When the narrative of sheer scale in the Chinese New Energy Passenger Car Market is no longer persuasive, a more severe question arises: Where lies the value foundation of the industry?
Looking at the sales data for April alone, it seems everything is "growing upwards": The retail penetration rate of Chinese new energy vehicles historically broke through 60%, reaching 61.4%, meaning for every 10 new cars sold, more than 6 are new energy vehicles.
However, a set of less-than-ideal data echoed in the industry at the same time: In 2025, domestic car sales exceeded 34.4 million units, but the overall profit margin of China's automotive industry during the same period was only 4.1%.
"It looks like scale is growing, but the industry's overall health faces challenges." Wang Hui, Vice President of Avatr Technology, cited data from the CPCA, and in January-February 2026, this figure dropped further to 2.9%.
The latest data shared by Cui Dongshu, Secretary-General of the CPCA Passenger Car Section, shows that in January-March 2026, the automotive industry's profit margin fell to 3.2%, at a low level for the same period in recent years. The automotive industry's profit margin is not only significantly lower than the average profit margin of national industrial enterprises above designated size, but it is also approaching the break-even point for operations for the vast majority of vehicle manufacturers.
When a penetration rate of 61.4% collides with a profit margin of 2.9%, it forms a very fractured industrial landscape: China's automotive industry is speeding ahead on the road of "getting bigger", but is stumbling on the road of "getting stronger".
At the Shenzhen 2026 (4th) Future Automotive Pioneer Conference, these "pioneers" gave some answers and posed deeper questions.
Image Source: Future Automotive Pioneer Conference
Sales Are Rising, Profits Are Falling?
Since 2026, China's automotive market has presented a seemingly contradictory yet established picture.
On one hand, the surge of new energy vehicles is unstoppable. Data from the CPCA Passenger Car Section shows that in April 2026, domestic new energy passenger car retail reached 849,000 units, the penetration rate historically broke through 60%, reaching 61.4%, an increase of 9.7 percentage points compared to the same period in 2025, setting a historical record for monthly penetration in the domestic car market.
Among these, the performance of independent brands was particularly eye-catching. In April, the new energy penetration rate within independent brands reached 80.1%, while the new energy penetration rate among luxury vehicles was only 26.1%. Chinese brands already hold a dominant position in the new energy market.
On the other hand, profit margins for vehicle manufacturers are being compressed sharply. From 4.1% in 2025 to 2.9% in the first two months of 2026, this downward curve is concerning.
Just looking at the absolute value of profit, the total profit of the automotive industry in January-March 2026 was 78.4 billion yuan, a 18% year-over-year decrease. Facing this figure, Wang Hui's remarks at the conference appeared particularly sharp: "Sales without profit are fake sales; scale achieved through price wars is even more of a false prosperity."
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"Selling more while losing more" has turned from a joke into a ruthless reality.
Investigating the reasons, large-scale "price wars" are undoubtedly the most direct catalyst.
Since 2025, the industry has seen the slogan "Electricity is cheaper than fuel", followed by various companies catching up. Lowering prices is no longer news. But the more fundamental problem is that when all car manufacturers have high convergence in technical routes and product configurations: 800V high-voltage platforms, AI voice large models, and end-to-end intelligent driving become standard configurations, price becomes the only differentiated competitive means, and profits are eroded layer by layer.
Xu Jun, Senior Vice President and Chief Operating Officer of Leapmotor, analyzed: "A range of 700 kilometers versus 1000 kilometers, user perception difference approaches zero, yet costs rise exponentially. Compute power from 30 TOPS to 1000 TOPS, experience difference is far smaller than parameters."
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He therefore believes that specs so far are just a basic entry ticket, not the deciding factor.
Behind Xu Jun's viewpoint is a trend worth reflection: When automotive technology enters a "convergence period", the architecture of centralized computing + regional controllers is converging, end-to-end intelligent driving solutions are becoming identical, and AI solutions for smart cockpits are becoming increasingly similar, making it increasingly difficult to build differentiated competitiveness relying on technical parameters.
