Gasgoo Munich- Barely had the National Day holiday ended when the "sound of rising prices" echoed across the auto supply chain. Rubber hit a nine-year high, tire companies issued notices one after another, and the plastics leader raised quotes on the first day back. From chips to lithium salts, from copper and aluminum to carbon black, almost no cost item remains where it was.
An auto industry accustomed over recent years to "trading price for volume" has once again been pushed into a corner by a bill for across-the-board price hikes. Where exactly is this cost pressure coming from, and where will it take the industry? That is the question facing the entire sector.
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Back to Work, Price Hike Notices Arrive First
Returning to work after the National Day break, what arrived earlier than orders were suppliers' price hike notices. Several automotive supporting sectors synchronized price adjustments after the holiday, pushing the already intense competition for market share right back to center stage through the lens of costs.
Tires were the first to sound the alarm. According to CCTV Finance, as of the close on October 8, the main rubber contract on the Shanghai Futures Exchange settled at 20,145 yuan per ton—a cumulative gain of over 28% this year and its highest level in nine years.
Natural rubber is the core raw material for tires, and the downstream sector immediately tensed up at the slightest movement in prices.
CCTV Finance also revealed that just since September, over 60 tire companies have collectively issued more than 70 price hike notices. Covering all categories from truck and bus radials to passenger car and engineering tires, the adjustments mostly range between 2% and 5%.
This isn't the first round this year. As early as April and May, over 80 tire companies collectively adjusted prices, with increases ranging from 2% to 10%.
The precedent isn't far off; the previous round of adjustments earlier this year trickled all the way down to the retail end.
According to Jiemian News visits to multiple dealers in May 2026, economy tires generally rose by 30 to 50 yuan, while mid-to-high-end products saw increases mostly between 100 and 200 yuan, with some specs even higher. The overall terminal increase was about 5% to 10%. Multinational brands like Michelin, Goodyear, and Bridgestone, as well as domestic leaders like Linglong and Triangle, were all affected.
For now, however, this new round of hikes remains largely at the manufacturer and channel levels, having not yet passed directly to car owners.
Large vehicle maintenance platforms still have buffer room; some promise price guarantees for dozens of days. Stacked with local government consumption subsidies, considerable discounts can still be found on some tires during the promotional season.
But shop operators know clearly that if upstream prices keep rising, that buffer at the terminal end will only get thinner.
Pushing tires into the price hike channel is the simultaneous rise of several major raw materials.
This year, natural rubber, carbon black, synthetic rubber, and various chemical auxiliaries have all trended higher. Carbon black saw the fiercest surge. Since raw materials account for over 70% of tire production costs, simultaneous increases in these key ingredients leave companies almost no room to maneuver.
Take carbon black: impacted by coke production cuts and fluctuations in the petrochemical chain, weekly gains in September once exceeded 30%, with a cumulative monthly rise of about 45%. International producer Cabot raised the price of specialty carbon black by 5,800 yuan per ton in September.
The Association of Natural Rubber Producing Countries further predicts that global natural rubber output in 2026 will be about 15.32 million tons, while consumption reaches 15.60 million tons. That leaves a supply gap of roughly 280,000 tons, which has widened compared to the previous year.
Aging trees in producing countries, spreading diseases, and drought in production areas mean supply contraction is not a short-term phenomenon.
Just as tire companies were collectively issuing notices, the plastics sector also hit the price hike button. On October 8, the first working day after the holiday, domestic modified plastics leader Kingfa issued a letter to customers announcing price adjustments for multiple products.
Image Source: Kingfa
Modified PA6 rose by 2,500 yuan per ton; modified PP, PE, PA66, and PBT by 2,000 yuan; modified ABS, PS, and PC by 1,500 yuan. Even modified PVC saw a 1,000 yuan increase, while export orders quoted in US dollars were raised by between $150 and $400.
Almost at the same time, another industry leader, Dowin Technology, also issued a notice raising prices across its full line of products—including thermoplastic elastomers, modified plastics, masterbatches, degradable materials, and copolyesters—by between 1,500 and 3,000 yuan per ton.
The reasons given in both letters were highly consistent: international oil prices have remained high due to geopolitical turmoil, driving up petrochemical raw materials, chemical additives, energy, and processing costs simultaneously. Internal absorption by enterprises has reached its limit.
Tires and modified plastics belong to different links in the auto supply chain, yet behind them lies the same petrochemical chain. After the National Day holiday, they sent out price hike signals in unison.
Together, they outline a fact: this round of cost increases is no longer a solitary advance by a single raw material, but systemic pressure across the entire supply chain. To understand why this price hike is so fierce, we need to pull the timeline back to the beginning of this year.
Everything is Rising, and Chips are the "Fiercest Link"
"There are several aspects to this year's price increases, like the rise in memory chips, and the increase in raw materials like lithium, aluminum, and copper. The war between the US and Iran has pushed up oil-related items. Plastic granules, and many tire manufacturers, are raising prices. Costs have risen quite a bit." William Li, founder, chairman, and CEO of NIO, summarized it this way in a public exchange in late April.
