Financial results for the first half of the year from listed automakers at home and abroad have been released one after another. In the domestic market, 15 major passenger vehicle listed companies recorded combined operating revenue of 1,438.66 billion yuan and aggregate net profit attributable to shareholders of 21.80 billion yuan, yielding a net margin of 1.52%. This data aligns closely with estimates from Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers, who noted at an industry event that average profit margins in the vehicle manufacturing segment had fallen to 1.5% in the first half of 2026, a year-on-year decline of 43% and the lowest level in a decade.

Rising costs are the primary driver behind this significant margin compression. Executives from several automakers, including Seres Group Co., Ltd. (601127.SH), Li Auto (02015.HK), and NIO Inc. (09866.HK), have publicly acknowledged that price increases for core components such as batteries and chips have placed considerable cost pressure on their operations. Additionally, intense market competition during the period forced substantial price cuts and promotional activities, further squeezing profitability on the revenue side. According to data from the China Passenger Car Association's Passenger Car Market Information Sub-committee, price reductions for new energy vehicles reached 12%, conventional fuel vehicles saw cuts of 14.1%, and the overall passenger car market experienced a 12.6% average price reduction in the first half.

Globally, the divergence remains stark. During the same period, 12 major multinational automakers achieved a combined net profit attributable to shareholders of approximately 247.3 billion yuan, reflecting an average net margin of 3.91%. Toyota (7203.T) alone generated roughly 72.37 billion yuan in net profit for its fiscal first quarter from April to June 2026, a figure about six times that of China's most profitable automaker, Byd Company Limited (002594.SZ), and exceeding the combined profits of all 15 listed Chinese automakers.

However, the traditional narrative of one Toyota matching all Chinese automakers no longer fully captures the current dynamics of the global auto industry. In reality, a significant portion of Toyota's profits stems from financial services and foreign exchange gains. A closer examination of these multinational automakers' financial reports reveals a complex ledger behind each company's earnings, with challenges from electrification, tariffs, supply chains, and even the Chinese market eroding profits to varying degrees.

In short, Chinese automakers are striving to maintain and improve profitability, while multinational giants are also finding it increasingly difficult to earn money and face their own uncertainties. From a global industry perspective, the challenges of transformation are universal, affecting domestic players and international titans alike.

Where the Profits Are Going

For Chinese automakers, the most direct cause of profit pressure is the upstream supply chain. Financial data from Contemporary Amperex Technology Co., Limited (300750.SZ) shows the battery giant achieved operating revenue of 276.92 billion yuan in the first half, up 54.80% year-on-year, with net profit attributable to shareholders reaching 43.28 billion yuan, an increase of 41.98%. This profit scale exceeds the combined earnings of five major automakers: Byd Company Limited, Geely Auto (0175.HK), Chery Auto (09973.HK), SAIC Motor, and Great Wall Motor. One battery company's profit surpasses the combined total of these five automakers by more than 5 billion yuan.

Furthermore, Contemporary Amperage Technology Co., Limited's situation is not unique. During the same period, Tianqi Lithium Corporation (002466.SZ) recorded net profit attributable to shareholders of 4.24 billion yuan, a surge of approximately 49 times year-on-year, with a gross margin of 64.39%. The company stated that the substantial profit increase was primarily due to higher average selling prices for lithium products and increased sales volumes of lithium compounds and derivatives compared to the same period last year. Market data indicates that the average spot price of battery-grade lithium carbonate in the first half was approximately 163,400 yuan per ton, up about 93,000 yuan per ton from roughly 70,400 yuan per ton in the first half of 2025, representing a rise of over 130%. According to CITIC Securities' calculations, for every 10,000 yuan increase in lithium carbonate prices per ton, vehicle costs rise by 318 yuan per unit, assuming unchanged battery capacity.

Cost increases extend beyond this. Automotive-grade memory chip prices have climbed even more steeply, rising approximately 180% between April and June. In terms of raw materials, aluminum prices breached 25,000 yuan per ton earlier this year, while copper prices surpassed 100,000 yuan per ton. CITIC Securities had already issued warnings at the start of the year, projecting that battery costs would push average vehicle costs up by approximately 3,000 yuan for the full year 2026, with copper and aluminum price increases potentially adding another 2,000 yuan per vehicle. While the impact of memory price increases is relatively smaller, they are expected to exert a persistent cost pressure throughout the year.

