What does that figure imply? It represents not only a sharp decline from November but also a contraction of more than half compared to the 4.1% recorded in December of the previous year. Even across the full year, the sector's average profit margin of 4.1% remains stuck at a historical low for the second consecutive year—trailing the 5.9% average for downstream industries.
While the full-year output of 34.78 million units—a 10% annual gain—appears impressive, and the penetration rate of new-energy vehicles has climbed to 48%, the dilemma of "diseconomies of scale" erupted at year's end. In December, industry revenue edged down 0.8% year-on-year while costs rose 0.8%, a squeeze that caused total profits to plummet 57.4%. The dynamic makes one thing clear: relentless price pressure in the end market, combined with stubbornly high manufacturing costs, has severely eroded the profitability of automakers.
Behind this dramatic contraction lies a sector under siege from multiple fronts. Upstream raw materials—specifically lithium carbonate, which doubled in price during the year—directly drove up battery and manufacturing expenses. At the same time, fierce market competition prevented automakers from passing these costs entirely to consumers, forcing most to absorb the hit themselves. Notably, while Beijing's campaign against "involution" has helped restore profits in upstream sectors like steel and non-ferrous metals, the recovery in auto manufacturing is conspicuously lagging.
That 1.8% margin in December serves as a warning bell for an industry still growing at speed. It exposes a hard truth: having bid farewell to an era of simple volume expansion, China's auto sector must now confront the core challenge of achieving profitable growth. In the next phase of industry competition, building profitability will be far more brutal—and far more critical—than the battle for market share.
