Can automakers' collective "slimming down" by cutting half of their vehicle models save their profits?
In the summer of 2026, one of the hottest topics in the automotive industry, apart from which new models are to be launched, is which models are set to be phased out. In July, after the meeting of its supervisory board, the Volkswagen Group announced that it will gradually streamline its product lineup in the future, cutting the number of models by up to 50%. Around the same time, Nissan plans to reduce its global on-sale model portfolio from 56 to 45. Toyota has abandoned the development of the mass-produced Lexus LF-ZC model that was originally scheduled for mass production in 2026. Changan Automobile explicitly stated at an internal communication meeting that it will completely abandon the previous volume-focused expansion model of "launching as many products as possible to gain competitive advantage". A "slimdown campaign" sweeping the global automotive industry is spreading.
From the perspective of consumers, it seems counterintuitive for carmakers to cut models — wouldn't selling one more car bring in one more share of revenue? But the reality of the industry is far more complex than this simple logic.
Why are all carmakers "cutting models"?
Let's look at a set of data: Data from the China Passenger Car Association (CPCA) shows that from January to May 2026, the profit of China's automotive industry reached 144 billion yuan, with a profit margin of only 3.4%, far lower than the average 6.1% level of the downstream industrial sector. The profit margin of the vehicle manufacturing segment has dropped from 5% three years ago to 1.5% today.
Where did the profits go? Squeezed by both the upstream and downstream sides, carmakers in the middle are left gasping for breath.
Upstream, raw material prices have rebounded sharply. In the first half of 2026, the price of lithium carbonate rose from a low level to nearly 200,000 yuan per ton, the price of automotive-grade storage chips and copper increased by more than 40% respectively within the year, and the price of some raw materials even rose by more than 180%. Tire enterprises have also issued successive price increase notices. All these costs are ultimately passed on to vehicle manufacturers.
Downstream, price wars have become the norm. From January to May, 77 passenger car models launched price reduction promotions, with an average price cut of 13.1% across all categories. Due to high inventory and shrinking demand, the average price cut for fuel vehicles reached 14.9%, and discounts for some old joint-venture models even exceeded 20%. The average price reduction for new energy vehicles that cut prices reached 30,000 yuan, with a decline of about 12%. The price defense line of luxury brands collapsed in the first half of 2026, and the phrase "buy a Land Rover for 160,000 yuan" once went viral across social media.
With rising upstream costs and falling end-market prices, the profit margin of the vehicle manufacturing segment has been severely squeezed. Cui Dongshu, Secretary-General of the CPCA, pointed out when analyzing the general decline in carmakers' profits in the first half of the year that this is the result of the superposition of three pressures: skyrocketing upstream costs, intensified end-market price wars, and rigid investment in transformation. Cost is the core contradiction, while sluggish sales have further amplified the loss margin.
More critically, the cumulative retail sales of narrow-sense passenger vehicles in China in the first half of 2026 reached 8.701 million units, down 20.2% year on year. In the stock competition stage, there is less and less room to tap new incremental demand through price cuts. At the same time, the retail penetration rate of domestic new energy passenger vehicles has continuously exceeded 60%, the traditional fuel vehicle market is shrinking at an accelerated pace, and a large number of fuel models are facing the awkward situation of "poor sales". In such an industry environment, maintaining a huge product matrix is becoming less and less cost-effective. When a car cannot achieve economies of scale, its very existence is consuming the enterprise's profits. Cutting them down is a way to stop losses instead.
Who is cutting models and how?
This round of "slimdown" is not an individual act of a single carmaker. Carmakers ranging from Volkswagen, Nissan, Toyota, Changan, Great Wall, Geely, Seres, etc., from multinational giants to independent brands, are all making subtractions, but their practices and logic are not exactly the same.
The Volkswagen Group has made the most radical adjustments. In accordance with its 2030 strategic plan, Volkswagen will reduce the number of models by up to 50%, cut optional configurations by 75%, and lower its global annual production capacity from 10 million units to 9 million units. The first batch of models on the production halt list includes the Touareg, Touran, T-Roc Cabriolet, Audi A1, Q2, TT, R8, Q8 e-tron, as well as the Porsche 718 Boxster, 718 Cayman and the first-generation Macan. What remains will be high-profit, high-popularity core models such as the Lavida, Sagitar, Tiguan, and Passat. Arno Antlitz, Chief Financial Officer of the Volkswagen Group, explained that due to the impact of the current global economic and geopolitical environment, the existing cost reduction plans have not yielded sufficient results, and the group "must fundamentally restructure its business model".
