Volume and Profit Priority: Changan Exits Price-for-Volume Elimination Race

Gasgoo Munich- The Chinese auto market in the first half of 2026 sent a chill down the spine.

Data from the China Passenger Car Association (CPCA) shows retail sales of passenger cars reached 8.70 million units in the first half, down 20.2% year-on-year. The China Association of Automobile Manufacturers (CAAM) painted a similar picture: sales fell 4.1% to 15.02 million. Yet, as the broader market cooled, the penetration rate of new-energy vehicles (NEVs) surged from 39% in January to 63% in June, holding above 60% for three consecutive months. The industry is undergoing a structural schism—fire and ice.

Caught in this rift, Changan Automobile delivered a mid-term report full of contradictions: cumulative deliveries hit 1.20 million units, including 456,000 NEVs—a 5.2% annual gain—and 402,000 overseas units, up 35.1%. But the flip side is stark: total sales slumped 17.44% year-on-year, while net profit is expected to plunge between 57.66% and 67.7% to 740 million to 970 million yuan.

Beneath the numbers, doubts are piling up: Has the NEV push stalled? Has the premium brand strategy failed? Is autonomous driving entirely dependent on Huawei?

On July 16, Changan held a semi-annual media briefing. Tan Benhong, deputy party secretary, Executive Vice President Yang Dayong, and Avatr President Wang Jinhai all attended. Over three hours of discussion, "adjustment" became the buzzword.

Tan Benhong got straight to the point: "We are adjusting our rhythm, gathering strength."

Cutting unprofitable products to make way for quality

Sales are down nearly 240,000 units compared to last year. In a market where NEV penetration has breached 50%, Changan's own NEV sales are sliding. For any other automaker, these numbers would trigger panic. Yet Changan's top brass remains surprisingly calm.

"Competition in the auto industry is a marathon—a marathon with no finish line," Tan said. "If we don't change ourselves, if we cling to the past, we can't move forward."

That calm reflects a deliberate strategy of subtraction.

Yang Dayong was blunt: The LUMIN model contributed about 200,000 sales last year, but due to policy shifts, that volume is being actively contracted this year. Replacing it is the NEVO Q05.

Data shows this compact SUV sold 19,350 units in May, climbing to 23,523 in June. First-half sales topped 76,000, ranking it among the leaders in the compact SUV segment—a stronghold traditionally dominated by internal combustion engines. It has become a new pillar for sales.

Image source: Changan NEVO

With the Nanchang plant now online, NEVO is targeting 300,000 units in the second half and 400,000 for the full year. This drive is designed to lift Changan's NEV penetration rate and hit the annual target of 40%.

In this retreat and advance, Changan has shifted gears in its product structure.

This subtraction isn't a whim; it's a strategic choice.

In April, Changan unveiled its "1445" global strategy, slashing its product portfolio from 63 to 36 models—a 43% cut. Zhao Fei, president of Changan Automobile, put it bluntly: "By 2030, the baseline for survival for an auto group is 3 million units." Adjusting at that high volume requires balancing innovation, R&D for both ICE and NEVs, and exploring new marketing models.

Tan calls this "self-evolution, self-adjustment."

Tan revealed an internal "co-investment" mechanism—if a product isn't profitable, even if it hits volume targets, the project's investment stakes are wiped out. "Balancing volume and profit is critical."

Industry data underscores the harshness of this choice. From January to May, the auto sector's profit margin fell to 3.4%. Only Zeekr managed to achieve a year-to-date completion rate of over 50% for its annual sales target. Missing targets is the norm. Changan is choosing "volume and profit" over "price for volume"—painful in the short term, perhaps, but likely the only path to long-term survival.

Deepal and Avatr: Independent Front-End, Collaborative Back-End

Avatr has become the primary target of skepticism.

In the first half of 2026, Avatr delivered just 27,619 units, a 51.3% plunge, averaging less than 5,000 a month. Compared to 2025, when it broke 10,000 monthly sales for ten straight months, it feels like a different era. Four years of accumulated losses exceed 13.2 billion yuan, with cash on hand plummeting from 19.3 billion at the end of 2024 to 6.2 billion by April 2026.

The industry is asking: Is Avatr, once backed by the trio of Changan, Huawei, and CATL, losing steam?

Changan's response isn't to give up, but to adjust the pace.

In April, Changan's global strategy conference announced a strategic integration of Avatr and Deepal by year-end. The core philosophy: independent front-end, collaborative back-end.

