A large number of automotive component suppliers have been driven to the cliff edge of survival.

Honda, which is facing a sharp surge in survival pressure, is ready to target its suppliers! A Reuters report exposed on September 2 has disrupted the already tight global automotive supply chain.

The report states that Honda plans to complete cost cuts of over 9 billion U.S. dollars in the next four years, requiring a maximum 30% cost reduction target in three key component fields: stamping and forging parts, electronic components, and software-defined vehicle related parts.

After the news spread, Honda China quickly made a clarification, stating that the content was not officially released, and Honda has always carried out cost optimization work through joint innovation with suppliers.

Regardless of whether this 30% cost reduction directive is issued in an official document, this incident itself has become a highly symbolic industry footnote.

Nowadays, the net profit margin of many complete vehicle manufacturers has dropped to around 1.5%, the price war is raging, and the pricing of new cars has been cut again and again, leaving almost no profit margin on the vehicle end. As a result, the focus of cost reduction naturally points to the upstream supply chain, falling on component enterprises with weaker risk resistance capabilities.

In fact, the pressure transmission brought by involution in the automotive industry has long been staged, and the component industry is bearing the heaviest price of industrial competition. Under the seemingly prosperous automobile production and sales data, a large number of component manufacturers are struggling on the edge of the cliff. Some enterprises choose to take orders while bearing losses, some voluntarily give up large orders, and others shut down supporting production lines to escape the once-thriving automotive track.

Pressure is passed down layer by layer, the upstream of the industrial chain is collectively going through a harsh winter

In August this year, the incident that domestic leading automotive lighting manufacturer Xingyu Co., Ltd. dissuaded 107 fresh graduates in batches sparked huge controversy inside and outside the industry. From the perspective of labor ethics, the company's rude handling method was widely criticized, and the human resources and social security department also pointed out that its negotiation process was simple and blunt, and the company later issued a public apology for remediation.

But stepping out of this single labor dispute, this turmoil is more like a mirror, reflecting the current embarrassing survival situation of the component industry.

As a leading domestic automotive lighting supplier, Xingyu Co., Ltd. holds orders from many mainstream automakers, and it still needs to adjust its manpower structure to cope with uncertainties, so the situation of a large number of small and medium-sized component enterprises will only be more difficult. In particular, the huge mismatch between order prediction and actual market sales is a common dilemma faced by component enterprises.

Many component manufacturers completed the expansion of production lines according to the 20,000-unit capacity planned by the automaker, invested in equipment, plants and manpower, and got ready for production. However, after the new car was launched, the actual orders kept sliding, shrinking from 20,000 units to 10,000 units, and finally only 5,000 units or even 3,000 units were left. Once the heavy-asset production line is underutilized, equipment depreciation and plant rent are still rigid expenditures. The more you produce, the bigger the loss gap will be.

"We chose to voluntarily give up a large order worth 500 million yuan." Not long ago, the deputy general manager of Kabey, a leading new energy vehicle cable enterprise, said this in a research report of Zhejiang official media, which revealed the realistic dilemma of the industry.

This order seems to be considerable in size, but after accounting, the profit margin is only single-digit, while the break-even line for the enterprise to maintain healthy operation is about 10%. Taking the order will lead to losses, but giving up the order will lose market share, leaving the enterprise in a dilemma.

If enterprises like Kabey, which still have technical accumulation and the ability to migrate technology to other tracks such as data centers and commercial aerospace to complete transformation, then more small and medium-sized component enterprises have no such retreat.

Zhejiang is home to thousands of auto parts enterprises. The average profit margin of more than 2,500 component enterprises above designated size in the province is generally less than 5%, far lower than the healthy break-even line of about 8% in the industry. Increasing production without increasing profits has become the norm. Some enterprises have shrinking orders and idle production lines, falling into the vicious circle of "the more orders, the more losses".

The root cause of this dilemma is, at its core, the drastic turbulence in the complete vehicle market itself since last year. According to statistics from Auto Commune, the current hit rate of new domestic cars has dropped to only single-digit. A huge number of new cars are launched in clusters, and there are very few models that can continuously achieve high sales. In the past, a new car had a product life cycle of several years, but now the market dividend cycle has been compressed to 3 to 5 months. It reaches its peak as soon as it is launched, and its sales may drop off a cliff in just half a year.