The weight of brand attention in user purchase decisions is rising significantly.
Nio Founder Li Bin revealed the latest research data from McKinsey: One or two years ago, brand was only ranked fifth among purchase decision factors, now it has jumped to second, "believes it will soon enter the top spot".
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When brands begin to become the "deciding factor", China's automotive industry's technological dividend is quickly turning into brand dividends, while brand reconstruction and construction are far more difficult and test fortitude more than stacking parameters.
Who is Trying to Break the Negative Growth Curse?
Against the background of declining industry profit margins, not all enterprises have fallen into the mud of "revenue growth without profit growth".
At this conference, a few "dark horses" used solid data to prove a possibility: Chinese brands can not only sell at higher prices, but also make profits back.
Xing Xinchu, Chairman of Jianghuai Automobile Group, disclosed in his speech that since Maextro S800 launched in May 2025, cumulative deliveries have exceeded 18,500 units, ranking first in luxury sedan sales above 700,000 yuan for 8 consecutive months.
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From the perspective of price segments, million-level Chinese luxury cars surpassing century-old luxury brands was almost unimaginable five years ago.
Xing Xinchu attributed this to the path choice of "redefining luxury with technology": "The Maextro brand is not simply copying the development path of traditional luxury cars, but rewriting the narrative paradigm of ultra-luxury car brands with technological innovation."
Nio represents another path worth examining.
On June 1st, Nio announced the latest delivery data: Deliveries in May totaled 37,705 units, a significant year-over-year increase of 62.3%, and a month-over-month increase of 28.4%, setting a new record for single-month deliveries in the brand's history.
The main brand "Nio" delivered 20,013 units, a 50.8% year-over-year increase; the brand "Onvo" positioning the family market performed particularly well, delivering 12,029 units, a 91.5% year-over-year surge, and a month-over-month increase of up to 124.8%; the new brand "Firefly" delivered 5,663 units, a 53.9% year-over-year increase.
From January to May this year, Nio's cumulative new car deliveries have reached 150,526 units, a 68.7% year-over-year increase. At this point, Nio's historical cumulative deliveries officially broke through the 1.14 million mark, reaching 1,148,118 units.
Regarding financial reports, in Q1 this year, Nio's total revenue was 25.53 billion yuan, a 112.2% year-over-year increase, exceeding the revenue guidance upper limit of 24.48 billion to 25.18 billion yuan previously given by the company; total gross profit was 4.86 billion yuan, a 428.4% year-over-year significant increase; the company's comprehensive gross margin reached 19.0%, the highest in four years. Vehicle gross margin was 18.8%, growing quarter-over-quarter for four consecutive quarters, also the highest in four years. Other sales gross margin was 20.6%, also the best level in four years.
Regarding net loss, Q1 net loss narrowed to 332.1 million yuan, significantly narrowing from the net loss of 6.75 billion yuan at the same period last year. As of the end of Q1, Nio's cash reserves increased to 48.2 billion yuan, achieving positive operating cash flow for three consecutive quarters.
In Q1 2026, Nio brand's average transaction price reached 390,000 yuan, 50,000 yuan higher than BMW and 130,000 yuan higher than Audi.
Behind this price difference is a qualitative change in brand premium capability.
No less coincidentally, data shows that the average transaction price of the HIMA全系 series vehicles has remained stable at 390,000 yuan, ranking first in the average transaction price of Chinese car brands for several consecutive months, with performance in some periods surpassing traditional luxury brands.
In segmented brands, the AITO brand's average transaction price reached as high as 409,000 yuan, flagship model AITO M9 cumulative deliveries exceeded 280,000 units, ranking first in 500,000-level luxury SUV sales for 21 consecutive months. The Maextro brand positioning the ultra-luxury market also performed strongly, the first model Maextro S800 price range 708,000 - 1,018,000 yuan, deliveries exceeded 17,000 units in 11 months since launch, ranking first in ultra-luxury sedans above 700,000 yuan for 8 consecutive months, single-month sales even exceeding the total sales of multiple traditional top luxury sedans.
