In the first half of 2026, the market penetration rate of new energy vehicles and the adoption rate of intelligent features in China are at historical highs. However, the financial performance forecasts for the first half of the year released by numerous listed automakers reveal a widespread trend of revenue growth failing to translate into profit increases, with many even reporting substantial losses.
This wave of profit warnings indicates that the previous path to profitability—expanding sales volume to spread costs and then converting that into profit—is becoming increasingly difficult to sustain.
From GAC to SERES (SEHK: 09927), BAIC BluePark, and JAC, these leading automakers, each following different transformation paths, have all experienced profit contraction in the first half of this year. This suggests the industry is in a transitional period where the old profit model is breaking down, and a new order has yet to be established.
The traditional joint-venture "cash cow" businesses that once supported group survival are shrinking faster than anticipated. Meanwhile, the intelligent and new energy vehicle businesses, which are the main drivers of growth, have yet to achieve self-sufficiency due to a loss of pricing power at the front end and rigid supply chain costs at the back end.
The accelerated pace of model refreshes further compresses the time available for cost recovery. A vehicle model may fail to reach sufficient sales volume before old materials, molds, and dedicated production lines see reduced utilization due to product transitions, causing the impact on profits to materialize earlier.
Against this backdrop, sheer sales numbers can no longer mask the bleeding at the bottom line of the income statement. Competition among automakers has evolved from a simple battle for front-end channels and market share into a multi-dimensional endurance race concerning cost control across the entire industry chain, financial risk hedging, and management of technological depreciation.
Widespread Loss Warnings
Several automakers have recently disclosed their performance forecasts for the first half of 2026. The data shows a significant divergence in sales, revenue, and net profit among the relevant listed companies.
This financial pressure phenomenon transcends differences in corporate structure and development stage, manifesting in both traditional automotive groups and new energy vehicle manufacturers.
GAC Group forecasts a net loss attributable to owners of the parent company between 4.06 billion and 4.57 billion yuan for the first half of 2026, with an adjusted net loss after excluding non-recurring gains and losses ranging from 4.8 billion to 5.6 billion yuan.
Compared to the same period last year, the scale of this loss has expanded. An analysis of its business structure reveals that the primary reason for the profit decline lies in the traditional internal combustion engine vehicle segment, particularly the sales downturn of joint-venture brands.
In the first half of this year, major profit contributors like GAC Honda and GAC Toyota experienced a year-on-year decline in production and sales volume in the end market, leading to a reduction in the investment income obtained by the group. Simultaneously, in the self-owned new energy vehicle segment, GAC Aion and Trumpchi maintained high promotional discounts and channel investments to cope with intense industry competition.
Under the combined effect of shrinking joint-venture earnings and increased investment in self-owned brands, GAC Group's overall financial metrics are under significant pressure.
Automakers in the midst of transformation are bearing the pressure of asynchronous scale expansion and profit recovery, with BAIC BluePark serving as one example.
According to its performance forecast, BAIC BluePark expects a net loss attributable to owners of the parent company between 1.77 billion and 1.97 billion yuan for the first half of the year.
Judging solely from front-end market performance, BAIC BluePark is not lacking in growth. Its Arcfox brand achieved a substantial year-on-year increase in deliveries in the first half through a dense rollout of new models and extensive marketing campaigns. This indicates that before the overall scale effect crosses the threshold to offset fixed asset depreciation and massive R&D investment, BAIC BluePark carries a heavy financial burden with each vehicle sold.
The contrast is even more pronounced for SERES. The company, which once reached a profit peak due to strong sales of its AITO series, unexpectedly faced a change in performance in the first half of this year, forecasting a substantial loss of 1.5 billion to 1.8 billion yuan, a direct shift from profit to loss.
This data has caused significant shock within the industry because, from the perspective of end-market deliveries, SERES's performance in the first half was remarkable, with high-premium flagship models like the AITO M9 and the new AITO M7 repeatedly setting new delivery records. However, rising raw material prices and adjustments to the book value of existing assets meant that sales growth did not translate into profits.
Another company disclosing a loss is JAC Motors, whose semi-annual performance forecast estimates a net loss attributable to owners of the parent company exceeding 700 million yuan.
As an automotive group involved in both commercial and passenger vehicles, JAC Motors maintained a relatively stable foundation in its commercial vehicle and some overseas export businesses. However, its passenger vehicle operations faced considerable pressure in the competitive domestic mass consumer market.
