According to a McKinsey research report, while China's automobile market size and profits account for approximately a third of the global auto industry, the total profits of domestic auto companies represent less than 5% of the global auto industry's total profits. This disparity underscores a weak profit-making ability which not only dampens investor enthusiasm but also hinders auto companies from establishing long-term, sustainable competitiveness. The vibrant scene in the intelligent electric vehicle market is built upon a serious overextension of these companies' profitability.
This year, the automotive market has seen the rollout of new technologies and models, with continual breakthroughs in electrification and intelligence. Exports have been consistently positive. However, fluctuating consumer demand and fierce price competition have put immense pressure on industry profits, with only a handful of new energy vehicle companies turning a profit.
Statistics indicate that in the first half of this year, the automotive industry achieved a net profit (excluding non-recurring gains and losses) of 439.70 billion yuan, a year-on-year increase of 35.17%. Among this, the passenger car segment reached 219.00 billion yuan, down 14.06% year-on-year. The auto parts segment achieved 258.59 billion yuan, up 24.72% year-on-year, and the commercial vehicle segment reached 65.53 billion yuan, an astounding year-on-year growth of 420.22%. The profitability of the passenger car segment has been under short-term pressure due to price wars in the industry.
Data from the National Bureau of Statistics shows that from January to August this year, the sales profit margin of the automotive industry was 4.9%. Compared to the average profit margin of 5.5% for all industrial enterprises, the automotive industry is still lagging. In the same environment, auto parts companies are deeply affected by high costs, with car manufacturers constantly pressing down on procurement prices for parts. A recent survey report released by the China Automobile Dealers Association indicates that massive and significant price cuts for new cars in the first half of the year have eaten into the already thin profits of auto dealers. In the first half, 50.3% of dealers suffered losses while only 35.2% made profits, representing a high in recent years for loss percentages.
Dai Jiahui, Joint Head of Greater China for the global management consulting firm AlixPartners, also told reporters that currently, only a few electric vehicle companies are profitable. This is due to high battery costs and the lack of large-scale production capabilities. Even if they maintain leading operational efficiencies, electric car manufacturers need to achieve an annual sales volume of 400,000 units just to break even.
