The second half of China's auto market: Shifting from scale competition to value competition

In the sweltering peak of summer, China's automotive market presents a starkly contrasting picture of "fire and ice".

Not long ago (July 16), eight automakers including Xpeng, Li Auto, IM, and Geely held simultaneous press conferences. Ranging from 90,000-yuan family SUVs to 400,000-yuan high-end flagship models, covering all-new vehicles, annual facelifts, and core technology releases, they could not wait to unveil their key products for the second half of the year, aiming to capture market attention in advance.

The simultaneous debut of 7 new models in a single day became the most intuitive external manifestation of the market's "involution". High-frequency iteration is actually a norm. Data shows that in the first five months of this year alone, 550 new vehicles were launched in the domestic automotive market, averaging more than 3 per day.

However, this upbeat sentiment failed to translate into sales, and the retail market showed a completely opposite trend. Data from the China Passenger Car Association reveals that in the just-concluded June, retail sales in China's passenger vehicle market reached 1.602 million units, down 23.2% year-on-year and up 6.1% month-on-month; cumulative retail sales since the start of this year stood at 8.701 million units, a year-on-year decrease of 20.2%.

The performance in financial reports is even more severe. As of press time, multiple automakers have released their semi-annual performance forecasts, with projected losses and declining profits becoming a widespread phenomenon. On one hand, new products are being launched in clusters and price wars continue to escalate; on the other hand, sales are shrinking and profitability is under immense pressure. Amid the industry's polarization dilemma, what path should Chinese automakers take in the second half of the game?

01

Soaring Raw Material Prices Make Losses on Every Sale a Norm

In mid-July, automakers officially kicked off the release of their interim performance reports. Many automakers announced their semi-annual performance forecasts, but the overall situation remains unclear.

According to the data, Changan Automobile expects to achieve a net profit attributable to shareholders of 740 million to 970 million yuan in the first half of the year, a year-on-year decline of 57.66% to 67.7%; Great Wall Motors expects a net profit attributable to shareholders of 2.35 billion to 2.6 billion yuan, down 59% to 63% year-on-year.

A key factor behind the "halving" of profitability is the rise in raw material prices. Some data can intuitively show the extent and scope of this increase. Taking the price of lithium carbonate, the core raw material for power batteries, as an example, the average price of battery-grade lithium carbonate was 75,500 yuan per ton in 2025, while the current spot price has exceeded 170,000 yuan per ton, representing an increase of about 125%.

Prices of raw materials such as copper, aluminum, and plastics are also rising. Since 2025, global copper prices have continued to surge, with a cumulative increase of over 40% within the year. Entering 2026, domestic spot copper prices still remain above the high level of 100,000 yuan per ton. In terms of tire prices, as of April this year, more than 70 domestic tire companies, including foreign giants and local brands, have intensively issued price increase notices, covering mainstream categories such as passenger car tires and truck/bus all-steel heavy-duty tires. In addition, the price of automotive-grade storage chips has increased by more than 180% in stages.

Under the combined effect of various factors, the current manufacturing cost per vehicle in the automotive industry has increased by 15,000 to 20,000 yuan, and the entire industry is facing cost pressure. Against this backdrop, automakers have pushed product prices to new lows through fierce competition.

For example, the entry-level version of BYD Qin PLUS DM-i has dropped to 79,800 yuan; the bare car price of Changan Eado after a limited-time discount is only 64,900 yuan; multiple plug-in hybrid sedans under Geely's Galaxy brand have pushed the threshold for midsize plug-in hybrids below 100,000 yuan; Xpeng and Tesla have simultaneously launched official price cuts and long-term 0-interest financial policies, bringing the starting price of the Model 3 down to 235,500 yuan with standard high-level intelligent driving hardware, attempting to attract users through price reductions and enhanced configurations. Such competitive dynamics have further pushed the industry's profit margin to a new low. It is worth noting that the profit margin of China's automotive manufacturing industry dropped to 4.1% in 2025, hitting the lowest level since 2015.

Regarding this contradictory situation, Zhang Xiang, a visiting professor at Huanghe University of Science and Technology, told *Time Weekly* that automakers are currently generally facing inventory pressure and have not yet achieved economies of scale, which prompts them to increase sales through price cuts on one hand, and expand market share and order volume by launching new vehicles on the other.

"The main reason is overcapacity. They all hope to hold on until the end, outlasting their competitors in the industry".

According to Jiang Han, a senior researcher at the Pangoal Institution, this is an inevitable pain point as the automotive industry transitions from incremental expansion to stock competition. He stated bluntly that the underlying logic of the market has completely changed, and simply relying on new vehicle launches can no longer drive overall market growth. "Endless price wars and rising raw material costs create a dual squeeze, making the abnormal norm of 'losing money with every sale' a reality for automakers".

02

The Era of Unrestrained Expansion Is Over: How Can Automakers Build Their Moats?

In late June this year, Sheng Qiuping, Vice Minister of Commerce, introduced at a press conference that China's car ownership has reached 370 million vehicles so far, with auto sales ranking first globally for 17 consecutive years, making China a veritable automotive powerhouse.

However, the automotive consumption landscape is changing, and the growth of new vehicle consumption is facing periodic pressure. In the first five months of this year, China's automobile production and sales reached 12.235 million units and 12.207 million units respectively, down 4.6% and 4.2% year-on-year.