In order to seize the market, automakers are constantly accelerating the iteration rhythm of new cars, optimistically estimating sales during product planning, and releasing large-scale procurement expectations to component enterprises. Based on the forecasts given by automakers, component enterprises invest in equipment expansion, reserve manpower, and prepare sufficient raw materials. However, the market does not buy it, a large number of new cars quickly fade into obscurity, and the orders of automakers shrink accordingly. Most of the risks of all the previous heavy asset investment are borne by component enterprises.

To make matters worse, more and more automakers are promoting full-stack self-research and self-production of core components, bringing components into their internal systems for production. The market space originally reserved for external suppliers continues to shrink. External suppliers not only face vicious price-cutting competition among peers, but also face the squeeze from the self-research business of automakers.

Under the multiple squeezes of the once-prevalent unspoken rule of "dual-track development" in the industry (automakers use formal suppliers to complete R&D, testing, and finalization, get drawings, samples, and test data, then turn to small workshops without R&D for low-volume mass production, and suppliers who are down-to-earth in technical R&D invest huge costs, only to end up making wedding dresses for others), the differentiation of the component industry has intensified.

Leading component enterprises can rely on their influence, scale and voice to maintain operation, while a large number of small and medium-sized component manufacturers have weak risk resistance capabilities. Fluctuations in raw material prices, one order reduction, and one round of forced price reduction are enough to drag the enterprises into the quagmire of losses, and they are becoming the first group of victims in this round of automotive involution wave.

Only cutting trees without planting trees, industrial prosperity is just a false illusion

The production and sales volume of China's automobile market ranks first in the world, and the momentum of new energy transformation is rapid, which seems to be a scene of prosperity. But behind the prosperity, a dangerous cycle is taking shape.

A survey by the All-China Federation of Industry and Commerce Auto and Motorcycle Parts Chamber of Commerce shows that more than 60% of component enterprises are subject to forced annual price cuts by automakers, and 7% of enterprises have an annual reduction of 16-20%, which has touched the life-and-death line. In the first half of 2026, among the 73 A-share component enterprises that disclosed their performance forecasts, 17 suffered losses for the first time, which reflects from the side that the pressure of the industrial chain is spreading to the middle and downstream.

"A compliant factory with a complete system and full social security offers a quote of 100; a small workshop using recycled materials, skipping tests, and employing workers without social security offers a quote of 50, and the procurement side uses such a low price to force formal enterprises to cut prices." A practitioner deeply engaged in component supporting services complained that this is how involution comes into being.

Indeed, automakers rely on cost reduction in the short term to launch lower vehicle prices and obtain sales data; small workshops get orders by copying and simplifying processes; but the living space of formal R&D suppliers continues to shrink, and fewer and fewer enterprises are willing to invest in technological innovation. Intellectual property rights are not respected, and R&D investment cannot get returns.

Some practitioners also feedback that there are more and more unorthodox practices in the automotive industry now. After the budget for development costs is submitted, it will be cut in half first no matter what. The test field costs money, can we just adjust and test it on the public road? When it comes to extreme working conditions, what extreme conditions do we need? Consumers basically drive this car for urban commuting, will they drive it to the limit? Why don't competing cars need such extreme tests?

Once a supplier asks the automaker for development costs, the automaker will say "Our project target is to achieve monthly sales of XX ten thousand units, why do we need development costs? It can be amortized later." The supplier asks what to do if the sales volume cannot be reached, and asks for claim and risk hedging. The procurement side will very firmly state that the development cost is waived, and subsequent claims will be discussed later. It also requires the supplier to reduce the price by 5%-10% every year. If you don't do it, I will take the drawings to find XX manufacturer, whose attitude is better than yours.

It is often said in the industry that components are the foundation of the automotive industry. If the foundation is full of holes, no matter how gorgeous the vehicle scale is, it is only built on quicksand. In the long run, the technical heritage of the entire industry will be continuously overdrawn, and the subsequent consequence is that everyone is "cutting trees", but few people are willing to calm down and "plant trees".

The large-scale losses and exit of component enterprises are not just a matter of life and death for the enterprises themselves, but also related to the risk resistance capability of the entire industrial chain. When the market environment fluctuates, without the support of a group of high-quality suppliers with profits, technology and reserves, complete vehicle enterprises will also fall into passivity.

