Chinese automakers face profit decline due to rising raw material and chip prices

The largest Chinese automakers have published financial forecasts for the first half of 2026, which indicate a significant deterioration in industry profitability. Of the six companies that have already disclosed preliminary results, four expect losses, and another two predict a net profit decrease of more than 57%.

GAC Group expects the most significant losses, forecasting a net loss of 4.06–4.57 billion yuan. Among the main reasons, the company cites rising raw material prices, increased product promotion costs, declining sales of joint ventures, and the impact of exchange rates.

Changan Automobile expects to end the first half of the year with a profit of 740–970 million yuan, but this figure will be 57.66–67.7% lower than last year. The manufacturer also attributes the deterioration in results to rising material costs, exchange rate fluctuations, and increased overseas investments.

Seres, BAIC Bluepark, and JAC Motors reported a shift to losses, while Great Wall Motor warned of a profit decline due to delays in tax subsidies in overseas markets and the impact of currency factors.

One of the most serious problems for the industry has been memory chips. Contract prices for certain types of such chips more than doubled in the first half of the year, and may increase by another 60–70% in the second half. The reason cited is high demand from artificial intelligence system developers and data centers, which leads chip manufacturers to reallocate capacity to more profitable areas.

As a result, car manufacturers face two negative factors simultaneously. On the one hand, rising material and component prices increase the cost of each car by approximately 4–7 thousand yuan (45-80 thousand rubles), and for some premium segment models – up to 10 thousand yuan (about 120 thousand rubles). On the other hand, the domestic market in China is experiencing serious pressure: retail sales of passenger cars in the country decreased by 20.2% in the first half of the year, forcing manufacturers to actively use discounts and simultaneously accelerate the launch of new models. On average, 3.6 new models were launched daily in the first five months of 2026.

According to S&P Global Ratings, a significant recovery in domestic demand is not expected in the near future. Companies with large-scale production, strong positions in the premium segment, and developed overseas business will prove to be the most resilient. For manufacturers operating in low-margin segments, financial pressure is likely to continue to intensify.

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