China’s Car Market Posts Record Sales, but Profits Hit a Wall
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An intelligent production line at an automobile welding workshop in Qingdao, Shandong province, on Aug. 22, 2025. Photo: VCG
Profit margins in China’s automotive industry sank to a record monthly low of 1.8% in December 2025, dragging the full-year average to just 4.1%. The decline underscores the toll taken by fierce price wars and soaring input costs, despite robust sales in the world’s largest vehicle market.
The sector posted record revenue of 11.2 trillion yuan ($1.6 trillion) in 2025, up 7.1% year-on-year. But profit growth failed to keep pace. According to data released Tuesday by the China Passenger Car Association (CPCA), citing the National Bureau of Statistics, total profits inched up only 0.6% to 461 billion yuan. The divergence highlights intense competition, particularly as the industry accelerates toward electrification.
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- China’s auto industry profit margins fell to a record low of 1.8% in Dec 2025, averaging 4.1% for the year despite 11.2 trillion yuan ($1.6 trillion) in revenue.
- Rising input costs, fierce price wars, and the NEV transition squeezed margins; battery lithium prices nearly tripled to 169,000 yuan/ton by Jan 2026.
- Global auto margins varied: Toyota’s margin was 9.1%, Volkswagen/BMW/Mercedes 0.2–6.5%, GM 6.86%, and Ford 3.4% in 2025.
AI generated, for reference only
Who’s Who
- Toyota Motor Corp.
- Toyota Motor Corp. demonstrated resilience among its Japanese counterparts. For the six months ending September 2025, the company achieved an operating margin of 9.1%. This performance contrasts with Nissan, Mazda, and Mitsubishi, which reported losses during the same period.
- Nissan
- Nissan, a Japanese automaker, experienced losses during the six months leading up to September 2025. This contrasts with the stronger performance of Toyota, which maintained a 9.1% operating margin within the same period. The article highlights that Nissan, alongside Mazda and Mitsubishi, struggled with profitability.
- Mazda
- In the global automotive market, Mazda faced challenges, posting losses in the six months through September 2025. This contrasts with Toyota, which remained resilient during the same period. This indicates that Mazda, among other Japanese automakers like Nissan and Mitsubishi, struggled with profitability.
- Mitsubishi
- Mitsubishi, a Japanese automaker, experienced losses during the six months leading up to September 2025. This contrasts with Toyota Motor Corp., which maintained a resilient operating margin of 9.1% during the same period. The article highlights mixed profit performance globally within the automotive industry.
- Volkswagen
- Volkswagen, a German automaker, experienced a significant shrink in its profit margins during the first three quarters of 2025, with margins falling to between 0.2% and 6.5%. This decline is attributed to transition costs and higher U.S. tariffs, reflecting broader challenges faced by European carmakers.
- BMW
- BMW, alongside Volkswagen and Mercedes-Benz, experienced shrinking profit margins in Europe during the first three quarters of 2025. Their margins ranged from 0.2% to 6.5%, largely due to transition costs and higher U.S. tariffs impacting automakers.
- Mercedes-Benz
- Mercedes-Benz, or 梅赛德斯-奔驰 in Chinese, experienced shrinking profit margins in the first three quarters of 2025. Margins for the German automaker, along with Volkswagen and BMW, ranged from 0.2% to 6.5%. This decline was attributed to transition costs and higher U.S. tariffs.
- General Motors
- The article indicates that General Motors (GM) maintained a profitable combustion engine unit, despite experiencing losses in its electric vehicle business in 2025. GM posted an EBIT (Earnings Before Interest and Taxes) margin of 6.86% in 2025. This performance is highlighted as relatively better among US carmakers due to a policy shift away from aggressive electrification.
- Ford
- In 2025, Ford projected a 3.4% EBIT margin, indicating its combustion engine units remained profitable despite suffering losses in its EV businesses. This performance highlights a policy shift in the U.S. away from aggressive electrification, allowing traditional car segments to maintain profitability.
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What Happened When
- 2014：
- Profit margin in China’s auto industry peaked at 8.99%.
- April 2022：
- Profit margins in China’s automotive industry fell to 0.7% due to strict Covid-19 lockdowns.
- 2025：
- China's automotive industry recorded an annual average profit margin of 4.1%.
- 2025：
- China's auto sector posted record revenue of 11.2 trillion yuan, up 7.1% year-on-year.
- 2025：
- Total profits in China’s auto industry increased 0.6% to 461 billion yuan.
- 2025：
- NEV (New-Energy Vehicle) production in China rose 25% to 16.52 million units.
- 2025：
- Internal combustion engine vehicle output in China shrank 1% to 18.25 million units.
- 2025：
- Local funding pools for subsidies dried up in China.
- 2025：
- Full purchase tax exemptions for NEVs in China expired.
- 2025：
- GM reported an EBIT margin of 6.86%; Ford projected a margin of 3.4%.
- 2025：
- Nissan, Mazda, and Mitsubishi posted losses.
- First three quarters of 2025：
- Volkswagen, BMW, and Mercedes-Benz’s margins in Europe fell to between 0.2% and 6.5%.
- Six months through September 2025：
- Toyota Motor Corp. posted an operating margin of 9.1%.
- Late 2025：
- Vehicle trade-in subsidies in China expired.
- By Year-end 2025：
- Carmakers in China offered aggressive discounts to secure orders because of policy changes.
- Second half of 2025：
- Battery-grade lithium carbonate in China more than doubled in price, ending the year at 119,000 yuan per ton from a low of 58,000 yuan.
- December 2025：
- Profit margins in China’s automotive industry sank to a record monthly low of 1.8%.
- January 1, 2026：
- A 5% purchase tax on NEVs in China took effect. Many companies pledged to cover this tax for delayed deliveries.
- From January 1, 2026 to January 18, 2026：
- Passenger car wholesale volume in China fell 35% year-on-year to 740,000 units; retail volume dropped 28% to 679,000 units.
- As of January 28, 2026：
- Battery-grade lithium carbonate price in China reached 169,000 yuan per ton.
AI generated, for reference only
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