Up front, where customers see, nothing is cut. Avatr remains anchored in the 300,000 to 500,000 yuan "new luxury" market, while Deepal focuses on the 150,000 to 250,000 yuan mid-to-high-end sector. Design, positioning, and showroom experiences stay separate.

"The positioning is very clear; there's no stepping on toes," Tan said. "Differentiation is vital. Homogeneity leads only to price wars."

In the back, invisible to users, everything is integrated. Platform architecture, electric systems, autonomous driving software stacks, and supply chain procurement are all shared. Deepal's high-end models will reuse Avatr's 896-line LiDAR, while Avatr can leverage Deepal's scale to lower BOM costs.

Through tech sharing and centralized purchasing, costs are expected to drop 20% to 30%, paving the way to stop the bleeding.

Integration isn't about killing brands; it's about helping them survive. Deepal's first-half performance proves the point: sales climbed 14.6% to 164,156 units, breaking 30,000 monthly sales for four consecutive months.

So, does Avatr's sales slump mean its premium ambitions have failed?

Tan offered a two-part answer. First, Avatr's premium luster hasn't faded: "The average price this year has risen significantly compared to last year." Gross margins hit 9.4% in 2025, showing the brand still commands a premium.

Second, Changan's understanding of "going premium" is evolving—from "chasing volume" to "laying foundations". "Premium brands need service, brand equity, and resources—not just selling cars. Avatr faces this challenge: after the sale, many resources must be reserved for service."

In the current resource environment, Changan refuses to blindly chase volume.

Wang Jinhai, Avatr's VP, revealed the brand is waging a 'six-month battle' to improve user experience, with flagship stores in high-tier cities rolling out nationwide. In the second half, the Avatr 07L will begin pre-sales, coming standard with CATL batteries and Huawei's Qiankun 896-line LiDAR and ADS 5 advanced driving system.

Just a month ago, Changan promoted Chen Zhuo and Di Zhirui to group vice presidents—two executives born in the 80s deeply involved in the NEV front lines. The signal is clear: NEVs are Changan's only strategic direction.

Avatr's declining sales aren't a failure of its premium push—quite the opposite. Changan is redefining the survival rules for high-end brands: don't burn brand value on low-quality volume, but build brand equity through high-quality operations.

In-House Autonomous Driving: Refusing to Become a "Shell Company"

"Is Changan's autonomous driving actually any good?"

It's a hot topic online, with some skeptics asking, "Does Changan rely entirely on Huawei?"

Tan didn't dodge it. He was direct: If autonomous driving were still just about rules and features, a supplier would suffice. But today, driving tech is about AI, large models, and understanding computing power—it's the practice of transforming into a tech company. "If we don't do this, we might really end up as just a shell manufacturer."

This sounds like an explanation of the technology, but it's actually a manifesto for why Changan insists on in-house R&D.

At the Chongqing Auto Show this year, Changan unveiled "Tianshu Navigation," its full-stack in-house driving system. Available in Pro, Max, and Ultra versions, the Pro model comes standard with LiDAR, while the Ultra features a VLM visual language model. Officials claim it detects obstacles two seconds faster than the human eye in low-light conditions like tunnels or at night, and with the SDA central computing architecture, system response is 0.15 seconds faster.

Changan has been working on intelligence for 17 years. It now has over 7,500 software and driving staff, investing roughly 3 billion yuan in computing power this year alone—over 10 billion in the last five. Yang Dayong revealed that the NEVO Q06, launching in September, will feature Tianshu Navigation across the lineup. He likened its driving capability to a "top-tier 985 university" level. Existing owners with LiDAR-equipped models will also get the upgrade via OTA.

"If your autonomous driving can't handle the mountain roads of Yunnan, Guizhou, or Sichuan, don't bother coming." That slightly tongue-in-cheek remark reveals Changan's confidence in its own tech.

And what about Huawei? Changan's stance is clear: walk on two legs—in-house and external sourcing.

NEVO handles the debut of in-house driving tech; Deepal uses Huawei solutions for the mass market; Avatr leverages Huawei and CATL resources to maintain its luxury positioning. Each brand has its role, without overlap.

Tan emphasized that with clear positioning, Changan is integrating middle-office resources. "Amplify efficiency, lower costs, and we can offer more resources to give consumers better products."

This isn't about rejecting Huawei; it's about preventing any single supplier from becoming the brand's only label.

