed Overseas?
As the price war continues in the domestic market, overseas markets are becoming the "second battlefield" for a new round of competition among Chinese automotive brands.
At this conference, numerous guests elaborated on the strategic layout and direction of Chinese auto globalization. If domestic competition is intense competition for stock market share, then global competition is a long-term endeavor for incremental markets.
Avatr's globalization practice offers a highly representative sample.
Wang Hui disclosed in his speech that Avatr has entered over 40 countries and regions. The Avatr 11 starts at about 290,000 yuan domestically but approaches 450,000 yuan overseas.
"In Thailand, we are ranked first in luxury electric SUV sales, and in Dubai, we have captured 10% of the local high-end EV market," Wang stated. "By the end of this year, we will officially enter Europe. Although we've been overseas for only about a year and a half, we have already achieved stable profitability. So globalization is something we must do."
Wang also revealed the brand strategy of sponsoring the Portuguese national team during an interview. He stated that Avatr's main European products will fully enter Europe around November or December, and he will visit to communicate with partners in multiple countries. "Sponsoring the Portuguese national team is just one of our moves at the brand level in Europe. We adhere to long-term strategy in Europe and globally; beyond the brand and product ends, our greater resource investment is in building service, systems, and operational capabilities."
Geely's globalization layout is even more comprehensive and systematic.
Li Chuanhai, vice president of Geely Auto Group, pointed out that the "most essential thing" in Chinese auto globalization "is not moving volume through low prices, but taking technology as the root, systems as the foundation, and brand as the soul, ultimately completing a globalization that shifts from selling cars to defining the future of automobiles."
Future Automotive Pioneers Conference
He introduced that Geely has operated global businesses for 20 years, possessing five major R&D centers and 16 testing bases, deeply integrated with local partners in Europe, Southeast Asia, the Middle East, Latin America, and Eastern Europe. Geely has participated in the co-construction of international standards and is the first Asian automaker with voting rights on the IATF board.
In terms of auto exports, April 2026 data also provides an important reference.
In April 2026, auto exports reached 901,000 units, up 74.4% year-on-year, with NEV exports rising over 100% to 430,000 units. Overseas markets have become the most important engine of growth for China's auto industry.
However, while export growth is positive, a comparative set of data is worth examining: In the first quarter of 2026, Mercedes-Benz Group's sales in China were 111,600 units, a decrease of 26.9% year-on-year, making it the region with the most significant decline among its major global markets. Meanwhile, financial reports show Mercedes' Q1 revenue was 31.602 billion euros, down 4.9%; net profit was 1.433 billion euros, down 17.2%; and global sales were 499,700 units, a 6% decrease.
These figures reflect the challenges Mercedes faces in the Chinese market and raise a question: When Chinese brands gain a foothold overseas, with what approach will they face global competition?
Chinese automakers are replicating the dilemma BBA once faced in the Chinese domestic market: just as local brands gained market share through technological advantages and high cost-performance, strong international brands may similarly face challenges from local brands in other markets.
When asked about his view on Chinese new luxury brands, Drummond Jacoy, executive vice president of Mercedes-Benz R&D China, responded with a mix of prudence and urgency: "There are many excellent brands and products in China; I respect them greatly. We are embracing technological innovation and learning constantly, integrating cutting-edge technology with our brand heritage."
Future Automotive Pioneers Conference
He emphasized that Mercedes has already launched deep cooperation with Chinese tech companies—from ByteDance and Tencent to Momenta, from Amap to Aispeech. Mercedes is trying, in unprecedented ways, to close the intelligence gap with local Chinese enterprises.
This precisely reveals the new state of global competition: the landscape has expanded from China to the globe, and the core focus has evolved from single product competition to comprehensive competition involving technology, ecosystems, supply chains, and brand.
In Li Chuanhai's words: "Expanding overseas isn't hard; standing firm, blending in, and taking root is the real challenge."
True globalization is certainly not simply replicating domestic product and pricing models overseas, but achieving comprehensive, deep fusion from capital to technology, and from standards to supply chains.
Leapmotor's strategic layout echoes this judgment. Leapmotor founder Zhu Jiangming has publicly stated the company's globalization goals: the first step is to achieve a "60-40" split, with China at 60% and overseas at 40%; next, strive for "50-50"; the ideal state is an "inverted 40-60," where Chinese autos' global share achieves 40% domestic and 60% overseas—that would be the optimal state of true globalization.
Moving from "selling products" to "building systems" is a threshold Chinese auto globalization must cross. In the next three to five years, whoever can first establish a healthy, sustainable profit model in overseas markets will seize the opportunity in the long-term journey of globalization.
Conclusion: Automakers Must Start Making Money
Returning to the theme of this conference—"Ascending Step by Step."
China's auto industry took 20 years to complete the leap from catching up to leading. There were no shortcuts on this road; every step was earned. But today, the industry faces a challenge: its achievements in volume have reached their peak—it is the world's largest auto producer, the largest NEV market, and a global leader in intelligent tech clusters—yet breakthroughs in quality are only just beginning to show in localized areas.
An industry profit margin falling below 3.2% means the red light for industrial health is on.
When most enterprises exhaust their profits in the price war, who will have sufficient funds to invest in next-gen tech R&D, brand reshaping, and global expansion?
From Wang Hui's "sales without profit are phantom sales," to Xu Jun's "anyone can cut prices; cutting costs is the real skill," to Li Chuanhai's "maintaining a sense of direction in no-man's land," the most valuable consensus at this conference might be this simple truth: competition in the auto industry is an endurance contest, not a sprint.
As Xiang Xingchu put it: "On the road of high-end breakthroughs for Chinese brands, there are no lone heroes, only co-evolution."
When a 61.4% penetration rate and a 3.2% profit margin are written on the same page of this industry report, the answer is clear enough: China's auto industry must move from the stage of pursuing "getting big" to a new stage of "getting strong."
The question isn't whether cars can be sold at the million-yuan level, but whether the entire industry can stand firmly on every step of the "ascension" when the price war erodes the last fraction of profit.