That statement captures the main theme of auto cost trends in 2026.
The turning point for the petrochemical chain came in late February. A sudden escalation of geopolitical conflict in the Middle East sent international oil prices soaring, transmitting down the chain. Prices for synthetic rubber, carbon black, and plastic granules rose in response.
If the rise in plastics and rubber carries a hue of cost-push and sentiment amplification, the rebound in power battery materials is more direct.
Battery-grade lithium carbonate was sitting at a low of around 75,000 yuan per ton in mid-2025, before rebounding all the way. In February 2026, futures first broke above 170,000 yuan. By mid-May, spot prices surged to around 200,000 yuan per ton, with futures briefly nearing 210,000 yuan—more than double the previous low.
Prices then pulled back quickly. Although they briefly rebounded to 150,000 yuan in August, around the National Day holiday they returned to the vicinity of 120,000 yuan per ton. Yet compared to the previous "ice point," cost pressure remains significant.
Power batteries account for 30% to 50% of the cost of a new energy vehicle. Lithium carbonate, known as "white oil," sends every price fluctuation straight to the procurement lists of automakers via battery makers.
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Another new cost comes from policy. Starting September 1, a 2% consumption tax was reinstated on mature battery products like lithium-ion batteries. In 2027, this rate will rise to 4%, formally ending the "tax-free bonus" batteries have enjoyed for years.
But for high-end intelligent driving models, what really makes automakers "wince" isn't lithium, but memory chips.
With the explosion of generative AI, global demand for high-bandwidth memory (HBM) in data centers is seemingly infinite.
Driven by profits, storage giants Samsung, SK Hynix, and Micron have all shifted capacity toward AI servers, severely squeezing production capacity for automotive-grade storage. Since these three monopolize over 90% of global storage capacity, the supply-demand balance has suddenly tipped.
According to TrendForce data, global conventional DRAM contract prices rose 90% to 95% quarter-over-quarter in the first quarter of 2026, while NAND flash contract prices rose 55% to 60%. The upward trend continued into the second quarter. CCTV Finance reported that from March to June 2026, procurement prices for automotive-grade storage rose by about 180%.
This market rally ignited by AI has lasted over a year, distinct from past cycles driven by phones and PCs that came fast and left fast.
A mid-to-high-end smart car uses 4 to 16 DRAM chips and 2 to 6 NAND chips; the higher the intelligence, the greater the consumption. UBS estimates that memory price increases alone have pushed up the per-vehicle cost of high-end smart driving models by 3,000 to 7,000 yuan. This even exceeds the impact of power battery price fluctuations, becoming the most significant uncontrollable cost for automakers right now.
On high-end smart driving models, memory chip costs can account for 8% to 20% of the vehicle price.
The pressure is visible in corporate financial reports. NIO management disclosed on an earnings call that the company's per-vehicle cost in the second quarter of 2026 increased by about 14,000 yuan compared to the end of 2025. That equates to an extra 1.5 billion yuan in costs for the quarter—roughly 10,000 yuan from memory, 3,000 to 4,000 yuan from batteries, and the rest from copper, aluminum, and other commodities.
This breakdown reflects the cost structure of a high-spec model like NIO, not the industry average. William Li expects that by the second half, the company's per-vehicle cost will have cumulatively risen by 16,000 to 17,000 yuan compared to the end of 2025.
Base metals haven't missed out either. Since 2026, copper prices have stood firm at the 100,000 yuan per ton mark, while aluminum broke through 25,000 yuan. In the first half, the average LME copper price rose about 40% year-on-year, and domestic spot copper prices rose 26%.
Building a mid-sized electric vehicle requires about 200 kilograms of aluminum and 80 kilograms of copper. Just these two items push up per-vehicle costs by about 1,800 yuan.
HSBC, UBS, and others estimate that combining lithium, chips, and metals, the comprehensive cost increment for a mid-sized smart EV is about 6,000 to 14,000 yuan. This range is an industry-wide calculation and differs from NIO's specific breakdown of a single, high-end manufacturer—the two are not duplicates.
Image Source: NIO
Costs are rising across the board, yet terminal prices can't move—profit margins are being squeezed from both ends.
Latest data from the CPCA shows that from January to August 2026, the auto industry's profit was 253.4 billion yuan, down 16% year-on-year. The sales profit margin was a mere 3.6%, compared to the downstream industrial average of about 6.5%. Looking back further, the industry sales profit margin dipped as low as 3.4% from January to May, with the vehicle manufacturing segment hitting just 1.5%—a ten-year low.
Navigating the Cycle, the Supply Chain Bets on "Resilience"
As price hikes become the norm, the industry's biggest question arises: Is this round of cost increases a temporary interlude, or a medium-to-long-term trend?
Memory chips clearly belong to the latter. Goldman Sachs estimates that the global supply gaps for DRAM, NAND flash, and HBM in 2026 will be about 4.9%, 4.2%, and 5.1% respectively—the highest levels since 2011.