Automakers themselves have calculated more specific figures. Zhang Xinghai, Chairman of Seres Group Co., Ltd., stated at an industry forum in June that surging lithium carbonate and memory chip prices have increased the average cost per AITO vehicle by 15,000 to 20,000 yuan. Qu Yu, Chief Financial Officer of NIO Inc., noted during an earnings call that second-quarter costs per vehicle had risen by approximately 14,000 yuan compared to the end of last year, with expectations of a further 2,000 to 3,000 yuan increase in the second half. He Xiaopeng, Chairman of XPeng, summarized that most of the cost savings achieved through technological innovation have been passed back to partners in the memory and lithium carbonate businesses.

At the other end of the value chain, new car prices have fallen rather than risen. Data from the China Passenger Car Association shows that price reductions for new energy vehicles reached 12% in the first half, conventional fuel vehicles saw cuts of 14.1%, and the overall passenger car market experienced a 12.6% average price decline. Cui Dongshu, Secretary-General of the association, pointed out that from the overall market structure, pricing levels and cost pressures are inversely related: high-end automakers enjoy relatively ample profit margins with gross margins generally maintained above 20% and feel no urgency to adjust prices. In contrast, mid-to-low-end products face intensifying competition and shrinking market volumes, making significant price increases unlikely and cost pressures even more pronounced.

Data disclosed by Chen Shihua revealed that a 1.5% per-vehicle profit margin means a manufacturer earns only about 3,000 yuan from a vehicle priced at 200,000 yuan, less than a fraction of a battery's cost. In 2023, the vehicle manufacturing profit margin remained at 5%, meaning profitability has shrunk by 70% in just three years.

Additionally, while Chinese automakers actively expand overseas markets and optimize revenue structures, they also bear foreign exchange risks. Guoyuan Securities noted that overseas business growth and exchange rate results often move in opposite directions, with overseas revenue expansion potentially accompanied by losses. USD and EUR receivables from export proceeds generate translation losses during periods of RMB appreciation, and the timing gap between revenue recognition and payment settlement amplifies exposure. While overseas procurement, foreign currency borrowing, and offshore production can create natural hedges, mismatched currency structures still increase financial expenses. Based on disclosed financial reports, exchange rate risks have hit several fast-exporting automakers particularly hard. Chery Auto recorded a net exchange loss of approximately 2.09 billion yuan in the first half, compared to a net exchange gain of 3.40 billion yuan in the same period last year. These figures demonstrate that overseas expansion comes at a cost, and exchange rate risk management is becoming a crucial metric for assessing the international competitiveness of automakers.

Industry insiders point out that except for companies like Byd Company Limited with full industry chain capabilities in certain areas, most automakers lack pricing power in batteries, chips, and other components, leaving them no choice but to absorb the pressure from this round of cost increases. Intense market competition has greatly limited the space to cover costs through price increases, and with exchange rate risks concentrated in the first half, the result is that automakers have paid the price in terms of profits.

Differences Extend Beyond the Income Statement

According to Caijing's statistics, the 15 listed vehicle companies achieved a combined net profit attributable to shareholders of 21.8 billion yuan in the first half, with operating revenue of 1,438.66 billion yuan and a net margin of 1.52%. During the same period, 12 major multinational automakers posted a combined net profit attributable to shareholders of approximately 247.3 billion yuan, with operating revenue of 6,319.6 billion yuan and a net margin of 3.91%. The gap between the two groups is not merely in profit scale, which differs by roughly 11 times, but also in the structure of profitability.

The familiar narrative that one Toyota's profits match all Chinese automakers continues to hold. In its fiscal first quarter from April to June 2026 alone, Toyota achieved net profit attributable to shareholders of approximately 72.37 billion yuan, about six times that of Byd Company Limited, China's most profitable automaker, and exceeding the combined profits of all 15 listed Chinese automakers. Other multinationals including Volkswagen, General Motors, Mercedes-Benz, BMW, and Hyundai each posted net profits of nearly or exceeding 20 billion yuan in the first half. Whether measured by scale or quality of earnings, the overall gap between Chinese and multinational automakers is evident.

The stronger profitability of multinational automakers is supported by multiple factors. First is pricing power. China and the United States are the world's two largest automobile markets. While Chinese automakers are mired in intense domestic competition, multinational automakers face the pressure of high US tariffs. The difference is that multinational automakers can pass costs down the chain, whereas Chinese automakers must absorb them internally. A report from US auto consultancy Cox Automotive released in March showed that automotive-related tariffs implemented in the US over the past year have added approximately $30 billion in extra costs to the American auto industry, almost directly reflected in vehicle prices. Imported models saw price increases of $5,000 to $8,900 per vehicle, while locally assembled models rose by $1,600 to $2,000 due to steel and aluminum tariffs. The average transaction price of new cars in the US reached $51,974 on June 30, up $314 month-on-month and $2,421 year-on-year.

