Price War Leads to Thin Margins: BYD and 4 Other Major Automakers See Combined Net Profit Drop 16%

Nikkei Chinese reported statistics on five automakers with sales exceeding 1 million units and comparable performance for five consecutive years or more as of April 4th, including BYD, SAIC Motor, Geely Automobile, Great Wall Motor, and GAC Group. The combined sales of the five Chinese automakers in fiscal year 2025 increased by 7% to approximately RMB 2.12 trillion (about NT$9.8 trillion), but net profit decreased by 16% to about 60 billion yuan. Sales have grown for five consecutive fiscal years, but growth has slowed. Three automakers experienced a decline in final profit or a loss. The report cited statistics from the China Association of Automobile Manufacturers, showing that new vehicle sales (including exports) in 2025 increased by 9% compared to 2024, reaching 34.4 million units. However, data compiled by executives from the passenger car industry association showed that the average sales price of passenger cars in China in 2025 was 170,000 yuan, an 8% decrease from 2024. This is also related to the 'trade-in' policy, where low-priced models benefited more from subsidies, leading to increased sales. The report pointed out that in China's excessive automotive competition, coupled with rising production costs and falling sales prices, the overall situation is one of 'thin margins and high volume,' squeezing the profit margins of various companies. Among them, the largest automaker, BYD, saw its net profit fall by 19% to 32.6 billion yuan, the first decline in three fiscal years. The gross profit margin of its domestic business, which accounts for 60% of sales, was only 17%, lower than the 19% of its overseas business. Due to intensified price competition for electric vehicles (EVs) and increased sales of low-priced models, BYD's average unit price for passenger cars has fallen for three consecutive fiscal years. Geely Automobile Holdings, a subsidiary of the private automaker Zhejiang Geely Holding Group, also experienced a decline, with sales revenue per vehicle decreasing by 8% year-on-year. State-owned automaker GAC Group reported a final loss of 8.7 billion yuan (compared to a profit of 800 million yuan in the previous fiscal year), its first loss since listing in Hong Kong in 2010. Sales were 1.72 million units, a 14% year-on-year decrease. Among these, the decline in sales from its joint venture with Honda was a major reason. State-owned automaker SAIC Motor's overall profitability is also declining, mainly due to overcapacity in its joint venture business. The company's sales were 4.5 million units, nearly 40% lower than its peak in fiscal year 2018. To absorb excess capacity, SAIC Motor is promoting factory restructuring. The report noted that in addition to sales competition, the cost burden of new technology research and development continues to increase. Chinese automakers have been developing technologies such as EV fast charging, driving assistance, and smart cockpits. BYD's R&D expenses in fiscal year 2025 increased by 9% year-on-year to 57.9 billion yuan, eight times that of five years ago. In 2026, Chinese automakers face even more severe challenges. In addition to economic stagnation, changes in the new energy vehicle purchase tax reduction policy will also have a negative impact. From January to March, BYD's new vehicle sales decreased by 30% year-on-year. The China Association of Automobile Manufacturers expects new vehicle sales (including exports) in China to increase by only 1% year-on-year in 2026, showing overall stagnation. With the domestic market nearing saturation, major Chinese automakers are pinning their hopes for growth on expanding into overseas markets. (Editor: Chen Kai-yu) 1150407