At the 2026 China Automobile Chongqing Forum on June 13, Li Bin, founder of NIO, made a judgment on the current industry landscape in his speech: the automotive market has officially bid farewell to the high-speed incremental growth period and fully entered the stage of stock competition; this year's domestic retail auto sales are expected to decline by 15% to 20% year-on-year, and industry competition has accordingly entered its most brutal final stage.

So, as the industry enters the second half, how should automakers adjust their strategies to meet the challenges?

Jiang Han's view is that in the knockout round where resources are rapidly concentrating on leading players, automakers fighting alone cannot bear the high-frequency iteration and huge R&D costs. An enabling system can provide large-scale, inclusive technical support to help automakers stabilize their fundamental position in the fierce stock competition.

He emphasized that the enabling system is evolving from a single technology supplier to a super platform of "technology platform + ecological sharing". Represented by Harmony Intelligent Mobility, it not only provides full-stack technology, but also unifies multiple brands into an integrated ecosystem through unified service, energy replenishment, and marketing standards, significantly reducing R&D and infrastructure costs for partner automakers. "Such systems are key moats for automakers to cope with the 'Matthew Effect' and survive the downward cycle".

Zhang Xiang holds a similar view. He told *Time Weekly* that in the second half of the competition, automakers will compete in product competitiveness, technological innovation, product cost-effectiveness, quality and safety, and systematic capabilities will become a key factor in determining success.

03

Led by Leading Players to Drive the Ecosystem: A High-End Breakthrough Through Industrial Collaboration

Taking Seres as an example, its predecessor can be traced back to a spring factory in the 1980s, which later shifted to focusing on the production of low-end commercial vehicles.

The 2021 partnership with Huawei became a critical turning point for Seres. Huawei's profound accumulation in intelligent technology, product definition, and consumer insights helped Seres quickly build product competitiveness tailored for the intelligent era. The joint co-creation mechanism covering technology R&D, complete vehicle manufacturing, quality management, brand marketing, channel sales, and user services fully leverages the core value of partner automakers in the manufacturing and engineering fields.

Within 46 months, the AITO brand achieved cumulative sales of 1 million units. The AITO M9, ranking first in three metrics: sales in the over 500,000-yuan segment, user Net Promoter Score, and quality performance, has topped the monthly sales chart for SUVs priced above 500,000 yuan for several consecutive months, with total deliveries exceeding 300,000 units. This success has directly propelled Seres into the first tier of domestic new energy automakers, achieving a high-end breakthrough that traditional independent brands once found difficult to attain.

Zunjie, a brand jointly built by JAC Motors and Huawei, is another typical example of industrial collaboration.

As of June, deliveries of the Zunjie S800 have exceeded 19,000 units, maintaining the top spot in sales for million-yuan luxury cars for 9 consecutive months. More importantly, the Zunjie project has pioneered a co-creation development model of "one vehicle driving the entire industrial chain", driving technological upgrades for over 200 suppliers in the Yangtze River Delta region. Hundreds of supply chain partners have achieved dual growth in technical capabilities and production capacity by participating in the project. In the battery sector alone, driven by the large-scale demand for the Zunjie S800, the AI visual inspection coverage rate in China's power battery industry has increased to over 90%, with more than 200 process optimization standards widely adopted by the industry, collectively enhancing the overall safety level of China's power battery sector.

It can be said that the mass production and delivery of the Zunjie S800 has validated the development path of "leading enterprises driving the upgrading of industrial clusters". Led by the Zunjie S800, China's high-end automotive manufacturing system has completed a systematic leap, achieving a transition from a follower to a member of the global first tier in high-end craftsmanship and core technologies.

04

The East Wind Is Coming: L3 Commercialization May Become a New Industry Growth Driver

After decades of rapid development, China's automotive industry has accumulated a wealth of technical reserves. In the face of homogeneous market competition, relying on technological innovation to create new value space has become an important new growth point for the future automotive industry.

Recently, the Xiangjie G9 was officially granted a Beijing L3-level autonomous driving road test license, becoming the first model approved for L3-level autonomous driving road tests at a speed of 120 km/h in Beijing.

International Data Corporation (IDC) pointed out in a report that L3 is an important watershed in intelligent driving capabilities, where the dominant role of driving behavior has shifted from human drivers to autonomous driving systems. This transformation is not only a technical issue, but also a systematic reconstruction of the regulatory framework and business models.

According to *Time Weekly*, Beijing has established a multi-level review mechanism for L3-level autonomous driving tests. Applicant vehicles must sequentially complete two core stages: simulation testing and closed-site testing, with a cumulative total of over 5,000 kilometers of autonomous driving tests, and simultaneously pass four full-dimensional verifications covering functional safety, safety of the intended functionality, cybersecurity, and data security. The issuance of this license marks a key step forward in domestic autonomous driving regulation and technological application.

For China's automotive industry, the value of L3 is far more than adding a new vehicle configuration. It will drive comprehensive upgrades in algorithms, chips, sensors, by-wire chassis, data closed-loop, functional safety, and complete vehicle architecture. As the automotive market enters the second half, what consumers are ultimately willing to pay a premium for will not be more homogeneous configurations, but generationally differentiated safety, intelligence, driving experience, and service capabilities.

In the past, almost all enterprises that entered the new energy vehicle track could share the dividends of market expansion; in the future, opportunities will only belong to a small number of enterprises that can build systematic capabilities, create technological generational gaps, and achieve global operations.

This article is from the WeChat official account "Time Weekly" (ID: timeweekly), written by Wu Dian, and published with authorization from 36Kr.