Marketing autonomous driving is an industry headache. Everyone claims to be in the first tier, but users struggle to feel the difference. Changan's approach is different.

Tan says Changan isn't doing this just for driving. If a large model can drive a car, what else can it do? Robots. The vision of 'one brain, multiple bodies' is moving from blueprint to reality: Changan has completed functional verification of in-vehicle robot components, with the first product planned for the second half of the year.

This crosses the boundaries of a traditional automaker.

In the second half of 2026, Tianshu Navigation will roll out at scale. Moving from "0 to 1" to "1 to N," Changan's in-house driving tech is entering a phase of mass verification.

Without in-house intelligence R&D, without understanding AI and computing power, the future might indeed hold nothing but shell manufacturing. That line is for the outside world—and for Changan itself.

HEV: A New Track, Full Iteration of ICE Cars by Second Half of 2027

The group isn't just adjusting brand architecture, models, and driving tech. There's one more massive shift: "By the second half of next year, all of Changan's internal combustion vehicles will complete their iteration," Yang Dayong revealed.

This decision rests on their forecast: China's future powertrain landscape will split roughly 65% EV to 35% HEV. HEVs—representing "new fuel" vehicles—are expected to hold about 10 million units of market share. "HEV is the core track for Changan's fuel vehicle transition, bar none."

Data confirms the urgency. In the first half of 2026, traditional ICE sales fell faster than the industry expected. Meanwhile, HEVs grew against the tide—wholesale volume reached 392,000 units from January to May, up 4.5% year-on-year.

Industry forecasts suggest 2026 HEV sales could hit 1.8 million to 2.0 million units, with market penetration rising from 5.4% to over 8%. As growth in both pure EVs and plug-in hybrids slows, these HEV figures stand out.

Changan Blue Whale Super Engine enters the 70,000 yuan era; Image source: Changan Automobile

On the ground, HEV orders for the CS75 PLUS Blue Whale Super Engine already account for 60% of total orders, while the Eado HEV sits at 25%. Once ICE inventory for the Eado is cleared, that HEV share is set to rise further.

In May, Changan launched the Blue Whale Super Engine HEV system, bringing mainstream hybrids into the 70,000 yuan price range. Starting in August, hybrid versions of the CS55 and UNI-V will launch. Yang Dayong noted that current HEV sales are capped by battery supply at about 5,000 units, but "from August, with four hybrid models pushing together, selling 15,000 units a month won't be a problem."

The deeper logic comes down to economics. Yang did the math: A tank of gas carries 35% in taxes, something EVs currently don't bear. "If EVs have to absorb all the social responsibilities currently shouldered by fuel cars, costs per kilometer would rise by about 0.2 yuan." That would push home-charging EV costs from 0.075 yuan to roughly 0.28 yuan per km—on par with HEVs.

Plug-in hybrids and range-extended vehicles, burdened by dual powertrains and heavier batteries, will struggle under weight-based fees. "The Blue Whale Super Engine will launch a 2.0 version next year, with an upgrade every year."

Changan's ambitions extend beyond China. In markets like Southeast Asia, Latin America, and the Middle East, where charging infrastructure is weak, HEVs are the optimal solution for Chinese brands challenging Japanese hybrid dominance. In 2025, Chinese HEV exports surged 94.1% year-on-year. Changan is leveraging its "Hai Na Bai Chuan" global strategy to lay out capacity and channels worldwide.

In Changan's roadmap, 2026 is for cultivating NEVs to support the full transition of all ICE vehicles to HEV by the second half of 2027.

Conclusion

Changan's adjustment is a self-revolution on a scale of 3 million units.

"The auto industry is a marathon. And a marathon without a finish line." Tan's words perhaps best capture Changan's current state. The strategy for the first 5 kilometers is different from the second. Changan has chosen to adjust its pace and gather strength in this second leg.

The growing pains are real—sliding sales, profit pressure, brand pressure. But the direction is clear: cutting unprofitable products, integrating cannibalistic brands, betting on in-house driving tech, and opening a new HEV track.

In the second half, the NEVO Q06 launches with Tianshu Navigation, the Avatr 07L opens for pre-orders, and the Blue Whale Super Engine HEV accelerates. Whether Changan can unlock a new round of growth after this adjustment remains to be seen. But at the very least, this "new state-owned enterprise" is proving one thing with its actions: it is no longer just chasing volume.