Gasgoo Munich- Data from National Bureau of Statistics show that China's auto production fell 4% year-on-year to 15.1 million units in the first half of 2026. Over the same period, industry revenue climbed 1.8% to 5.19 trillion yuan. However, operating costs hit 4.61 trillion yuan — up 2.8% — outpacing revenue growth significantly.
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As a result, total industry profit dropped 20% to 195.4 billion yuan. The sales profit margin stood at just 3.8%, well below the 6.5% average profitability seen in downstream industrial sectors.
On a monthly basis, the sales profit margin rebounded to 5.2% in June — better than the 3.7% seen in March and April. Yet June is typically a peak period for margins, and this year's reading remains unusually high. Looking back, the industry margin fell to 4.3% in 2024 and slipped further to 4.1% in 2025. The first half of 2026 continued this downward trend, with profit recovery lagging behind other consumer goods sectors.
The profit decline is closely tied to elevated upstream raw material prices and ineffective cost transmission along the supply chain. Lithium carbonate prices stayed high in the first half, keeping domestic battery prices firm. Meanwhile, the average export price for lithium batteries continued to slide, dropping 12% year-on-year to 104,800 yuan per ton between January and June.
Upstream mining profits surged 34%, with non-ferrous metals and oil sectors recording margins of 40.6% and 32.4% respectively. This creates a clear squeeze on mid- and downstream industries like auto manufacturing. Adding to the strain, most automakers do not produce their own batteries. They face an accounts payable cycle stretching 200 days, while accounts receivable turn around in just 60 days — intensifying both funding and cost pressures.
A sector comparison reveals a sharp divergence between old and new growth engines. Profits for computer, communications, and electronic equipment jumped over 90%, while non-ferrous metal smelting surged 96%. In contrast, auto manufacturing profits logged a 20% decline. Additionally, internal combustion engine vehicle production plunged 12%, while new energy vehicle production rose 6% to 7.4 million units, lifting penetration to 49%. Yet this structural shift has failed to offset the overall slide in profitability.
Analysts point out that while domestic demand is gradually picking up as the "Two New" policies take effect, the auto sector remains under mounting pressure from rising upstream resource costs and fierce price competition. Moving forward, automakers that accelerate their integration into core segments like battery production may find a path to improving their long-term profit structures.