Cost pass-through is not accomplished solely through sticker prices. The Cox Automotive report noted that although the average manufacturer's suggested retail price in the US rose 10.4%, dealers absorbed 4.5% while consumers bore the remaining 5.9%. In contrast, fuel vehicle prices in China fell 14.1% and new energy vehicle prices dropped 12% in the first half. This divergence in pricing trends has widened the profitability gap between the two groups.

Second is the foundation provided by high-margin vehicle models. Financial reports show that General Motors' North American operations contributed 87% of the company's total adjusted profit in the first half. Despite a 3.6% year-on-year decline in US industry sales, GM leveraged profit pillars such as full-size pickups and large SUVs to achieve an adjusted EBIT of $7.1 billion. Ford (F.US) posted a 10.5% profit margin in the first half, leading both companies to raise their full-year earnings guidance during this period. Honda (7267.T), meanwhile, relies more heavily on its motorcycle business, which generated operating profit of 234 billion yen in the fiscal first quarter from April to June, accounting for 44% of the company's total operating profit with a 20.5% margin, outperforming its automobile segment in both scale and quality.

Third is the support from diversified business portfolios. In the first half, Mercedes-Benz Financial Services achieved adjusted EBIT of 492 million euros, up 70% year-on-year, while its commercial vehicle business posted an adjusted sales return of 10.2%, both higher than the passenger car segment's adjusted sales margin of 4%. When the passenger car business faces pressure, other high-profit segments serve as a buffer within the group.

The profitability advantage of multinational automakers is real, stemming from stronger pricing power, optimized product structures, and more balanced business mixes. Within China, however, profitability is also diverging among automakers. GWMOTOR saw its new energy vehicle sales reach 144,600 units in the first half, a decline of 9.8% year-on-year, with a new energy penetration rate of approximately 24.8%, significantly diverging from the industry's 49.6% penetration rate. Based on interim and annual report data, this marks the first decline in Great Wall Motor Company Limited's new energy vehicle sales since 2023. These cases demonstrate that profit gaps exist not only between multinational and Chinese automakers but also among Chinese automakers themselves, with accelerating internal differentiation.

High Earnings, But Not Necessarily Stable Earnings

However, superior profitability does not guarantee smooth operations. In fact, some multinational automakers' half-year reports contain elements of cosmetic enhancement. The reason Toyota can achieve such high profits in a single quarter is largely attributable to financial and foreign exchange factors. While Toyota reported net profit attributable to shareholders of 1.48 trillion yen from April to June 2026, up approximately 76% year-on-year, its automobile business operating profit fell 21% to 719.9 billion yen, and the segment's operating margin dropped from 8.26% to 5.99% year-on-year. Group operating profit declined 8.8% to 1.06 trillion yen, marking the fifth consecutive quarterly decline. This is a classic case of impressive paper results masking declining core business performance.

Toyota's growth comes primarily from non-core factors. Financial reports show that other financial income surged from 153.7 billion yen in the same period last year to 850.5 billion yen, while foreign exchange gains swung from a loss of 212.3 billion yen to a gain of 112.3 billion yen. Together, these two changes contributed more than 1 trillion yen in profit growth. The impact of exchange rate movements on Toyota's results is the opposite of their effect on Chinese automakers, illustrating the two sides of currency fluctuation in a globalized context.

A closer examination of these multinational automakers' financial statements reveals the complex calculations behind each company's earnings, with electrification, tariffs, supply chains, and even the Chinese market eroding their profits to varying degrees.

Electrification is the primary challenge facing many multinational automakers. In Germany, new energy vehicle sales at Volkswagen, Mercedes-Benz, and BMW are growing, but the trends remain unclear and have even reversed in some cases. Mercedes-Benz's pure electric vehicle sales reached 103,000 units in the first half, up 45% year-on-year, but its plug-in hybrid sales fell 34% to 58,600 units. Volkswagen's situation is the opposite: pure electric sales declined 5.8% while plug-in hybrid sales grew 27%. BMW's pure electric sales in Europe grew 37.9% in the second quarter, yet its global pure electric deliveries still fell 7.4%. Industry insiders note that the fluctuating sales trends among German automakers correlate closely with the timing and technical direction of their new model launches, indicating that these companies have yet to establish clear long-term development paths in the new energy vehicle sector.