Channel surveys from institutions like Bank of America show that in the third quarter, the average price of most DRAM products still rose 20% to 30% quarter-over-quarter. In the fourth quarter, conventional DRAM is expected to rise another 10% to 15%—though figures vary slightly by institution. Large cloud providers have even signed contracts in advance, accepting procurement prices for the first quarter of 2027 that are higher than those of the fourth quarter of this year.
CITIC Securities and others judge that driven by AI demand, the memory sector is still in the early-to-mid stages of a super-cycle. Supply shortages will last at least until 2027, with substantive relief likely waiting for the concentrated release of new capacity in 2028.
Image Source: Longsys
Lithium carbonate, meanwhile, displays characteristics of "high volatility with a rising center." Some analysts expect that 2026 lithium prices won't return to the lows of mid-2025, with the price center likely running between 120,000 and 180,000 yuan per ton.
Demand is still growing, and the upstream sector resists low prices. The "floor" for battery costs is clearly higher than in the past; expecting costs to automatically return to previous levels isn't realistic.
With nowhere to retreat, automakers and the supply chain can only seek change. Practices over the past six months have already outlined several clear paths for response.
The most direct response is turning uncertain prices into determined costs through long-term agreements.
Overseas, General Motors and Ford signed long-term agreements with Micron in July, locking in automotive memory supplies in advance.
Domestically, Changan signed a five-year deep cooperation agreement with CATL early in the year. Leapmotor locked in camera and radar assemblies worth no more than 1.1 billion yuan through an annual framework agreement. Long orders have become the most direct tool to hedge against price hikes.
Beyond locking in prices, more automakers are re-examining the security of their supply systems.
Battery supply is shifting from "single sourcing" to "main supplier plus diversified backup." More and more models are introducing second or third battery cell suppliers during facelifts, or producing battery packs through joint ventures. This cuts costs, disperses risk, and takes back the initiative in supply chain security. Introducing multi-tier suppliers and bargaining through competition is becoming industry consensus.
Supply chain adjustments are also happening at the material level. With high copper prices, "aluminum for copper" is being picked up again by parts companies; when aluminum prices rise, firms re-evaluate "steel for aluminum" solutions. More companies are digesting pressure by optimizing design, adjusting configurations, and reconstructing cost structures.
The consumption tax exemption for sodium-ion and solid-state batteries has also objectively pressed the fast-forward button on material substitution and mass production of new technologies. Behind this lies a fine contest between engineering capability and cost control.
A more fundamental path points to independent and controllable core technologies.
Industry data shows that in the first half of 2026, the localization rate of automotive-grade chips in China exceeded 35%, up over 10 percentage points from two years ago. However, over 90% of that domestic share is concentrated in low-end power chips and general MCUs. The localization rate for high-end computing SoCs and high-safety MCUs remains below 5%—and that is the true pain point of this round of "stranglehold."
Under pressure, the verification and rollout of domestic automotive chips is clearly accelerating. A batch of design companies are breaking through in smart driving, cockpits, and storage, and some overseas automakers have announced plans to build their own semiconductor factories. Full-chain independence is difficult and has a long cycle, but the direction is certain.
Futures hedging, inventory optimization, and shifting some capacity to overseas bases with lower costs are also becoming realistic choices for companies.
Notably, industry divergence is intensifying under the heavy weight of costs.
The auto market entered a stage of stock competition in 2026 overall. Domestic demand is under pressure, while exports have become a rare growth pole and profit buffer. From January to August, new energy vehicle exports reached 3.435 million units, up about 1.2 times year-on-year. The average export price of new energy vehicles was about $29,800. Goldman Sachs estimates that overseas business profit margins are overall about 40% higher than domestic ones, allowing some cost pressure to be diverted overseas—though tariff barriers in Europe and the US are also raising the threshold for going global.
BYD's gross margin for automotive and related businesses rose counter-cyclically by 1.98 percentage points to 22.33% in the first half. Xiaomi EV's second-quarter gross margin fell from 26.4% to 19.2%, yet still remains at the forefront of the industry. Vertical integration, economies of scale, and premiumization are becoming the confidence of leading enterprises in hedging against price hikes. For companies already running on thin margins, high debt, and weak product power, any cost fluctuation could become an unbearable burden.
The elimination race won't pause because of price hikes; instead, it may accelerate as the cost threshold rises.
From a longer-term perspective, this round of across-the-board price hikes isn't necessarily all bad.
It is forcing the industry to re-examine pure "price wars" and focus more on true hard skills like technology, efficiency, and supply chain management. How fast this shift can happen, however, remains to be verified by time.
As price hike notices fly in again and again, what is truly being re-evaluated is a company's pricing power and supply chain control.
The cost curve is replacing the sales chart as the industry's new dividing line. Only companies that can minimize costs to the extreme and grind resilience into their supply chains have the qualification to talk about the next cycle.
