Changan Automobile, Surprisingly Earned So Much Less

Volume increased, but profits did not follow.

Against the backdrop of the domestic automotive market decline and overseas boom, every traditional listed auto company stands at a crossroads, though everyone's feeling is different.

In this context, Changan Automobile, upgraded to a central automotive SOE, delivered its first semi-annual report after promotion, and the financial data does not look good.

In H1 2026, Changan Automobile's revenue was 65.634 billion yuan, down 9.71% year-on-year; net profit attributable to shareholders was 817 million yuan, down 64.32% year-on-year; net profit excluding non-recurring gains and losses was only 251 million yuan, plummeting 83.01% year-on-year. Gross margin was 14.5%, slightly down 0.08 percentage points year-on-year.

On the surface, this is a report card with declining revenue, profit, and gross margin. But carefully reviewing this semi-annual report reveals the situation is not as simple as it appears.

In the first half, Changan Automobile recorded a net exchange loss of about 230 million yuan, while last year's same period had a net exchange gain of about 1.356 billion yuan. One in and one out, the difference is 1.586 billion yuan. This is also an objective reality faced by all listed Chinese automotive companies.

Affected by this, Changan Automobile's financial expenses changed from a net gain of 1.957 billion yuan in the first half of last year to a net expense of 69 million yuan now, a difference as high as 2.026 billion yuan.

Changan Automobile also admitted in the semi-annual report: "After deducting the impact of exchange gains, the net profit attributable to shareholders of the listed company increased by 12% year-on-year." In other words, more than 64% of the decline in net profit was largely caused by exchange rate fluctuations.

[Image Source: Changan Automobile Announcement]

Apart from exchange losses, Changan Automobile accrued about 456 million yuan in asset impairment provisions in the first half, among which inventory price decline provisions reached 468 million yuan, while last year's same period was only 59 million yuan. If this impairment is deducted, the net profit for the first half could reach 1.273 billion yuan.

The combination of these two non-recurring factors is the real driver behind the sharp decline in this automotive central enterprise's profits.

Changan Automobile mentioned at the performance explanation meeting that, affected by the overall industry downturn in the first half, market demand continued to weaken. The company went all out to stabilize operations and grab sales volume. Although the half-year results were below expectations due to the general environment, it still stabilized the core business.

But in the view of AutosKline, guarding the core business itself has already consumed a large amount of resources.

In the first half, Changan Automobile's total sales volume was 1.1189 million units, down 17.44% year-on-year. Among them, new energy vehicle sales were 414,200 units, down 8.3% year-on-year.

But excluding the gap of about 70,000 units from the Lumin model which stopped production this year, the new energy sales actually grew by about 11% year-on-year. This means the sales growth of other products is just enough to fill the exit of old products.

[Image Source: Changan Automobile Announcement]

In this view, the contraction of fuel vehicles is the more troublesome problem.

Data from the China Association of Automobile Manufacturers shows that the domestic fuel vehicle market contracted by 27.8% year-on-year in the first half. Changan Automobile's main fuel models such as CS75 PLUS, sales volume dropped nearly 40% year-on-year.

Looking by brand, the situation is more differentiated.

Changan Qiyuan delivered 173,800 units in the first half, achieved profitability in a single quarter in the second quarter, becoming the first brand in Changan Automobile's new energy sector to achieve self-sustaining growth. At the same time, Deepal Automobile delivered 164,200 units, a year-on-year growth of 14.6%, overseas sales 35,800 units, skyrocketing by 141%.

Avatr, which was highly expected internally by Changan Automobile, became the group's financial bleeding point. It delivered only 31,500 units in the first half, a year-on-year plunge of 46.74%. Cumulative losses over 4 years of establishment exceeded 13.2 billion yuan, to the point where Zhu Huarong proposed an integration plan for Avatr and Deepal Automobile in April this year for cost reduction and efficiency improvement.

[Image Source: Avatr Prospectus]

The Changan fuel vehicle main lineup, as the main force of fuel cars, delivered about 329,800 units cumulatively in the first half. Affected by the overall contraction of the fuel vehicle market, sales continued to be under pressure. The highlight lies in the performance of hybrid models.

AutosKline believes that in the process of switching from old to new drivers of momentum, Changan Automobile is experiencing a period of transition. The profit pool of fuel vehicles is quickly drying up, and although the scale of new energy business is expanding, profitability has not caught up yet.

In comparison, the overseas market became a highlight for Changan Automobile in the first half, just like most listed auto companies.

In the first half of this year, Changan Automobile's overseas sales were 455,000 units, a year-on-year increase of 51.9%; overseas income was 21.942 billion yuan, a year-on-year increase of 78.77%, with the share of total revenue rising from 16.89% to 33.43%. Overseas gross margin was 20.13%, far higher than the 11.67% of domestic business.

Changan Automobile's overseas strategy is named "Embrace All Waters". It was upgraded to version 2.0 in April this year, establishing the four principles of "Long-term, Localization, Systematization, and ESG Integration". The goal is to achieve overseas sales of 1.5 to 1.8 million units by 2030.

In the first half, its Brazil factory officially started production, the Thailand factory's 20,000th vehicle came off the line, and the overseas sales network has expanded to 129 countries and regions. However, the two subsidiaries responsible for exports encountered increased revenue but not increased profit.