The impact of electrification transformation on US automakers is more directly reflected in their financial statements. General Motors incurred $3.46 billion in strategic adjustment expenses in the first half, with electric-vehicle-related charges accounting for $2.28 billion. Ford posted a net loss of $1.33 billion in the second quarter alone, largely due to a $3.6 billion one-time charge from the dissolution of a battery joint venture. Ford also formally disbanded its Model e electric vehicle division in April, with data showing that division accumulated losses exceeding $12.8 billion over five years of independent operation. Industry estimates suggest that major global automakers have recognized approximately $55 billion in cumulative charges from scaling back electric vehicle plans, adjusting product portfolios, and related asset impairments.

After recording its first annual net loss since going public in fiscal 2025, Honda has acknowledged that its goal of full electrification by 2040 is no longer realistic, significantly reducing its 2030 global pure electric vehicle sales target from 2 million units to between 700,000 and 750,000 units. The primary cause of this loss was an approximately 1.58 trillion yen impairment charge related to its electric vehicle business.

Another shared variable is the Chinese market. In the first half, Volkswagen's equity-method operating profit contribution from its Chinese joint ventures fell from 506 million euros to 184 million euros, a decline of 63.6%. Audi's profit contribution from China dropped from 279 million euros to 73 million euros, down 74%. Mercedes-Benz's revenue in China reached 7.01 billion euros, down 19.1% year-on-year. BMW, which does not separately disclose China revenue or profit in its financial reports, saw its deliveries in China fall 20.4% to 261,800 units in the first half, with the decline widening to 30.2% in the second quarter. Among Japanese automakers, Honda's China sales fell 34.7% to 205,800 units, Toyota's declined 17.1% to 694,700 units, and Nissan's dropped 15% to 237,000 units. Data from the China Passenger Car Association shows that domestic brands' cumulative market share reached 71.8% in the first half, leaving foreign automakers with just 28.2% combined.

Chinese automakers face structural issues of their own. Chery Auto's domestic revenue fell 41.7% to 44.31 billion yuan, with domestic retail sales of approximately 412,800 units, down 36.4%, exceeding the industry's overall 20.2% decline. Li Auto's pure electric i8 model saw monthly sales fall from a peak of over 6,700 units late last year to between 1,000 and 2,000 units, and the i series has yet to demonstrate self-sustaining profitability. These figures indicate that Chinese automakers are also under structural pressure in both new energy adoption and their domestic market.

Two Ledgers, Two Kinds of Difficulties

An in-depth analysis of the two sets of ledgers reveals that both Chinese and foreign automakers are seeking new certainties amid their respective uncertainties. Chinese companies need to answer whether the profits taken by upstream suppliers and price wars can be recovered. Overseas expansion is currently the most certain source of growth. In the first half, Byd Company Limited achieved overseas revenue of 181.3 billion yuan, accounting for 53% of total revenue. Chery Auto exported 939,000 vehicles, representing 74% of its sales. Great Wall Motor Company Limited sold 289,000 vehicles overseas, approaching half of its total. Geely Auto exported 474,000 vehicles, a remarkable 158% year-on-year increase. Notably, Byd Company Limited generated 52.57% of its revenue from overseas markets while overseas sales accounted for 43.8% of total volume, demonstrating the higher profitability of its international operations.

However, disclosed financial reports show that overseas growth comes at a cost. In the first half, Chery Auto recorded a net exchange loss of 2.09 billion yuan, while Geely Auto swung from a net exchange gain of 2.64 billion yuan to a net loss of 550 million yuan. GWMOTOR recorded a loss of approximately 266 million yuan after hedging, and Changan Automobile suffered exchange losses of about 230 million yuan. As the share of overseas revenue increases, currency exposure expands simultaneously, while overseas channels and localization investments remain in early stages. Overseas expansion is incremental growth, but its quality depends on market diversification and localization capabilities.

Moreover, the benefits of going overseas are not evenly distributed among automakers. GWMOTOR's Russian subsidiary generated revenue of 20.81 billion yuan in the first half, accounting for 20.4% of its total revenue, with net profit of 1.05 billion yuan representing about 40% of the company's net profit attributable to shareholders, indicating a high concentration in a single market. Chery Auto's overseas revenue accounts for 69.1% of total revenue, while domestic revenue declined 41.7%, revealing a clear structural imbalance favoring overseas markets. Li Auto's overseas market remains in the investment phase with limited short-term revenue contribution. Going overseas is incremental growth, but the quality and sustainability of that growth depend on market diversification and local operational capabilities.