Why did Volkswagen come to this point? In 2025, the Volkswagen Group's operating profit plummeted 54% year on year to 8.9 billion euros, and its after-tax profit plunged 44% year on year to 6.9 billion euros, the lowest level since 2016. In the first quarter of 2026, sales in the Chinese market plummeted 20%, and sales in the North American market fell by 9%. FAW-Volkswagen's retail sales in June dropped 43.3% year on year. Volkswagen, which once swept the world with economies of scale, is now overwhelmed by its own scale.
Nissan's adjustments are relatively moderate. Nissan plans to reduce its global model lineup from 56 to 45, phase out underperforming models, and reallocate investment to high-growth areas. Nissan also plans to concentrate 80% of its sales on three core model series, which are built on shared platforms, and the sales volume of each single model is expected to increase by more than 30%. Ivan Espinosa, CEO of Nissan Motor, emphasized that this is not a contraction of the product lineup, but a move to achieve long-term growth. Nissan's logic is: rather than dispersing resources to launch mediocre products, it is better to concentrate efforts to make a few models as perfect as possible.
Toyota's approach focuses more on "hitting the brakes". Toyota has abandoned the mass-produced Lexus LF-ZC model that was originally scheduled for mass production in 2026. This car was unveiled at the Japan Mobility Show 2023, with fast charging and long range as its selling points. According to the original plan, it was supposed to be put into production at the end of 2026, then postponed to mid-2027, and finally called off. Toyota responded that the suspension of this model development is mainly due to changes in market demand, and is part of the overall adjustment of the vehicle development project. When the pace of electrification transformation is not as expected, stopping losses in time is also a rational choice.
Chinese independent brands are also making adjustments, among which Changan Automobile's moves are the most representative. In the first half of 2026, Changan took the initiative to cut some low-profit products. The adjustment of only one low-end product priced below 50,000 yuan reduced sales by about 70,000 units. Tan Benhong, Deputy Party Secretary of Changan Automobile, clearly stated at the mid-year communication meeting: "Changan has now abandoned the strategy of 'launching as many products as possible to win the market', and is more pursuing high-quality development. We are cautious about the method of simply pursuing scale and trying to outcompete others by relying on scale. We must balance volume and profit, and take long-term interests into consideration." In the next five years, Changan plans to reduce its product portfolio from 63 models to 36.
Great Wall, Geely and Seres are also taking actions. Great Wall plans to integrate the Haval, Ola and GWM PICKUP brands under the GWM brand; Geely plans to bring brands including Geely Galaxy, Lynk & Co, Zeekr and others under the Geely Auto Holdings listed platform; Seres has divested its underperforming Blue Electric brand.
The logic behind these adjustments is the same: in the era of stock competition, the extensive expansion model that relies on multiple brands and multiple models to achieve full volume growth is no longer feasible. In the past few years, major carmakers blindly incubated sub-brands and launched a flood of new models to seize market segments, leading to redundant product matrices, serious homogenization, and a large number of low-efficiency models consuming enterprise resources. Now that profits are as thin as paper, every penny must be spent where it matters most.
However, streamlining the product line is not a universal cure. Cutting models is only the first step. What is more important is to invest the saved resources in the right places. If carmakers only simply reduce the number of models without achieving breakthroughs in product strength, technology R&D and cost control, the "slimdown" will only be a one-time financial stopgap, rather than a long-term competitiveness restoration. Zhu Huarong, Chairman of Changan Automobile, put forward the goal of building 6 global hit products with annual sales exceeding 300,000 units, which means that after streamlining, there must be popular models that can deliver expected performance.
As for whether streamlining product lines can really help carmakers get out of the profit quagmire, there is no definite answer yet. Profit inflection points may appear in echelons: leading independent brands with complete self-developed supply chains and high-margin overseas incremental revenue are expected to restore their profit margins to more than 4.5% in the fourth quarter of 2026; while joint-venture carmakers that lack core technologies and have a high proportion of fuel vehicles may see their loss period extend to the first quarter of 2027. But one thing is certain: the era of relying on launching a large number of models has passed. Faced with a profit margin of only 1.5%, every car must prove its value of existence.
This article is from the WeChat Official Account "Auto Market Insight", written by Yang Shuo, and published with authorization from 36Kr.