Chongqing Xingzhi Technology revenue was 10.905 billion yuan, a year-on-year growth of 85%, net profit 165 million yuan, down 65% year-on-year; Changan International Sales Service revenue was 4.316 billion yuan, a year-on-year growth of 25.6%, net profit 137 million yuan, down 58% year-on-year; overseas gross margin also decreased by 2.1 percentage points year-on-year.

The costs of overseas channel construction, brand promotion, and localized operations are being incurred in advance, and profits are naturally eroded. More importantly, the larger the export scale, the greater the exchange rate risk exposure.

According to foreign currency monetary items disclosed in the semi-annual report, as of June 30, Changan Automobile's foreign currency assets totaled about 7.967 billion yuan, foreign currency liabilities about 3.356 billion yuan, net foreign currency exposure about 4.612 billion yuan.

As Changan Automobile stated in the semi-annual report, if the Renminbi appreciates or depreciates by 5% against the US dollar, it will increase or decrease net profit by about 66.1935 million yuan as a result.

Although Changan Automobile has already carried out forward foreign exchange hedging business, the amount sold for hedging in the first half was about 372 million yuan. Relative to over 4.6 billion yuan of net exposure, the coverage ratio is less than 10%, making it difficult to effectively hedge exchange rate fluctuation impact.

In addition, from the end of the first half to the release of the latest August sales data, Changan Automobile's overall situation has not improved.

Total sales for the first 8 months of this year were 1.4772 million units, down 17.92% year-on-year. The decline rate is still expanding compared to the first half. Independent brands' sales for the first 8 months were down 20.18% year-on-year, compared to 19.91% in the first half. The decline is also expanding.

The only comforting thing is new energy. Changan Automobile's August new energy single-month sales broke through 100,000 units, a year-on-year growth of 12.98%, and new energy penetration rate broke through 51%.

[Image Source: Changan Automobile Announcement]

From accumulated data, new energy's first 8 months cumulative sales were 589,500 units. The year-on-year decline has narrowed from 8.3% in the first half to 5.03%. Qiyuan, Deepal and other brands continued to scale up, becoming main drivers.

But if placed under the group's overall performance, this result is obviously not enough.

At the beginning of the year, the group set an annual sales target of 3.3 million units. The completion rate for the first 8 months was less than 45%. In the remaining 4 months, monthly average needs to exceed 450,000 units to meet the target. In the current market environment, this is an impossible mission.

For such reality, perhaps Changan Automobile itself is also hard to feel satisfied.

At the semi-annual performance explanation meeting on August 31, facing online investor questions, Changan Automobile management's answer left people bewildered.

When investors asked about HEV model sales, Changan Automobile answered how advanced the Blue Whale Ultra Engine hybrid technology is; when asked about second-half performance outlook, the official answer was "Will continue to deeply promote three major plans" and "Persist in value orientation, volume and profit balanced operating principle"; when asked about capacity utilization rate, it only said "See disclosed relevant reports", turning to explain how to improve operational efficiency.

Behind these answers to non-questions, reflects Changan Automobile's caution and avoidance when communicating with investors under operational pressure. No matter how grand the enterprise high-level strategy is depicted, it cannot cover the reality of operational difficulties.

In the first half, Changan Automobile's three core strategies - Smart "Beidou Tianshu", New Energy "Shangri-La", and Overseas "Embrace All Waters", all made progress in technology and scale. But between strategy and profit, there are multiple variables such as product, market, cost, exchange rate, etc.

R&D investment has not yet converted to significant profit contribution. New energy brands are still continuously losing money. Fuel vehicle base accelerates contraction. Export business volume increases but profit does not.

After the semi-annual report release, multiple mainstream brokerages' judgment on Changan Automobile was highly consistent. They believe its short-term performance is dragged by exchange rate and other non-recurring factors, but the medium-to-long term logic of overseas expansion, new energy loss reduction, and smart technology remains unchanged.

CITIC Securities believes Q2 product structure continued to optimize, overseas sales hit a quarterly high. At the same time, based on domestic demand pressure, it lowered the full-year earnings forecast. Guoyuan Securities values Tianshu Smart Driving completion from hardware to complete solution loop.

However, institutions' prediction for full-year net profit ranges from 2 billion yuan to 5.6 billion yuan, divergence is quite large. Most research reports also warned of domestic demand continuing to bear pressure, industry competition intensifying, overseas trade barriers and exchange rate fluctuation, etc. risks.

For this semi-annual report, capital market feedback was relatively flat. On the first trading day after the semi-annual report release (August 31), Changan Automobile micro-dropped 0.42%. In that week, its stock price only micro-grew 0.28%, closing at 7.12 yuan. The stock price being nearly zero fluctuation might be because the profit performance forecast released in July already released most negative news in advance.

But if the time line is lengthened, since this year, Changan Automobile stock price has fallen from 11.74 yuan at year start to 7.11 yuan at noon close on September 10, a decline of 39.44%.

Views of AutosKline:

Changan Automobile's semi-annual report is a typical answer sheet for a traditional auto giant experiencing pain during key transition period.

Exchange losses and asset impairment amplified the profit decline. But even excluding these factors, fuel vehicle base contraction, new energy not yet profitable, overseas expansion investment period triple pressure superposition is the truly structural problem to face.

Beidou Tianshu, Shangri-La, Embrace All Waters, these strategy names are loud enough. Technical level also indeed let outside world see this central enterprise's strength. But Changan Automobile needs to prove not only owning advanced technology, but more is products can sell well, money can earn.

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