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The logic behind these brands rising against the trend in price wars is not accidental: First, deep understanding of user value rather than simple spec stacking, second, extreme investment in new technologies forming tech premiums, third, forming systemic capabilities in manufacturing, supply chain, and quality, fourth, deep synergy with partners like Huawei forming technological leadership.
However, analyzing the financial performance of the above brands more deeply, a thought-provoking question emerges: Will the existence of these high-price, high-profit brands change the trend of the automotive industry's profit margin overall?
The answer may not be optimistic. Although Maextro S800, Nio ES8/ES9, and AITO M9 have achieved impressive results in their respective price segments, their share of overall industry sales remains limited.
In other words, the "local breakthrough" of high-endization has not yet reversed the "overall predicament" of the entire industry.
For most independent brands, the average car price is still below 150,000 yuan, and the main battlefield of price wars continues intensely in the mid-to-low-end market.
When most players are still struggling at the loss line, a few successful high-end brands cannot support the entire industry's profitability level.
The true test of China's automotive industry moving "from big to strong" is not whether it can produce one or two products that can rival the Mercedes-Benz S-Class, but whether it can achieve high-quality value creation universally across all categories and price segments.
Mercedes-Benz Sales in China Dropped 27%, Can Chinese Cars Smile Overseas?
When the smoke of price wars rises and falls in the domestic market, the overseas market is becoming China's new "second battlefield" for the next round of competition.
At this conference, multiple guests elaborated in-depth on the strategic layout and direction of China's automotive globalization. If domestic competition is about fierce struggle in the existing stock market, then global competition is a long-term bet on the incremental market.
Avatr's globalization practice provides a highly representative sample.
Wang Hui disclosed in the speech that Avatr has entered more than 40 countries and regions. Avatr 11's starting price in China is about 290,000 yuan, but overseas it is close to 450,000 yuan.
"In Thailand, we firmly hold the #1 spot in luxury electric SUV sales, and in Dubai we occupy 10% of the local high-end electric vehicle market share." Wang Hui said, "At the end of this year, we will officially enter Europe. Although we have been in overseas markets for about a year and a half, we have already achieved stable profitability. So future globalization is something that must be done."
Wang Hui also revealed the brand strategy of sponsoring the Portugal national team in the interview session. He stated that Avatr's main products in Europe will fully enter Europe in November and December. He will go to Europe to communicate with partners in multiple countries. "Sponsoring the Portugal national team is just one of our actions at the Europe brand level. What we adhere to in Europe including globally is long-termism. Besides the brand side and product side, greater resource investment is in the service side, system side, and construction of operational capabilities."
Geely's globalization layout is more macroscopic and systematic.
Geely Automobile Group Vice President Li Chuanghai pointed out that the "most essential thing about China's automotive globalization is not low-price volume, but technology as the root, system as the foundation, brand as the soul, ultimately completing globalization from selling cars to defining the future of cars".
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He introduced that Geely has operated globalization business for 20 years, owning 5 R&D centers, 16 test bases, with deep integration of local partners in Europe, Southeast Asia, Middle East, Latin America, and Eastern Europe. Geely has participated in co-building international standards and is the first Asian car manufacturer in IATF with board voting rights.
In the dimension of car exports, data from April 2026 also provides an important reference.
In April 2026, car exports reached 901,000 units, a 74.4% year-over-year increase, among which new energy vehicle exports increased by more than double year-over-year, reaching 430,000 units. The overseas market has become the most important incremental engine for China's automotive industry.
