China’s vehicle manufacturing companies have been releasing their semi-annual financial reports, with new energy vehicle companies such as NIO, Leapmotor, Xiaopeng Motors, and Xiaomi all suffering significant losses. NIO’s CEO, Li Bin, stated that the industry is entering the most brutal final 3-5 years of the competition.
In the last week of August, Chinese media labeled the carmakers as “new forces in car manufacturing” successively releasing their performance reports for the first half of the year.
On August 26, Li Xiang Automobile disclosed that they delivered 98,330 vehicles in the second quarter, a decrease of 11.5% year-on-year, generating revenue of 25.7 billion yuan, with a net loss of 1.7 billion yuan. Their accumulated losses in the first half of the year reached about 4 billion yuan. The company’s cash reserves decreased from 94.3 billion yuan at the end of the first quarter to 87.5 billion yuan at the end of the second quarter, a 6.8 billion yuan decrease over three months.
On August 24, Leapmotor reported that they delivered 356,000 vehicles in the first half of the year, a 60.8% year-on-year increase, topping the sales chart with a net profit of 210 million yuan. However, when calculated per vehicle, the profit is less than 600 yuan.
Xiaopeng Motors’ data showed a delivery of 166,000 vehicles in the first half of the year, a 15.8% decrease year-on-year, with a net loss of 3.12 billion yuan. Their automobile sales gross profit margin of 12.1% is far from covering R&D and channel costs. The financial report indicated that the “service and other businesses” supported the comprehensive gross profit margin, involving electric vehicle platforms, software, and electronic architecture.
Xiaomi’s car data, released alongside Xiaomi Group’s financial report, revealed a delivery of 104,000 vehicles in the second quarter, a 28.2% year-on-year increase, but their car and AI businesses operated a loss of 2.6 billion yuan. The group financial report displayed that the car business relies on various support provided by the group.
On August 28, Li Bin, Chairman and CEO of NIO, posted on social media platform Weibo, stating that the retail penetration rate of new energy passenger vehicles continued to rise, reaching 65.1% in July. With China’s current vehicle ownership at 371 million, petrol cars make up 86.81%, with an average vehicle age of 8.2 years, approaching the end of the warranty period for first-generation new energy vehicles.
Industry experts analyzed Li Bin’s remarks as indicating that once the new energy vehicles pass the warranty period, if the batteries suffer severe degradation or damage, owners would need to bear the cost of battery replacement. The cost of replacing a power battery can often amount to tens of thousands of yuan or even hundreds of thousands of yuan, potentially exceeding the residual value of the electric vehicle itself.
During the 2026 China Chief Economist Fudan University School of Management Innovation Forum held recently, Li Bin also predicted the endgame of China’s automobile industry, framing the industry’s “final match” within 3-5 years.
Li Bin said, “We are about to enter the most brutal stage of the final match, which is the next three to five years, when the fate of the entire automotive industry will almost be settled.”
According to data from China Passenger Car Market Information Joint Association (CPCA), from January to June, the domestic automobile market recorded retail sales of 8.701 million vehicles, a 20.2% year-on-year decrease; and wholesales of 12.547 million vehicles, a 5.7% year-on-year decrease.
At last month’s China Automobile Industry High-Quality Development Summit, Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers (CAAM), stated that the operation of China’s automobile industry is facing challenges, with the industry’s profit levels at historic lows.
Chen Shihua highlighted that for car companies now, reducing prices does not necessarily lead to tangible sales growth. Besides the market contraction, the decline in overall vehicle profitability is influenced by two factors. Firstly, the increase in upstream raw material prices. Although raw material prices started rising last year, the impact only transmitted downstream this year; secondly, changes in the distribution of downstream profits. Compared to the traditional automotive supply chain, the proportion of batteries, chips, and intelligent components in the cost of the entire vehicle has risen within the smart electric vehicle industry chain, further squeezing the enterprise’s overall vehicle profit margins.