A healthy automobile industry should not be a competition to see who has the lower bottom line. Price reduction and cost reduction are not wrong in themselves. The truly benign cost reduction comes from technological iteration, process optimization and scale effect, rather than squeezing upstream profits, deleting necessary verification processes, and sacrificing product safety redundancy.

If enterprises that are down-to-earth in technology are constantly eliminated, and opportunistic players continue to make profits, no matter how dazzling the market sales are, it is just a false prosperity. When component suppliers reach the edge of survival, what needs to be guarded against is by no means only the fate of thousands of manufacturing enterprises, but also the future of the entire Chinese automobile industry.

Involution backfires on the bottom line, and consumers end up paying the bill

In fact, the development logic of any industry is very simple: enterprises need reasonable profits to have funds to invest in R&D, complete test and verification, and stable process control. When automakers continue to demand substantial price cuts for components and push supplier profits below the break-even line, contradictions will not disappear out of thin air, and pressure will inevitably find an outlet to release.

There are only three ways out for suppliers: either bear the losses and rely on their own funds to maintain supply; or reject orders and lose supply chain qualifications; or make compromises in materials, processes and verification links to compress invisible hidden costs.

Faced with the pressure of survival, many enterprises passively choose the third path, and this part of the reduced cost will eventually be transferred to ordinary consumers in the form of hidden product quality risks.

In a mature industrial system, as an industrial product with high safety level, any material change or process adjustment of automobiles requires complete ECR engineering change, ECN change notification, full-process verification, written filing and signature confirmation. However, many practitioners have found that the processes of many automakers are constantly being virtualized now. Process changes and material replacements of some components only rely on oral meeting communication, without document traces, omitting verification links, and the process bottom line is constantly being breached.

Some other practitioners have found that in the past, the complete R&D and verification cycle of a brand-new model was generally 3-4 years, with a large number of bench tests, high and low temperature, vibration, salt spray and other reliability tests checking layer by layer to eliminate potential defects before launch.

Now, in order to catch up with the launch node, the verification cycle has been greatly compressed to 18 months or even shorter. A large number of test projects rely on AI simulation, and processes and verification are constantly being simplified and deleted. Many problems can only be gradually exposed after the vehicles are sold to consumers.

"The schedule is too tight, modify the date of last year's test report and hand it in" "Assemble the car first, I don't know if I will still be in this position next year" "Don't talk to me about quality agreements and test costs, I can't understand them, I only want low prices" ... These words are no longer strange in the R&D field, and there are even seemingly absurd but widely practiced cases such as "It takes 10 months for a woman to give birth to a child, so as long as you find 10 women, you can give birth to a child in one month".

The problem is that the harmful consequences brought by involution, that is, the concentrated outbreak of industry quality problems, has become a visible reality. Complaints such as air conditioners spraying aluminum powder, air suspension collapse and air leakage, power battery bulging, hidden component corrosion on car bodies, and chassis component failures that have broken out on a large scale in the industry continue to rise. Now money is hard to earn. Consumers spend real money to buy cars, but in the end they have to depend on luck, praying that the increasingly high failure rate will not fall on themselves.

It is worth alerting that many quality risks are slow variables, which will not appear immediately after picking up the car, but will gradually be exposed after driving tens of thousands of kilometers and using the car for two or three years. The R&D, testing and material costs saved in the early stage will be converted into huge expenses of large-scale recall, after-sales claims and maintenance rework in the later stage. Many cases show that the cost saved by automakers through price suppression in the early stage is far less than the after-sales losses brought by batch failures in the later stage, and the entire business model has fallen into a pathological cycle.

As a result, some sharp radical remarks have emerged in the market. Practitioners inside the industrial chain have issued warnings of "do not buy domestic cars, do not buy new energy vehicles". Such statements are of course too absolute, but the emergence of such extreme voices is in itself a strong signal: when priority of speed and priority of cost override priority of quality, the cost of industrial involution will eventually be transmitted to the consumer side.

This article is from the WeChat official account "Auto Commune" (ID: iAUTO2010), the author is Du Yuxin, and 36Kr is authorized to release it.