Premiumization also offers significant opportunities. In the first half, Geely Auto's high-end brand Zeekr sold 178,000 vehicles, accounting for 12.5% of the group's total, yet contributed 31.7% of revenue with an average transaction price of approximately 350,000 yuan. Byd Company Limited's three high-end brands, Fangchengbao, Denza, and Yangwang, achieved combined sales of 228,000 units in the first half, up 61% year-on-year, with their share of total sales rising from under 8% to 12.6% compared to the same period last year. Denza's monthly sales exceeded 20,000 units in June for the first time, with an average product price of 360,000 yuan. According to the China Passenger Car Association, domestic brands' market share in the 400,000 yuan-plus segment reached 59% in the first half, up 21 percentage points from the same period in 2025.

But premiumization is not a story every automaker can deliver. The Zunjie S800 from JAC Motors saw monthly sales fall from a peak of 4,223 units to 367 units. The Zunjie super factory has a designed annual capacity of 200,000 units, yet cumulative deliveries as of mid-2026 amount to only 19,000 units, with capacity utilization below 10% and high per-unit amortization costs. Great Wall Motor Company Limited's VV9X has been slow to ramp up sales since launch, with monthly sales of 1,018 units in May, 1,505 units in June, and cumulative sales of 4,378 units by July, still far from the initial order announcement of over 10,000 units. Chery Auto's two high-end brands, Exeed and Luxeed, together account for only about 4% of the group's total sales, indicating that its premiumization efforts have encountered substantial setbacks. These cases demonstrate that high average prices do not automatically translate into high profits; converting premium pricing into reported profits requires scale and time.

Furthermore, Chinese automakers' expense side also warrants attention. In the first half, multiple companies increased spending on R&D, sales channel development, and intelligent technology investments. High R&D expenditures carry long-term and uncertain returns, making it difficult to convert them into profits in the short term. Zhang Yongwei, Chairman of the China EV100 Research Institute, pointed out that vehicle manufacturers are under triple pressure from rising upstream raw material prices, high R&D investment for intelligent transformation, and margin concessions from market competition, with profit space continuously compressed. These factors combined mean that the path to profit recovery for Chinese automakers is more complex than simple cost reduction.

Multinational automakers must answer whether their current strategies are sustainable. Facing rigid cost structures in Europe, German automakers still need to clarify the long-term direction of their electrification transition and how long the investment period will last. The recent news of plant closures, layoffs, and delayed bonus payments serves as a reminder that time is running out for German automakers. US automakers face the question of how long their moats around high-profit domestic models can hold. Japanese automakers must confront the post-currency-bonus landscape and, more importantly, the long-term impact of delayed product cycles and technology reserves following their retreat from pure electric vehicles.

Among the 15 sample companies, profit differentiation is widening. There are companies like Byd Company Limited and Geely Auto that maintain profits through scale and overseas expansion, alongside numerous automakers experiencing sharp profit contractions due to exchange rate effects, price wars, and transformation investments. The profit recovery for Chinese automakers is not a uniform curve but a decentralized breakout where each company seeks its own path. Three indicators could measure the progress of this transformation: first, whether Chinese automakers' overseas operations can achieve stable per-vehicle net profits amid tariff and currency fluctuations; second, whether high-end brand sales volumes can cross the threshold to dilute costs; and third, whether the proportion of self-developed, self-manufactured, or long-term contracted supply in core components like batteries and chips can substantially enhance bargaining power.

There is no doubt that the profit gap between Chinese and foreign automakers is real, but it is equally important to recognize that beyond this traditional narrative, Chinese automakers' performance should not be simply dismissed as an inability to make money. Chinese automakers are indeed navigating a difficult path under the dual pressure of costs and prices, while multinational giants also need to recalibrate their direction amid the ebb of electrification and market restructuring. Behind the differences in balance sheets lies a collision of two industrial logics and transformation tempos. Whether recovering profits or defending moats, the second half of the global automotive industry will test not just scale and speed, but also control over the value chain and strategic resolve. Whoever can establish new certainties amid uncertainty will define the competitive landscape of the next decade.

Sample and methodology notes: This article's statistics cover 15 Chinese listed vehicle companies with significant passenger vehicle operations on A-shares and Hong Kong stock exchanges, covering the period from January 1 to June 30, 2026. Financial data for the 12 major multinational automakers comes from their respective disclosed financial reports, with reporting periods based on each company's fiscal year. Toyota and Honda cover April to June 2026, while most others cover January to June 2026. Net profits of multinational automakers are converted to RMB at exchange rates on the date of financial report disclosure. Differences exist due to variations in Chinese and international accounting standards, fiscal year arrangements, and exchange rate conversion dates.