The market segment for new energy passenger vehicles priced between 100,000 and 200,000 yuan in China is saturated with product offerings. The lack of models with high premium potential has made it difficult for JAC to achieve effective breakthroughs in passenger vehicle revenue scale. Additionally, depreciation of fixed assets from some past production capacity has also affected the company's current profitability level to a certain extent.
The reasons for losses vary among these automakers, but they all reflect a situation where revenue growth is increasingly unable to cover continuous investments and existing costs.
Multiple Uncertainties Converge
Analyzing the loss performances of various automakers reveals that the profit contraction in the automotive industry in the first half of 2026 resulted from the convergence of multiple factors, including changes in market pricing mechanisms, impeded cost transmission in the supply chain, and rapid technology iteration cycles.
The most direct pressure still comes from price competition. After transaction prices decline, automakers need to sell more vehicles to compensate for the drop in per-unit gross profit.
In the current domestic passenger vehicle market, relatively ample production capacity and deepening product homogeneity have led companies to widely adopt defensive price-cutting and promotional strategies to compete for existing market share and maintain factory capacity utilization.
The decline in suggested retail prices and actual transaction prices has lowered the average revenue per vehicle. However, the rigid costs of automobile manufacturing, including labor compensation, factory depreciation, logistics networks, and basic operating expenses, have not decreased proportionally with vehicle prices.
When the increase in total sales volume driven by price cuts is insufficient to offset the gap left by the decline in per-unit gross profit, companies face a situation where net profit still falls even as revenue scale grows. The temporary weakening of pricing power has made the path of relying solely on scale expansion to spread costs more challenging.
Counterbalancing the decline in front-end selling prices is the rigidity of supply chain costs and the obstruction of the path for cost transmission to the end consumer.
In previous industry cycles, vehicle manufacturers, as the core of the industrial chain, possessed strong pricing power and could pass on some rising manufacturing costs to consumers through minor vehicle price adjustments. However, under the current buyer's market structure, this mechanism has largely stalled.
On one hand, procurement costs for some basic battery raw materials have not significantly declined after previous fluctuations. On the other hand, core hardware like automotive-grade computing chips and memory chips required for advanced intelligence has high procurement barriers and carries a certain premium.
Amid fierce end-market competition, automakers cannot digest these additional bill-of-materials (BOM) costs by raising final vehicle prices. They must absorb them entirely in their internal financial accounts, which directly creates a two-way squeeze on vehicle profit margins.
Furthermore, the rapid iteration of smart car technology has intensified the pressure from R&D expense amortization and asset impairment, becoming a hidden factor dragging down companies' current profits.
Currently, the update cycles for core technologies like automotive electronic and electrical architectures and autonomous driving algorithms have been significantly shortened. This means that the previous-generation technology platforms and supporting software/hardware solutions, in which automakers invested heavily in R&D, may face the risk of technological obsolescence and declining market competitiveness in a relatively short time.
To maintain the appeal of their product lines in the intelligent vehicle race, automakers must sustain high-intensity R&D investment. Simultaneously, the extremely rapid pace of technological renewal leads to financial compliance requirements for the early provision of asset impairment reserves for material inventories of older models and outdated production lines. This financial depreciation and asset impairment, which does not directly appear on the per-vehicle manufacturing BOM sheet, has substantially weakened net profit for the half-year period.
Faced with these common structural challenges in the industry, some automakers have begun attempting to reconstruct healthier financial models through pragmatic strategic and operational adjustments.
An automotive engineer noted that in planning product technology roadmaps, an increasing number of companies are adopting more flexible and diversified layouts to spread risk. For example, considering the actual demand for refueling convenience in some current markets, some industry players are entering or expanding the proportion of extended-range hybrid electric vehicles alongside pure electric models.
Simultaneously, expanding overseas has become a choice for many companies.
An automotive industry analyst stated in a research report on July 14th that reviewing the first half of 2026, the domestic passenger vehicle market was under overall pressure due to the phasing out of purchase tax incentives, demand pull-forward, and price-watching sentiment, with exports becoming the core growth driver. Looking ahead to the second half of 2026 and 2027, the industry's main focus will shift to the realization of exports and profit recovery. Leading automakers are expected to achieve growth in both volume and profit by advancing multiple powertrain types, establishing overseas factories, and engaging in external cooperation. While domestic competition will remain fierce, the trend towards premiumization is still worth watching.
Moving forward, whether automakers broaden their extended-range routes to hedge against the slowing growth of the pure electric market, accelerate overseas factory construction to leverage external premiums against the domestic "red ocean," or deepen cross-industry collaborations to secure a high-premium base in the above-300,000-yuan segment, their strategic focus is comprehensively shifting towards the pursuit of profit quality.
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