However, while export growth is gratifying, a comparative data worth examining is: In Q1 2026, Mercedes-Benz Group sales in China were 111,600 units, a 26.9% year-over-year decrease, becoming the region with the most significant decline among its major global markets. Meanwhile, financial reports showed Mercedes-Benz Q1 revenue was 31.602 billion euros, a 4.9% year-over-year decrease; net profit was 1.433 billion euros, a 17.2% decrease; global sales were 499,700 units, a 6% year-over-year decrease.
This set of numbers reflects both the challenges Mercedes-Benz encountered in the China market, and poses a question: When Chinese brands take root in the overseas market, in what posture will they face global competition?
Chinese cars are replicating the dilemma BBA faced in China's domestic market: When local brands continuously conquer territory through technological advantages and high cost-performance ratios, powerful international brands may also encounter strong counterattacks from local brands in other markets.
When Mercedes-Benz China Senior R&D Executive VP Drummond Jacoy was asked how he views China's new luxury brands, his answer was cautious yet with a hint of urgency: "China has many very excellent brands and products, I respect them very much. We are vigorously embracing technological innovation, continuously learning, and blending cutting-edge technology with brand accumulation."
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He particularly emphasized that Mercedes-Benz has already carried out deep cooperation with Chinese tech companies in China, from ByteDance and Tencent to Momenta, from Amap to Spark, Mercedes-Benz is trying to narrow the intelligent technology gap with China's local enterprises in unprecedented ways.
This just reveals the new trend of global competition: The battlefield has expanded from China's domestic market to the global market, and the core focus of competition has evolved from single-product competition to all-round competition covering technology, ecosystem, supply chain, and brand.
In Li Chuanghai's words: "Going out is not difficult, standing firm, integrating, and taking root is the real skill."
True globalization is by no means simply copying domestic products and price models overseas, but achieving deep and comprehensive integration from capital to technology, from standards to supply chain.
Leapmotor's strategic layout also echoes this judgment. Leapmotor Founder Zhu Jiangming once publicly disclosed Leapmotor's globalization goals. Zhu Jiangming believes the first step is to achieve a "40-60 split", China accounting for 60%, overseas accounting for 40%; next, strive for a "50-50 split"; the most ideal state is "reverse 40-60". If China's automotive global share can achieve 40% domestic and 60% overseas, that is the best state of true globalization.
From "selling products" to "building systems", this is the threshold China's automotive globalization must cross. In the next three to five years, whoever can first form a viable and sustainable profit model in the overseas market will seize the initiative in the long-term race of globalization.
Conclusion: Car Manufacturers Must Make Money
Back to this conference's theme — "Climbing Steps".
China's automotive industry has completed a leap from catching up to leading in 20 years. There are no short cuts on this road, every step is trodden out. But today, China's automotive industry faces an awkward dilemma: Its achievements in volume have reached the peak, global largest car producer, global largest new energy market, globally leading intelligent technology cluster, but breakthroughs in quality are only just beginning to show signs in local areas.
Industry profit margins dropping through 3.2% means the red light for industry health has already lit up.
When most enterprises have exhausted profits in price wars, who will still have enough funds to invest in R&D for next-gen technology, brand reconstruction, and globalization expansion?
From Wang Hui's "Sales without profit are fake sales", to Xu Jun's "Everyone can lower prices, cutting costs is the real skill", to Li Chuanghai's "Keeping direction in the no-man's land", the most valuable consensus of this conference might just be this common sense as simple as it is: The competition of the automotive industry is a war of attrition, not a blitzkrieg.
As Xing Xinchu said: "On the road of breakthrough in high-endization of Chinese brands, there are no lone heroes, only symbiotic evolution."
When the penetration rate of 61.4% and the profit margin of 3.2% are written on this page of the industrial picture at the same time, the answer is already clear enough: China's automotive industry must move from pursuing "getting bigger" to a new stage of "getting stronger".
The issue is not whether it can sell cars to the million-level, but when the price war burns out the last bit of profit, whether the entire industry can still stand steadily on every step of "Climbing Steps".
