In 2026, domestic passenger cars may say goodbye to the high-growth era, officially entering an adjustment phase characterized by deep competition in the stock market and dual pressure from supply and demand. Slowing growth and profit contraction are stage challenges faced by the entire industry. Latest data from CPCA shows that in June, domestic passenger car retail sales reached 1.602 million units, down 23.2% year-on-year; cumulative retail sales from January to June were 8.701 million units, down 20.2% year-on-year. The entire product category market weakened synchronously, fuel vehicle retail sales plummeted 39% year-on-year. Domestic sales of joint ventures, luxury, and independent brands generally faced pressure. Most automakers saw varying degrees of decline in domestic terminal sales. Increasing revenue without increasing profit has become the industry norm.

Looking at the market performance from the first half of 2026, the automotive industry shows typical cycle adjustment characteristics. Whether traditional independent, leading new forces, or mainstream joint venture brands, all face varying degrees of operational pressure.

Seres Zhang Xinghai revealed at the Chongqing Auto Forum that the price of storage chips rose by more than 400%, and lithium carbonate prices doubled year-on-year. The unit cost for all AITO models under the brand increased by 15,000-20,000 yuan. Cost pressure directly led to the company's H1 performance forecasted loss of 1.05 billion to 1.3 billion yuan. Chips and battery materials are the core sources of cost increases. Voyah Lu Fang publicly stated that chip cost increases for high-end smart models broke through 300% at most. Basic consumables such as copper, aluminum, and plastics rose in price synchronously. The added cost per smart vehicle exceeded 12,000 yuan. The industry generally faces a dilemma of 'rising costs, dare not raise prices'.

Terminal market demand is weak, price wars are fierce. Automakers dare not easily increase selling prices. Upstream raw materials and chip costs rose rigidly. Profit margins are squeezed from both sides. This round of industry downturn is industrial periodical pain formed by the superposition of multiple pressures: weak consumption, skyrocketing upstream costs, overcapacity, and normalization of price wars.

This round of adjustment is a necessary stage of industry development. Short-term pressure will force the industry to eliminate inefficient capacity and homogeneous products, accelerating high-quality enterprises to complete value upgrades. Facing a unified cycle dilemma, domestic leading automakers have escaped the mindset of passively responding to price wars. They have formed systematic, long-term breakthrough strategies, focusing on four core main lines: Opening a second growth curve through global overseas expansion to offset domestic stock bottlenecks; Escaping homogeneous price involution through differentiated new product matrices; Building long-term barriers with full-stack technology self-research to stabilize cost advantages; Achieving cost reduction and efficiency gains through channel model iteration, digging deep into user value.

In sharp contrast to the domestic market downturn, automotive exports have become the core engine for industry growth against the trend. CAAM data shows that in June, domestic automotive vehicle exports reached 1.037 million units, up 11.6% month-on-month and surged 75.1% year-on-year. Monthly export volume exceeded one million units for the first time. Cumulative exports in the first half reached 5.096 million units, up 65.3% year-on-year. Among them, new energy exports grew by more than 120%. Overseas markets effectively offset domestic demand gaps, forming a new industry pattern of 'domestic pressure, overseas volume'.

Opening a second growth curve through global overseas expansion to offset domestic stock bottlenecks:

Chery maintains its position in the first tier of independent overseas exports. Cumulative exports in the first half reached 943,800 units, up 71.5% year-on-year. Exports accounted for nearly 70% of total sales. Relying on local factories in Southeast Asia and South Africa, it digs deep into emerging mass markets, effectively offsetting the pressure of domestic market involution. BYD exported 789,000 units in the first half, up 70.5% year-on-year. Overseas sales accounted for 43.6% of the group's total sales. Relying on localized capacity in Hungary and Thailand to layout European and Southeast Asian markets, it aims to achieve balanced domestic and overseas sales development, effectively offsetting domestic price war profit pressure, and relying on scaled industrial output to establish global cost and channel advantages. Changan Automobile delivered 402,000 units overseas in the first half, up 35.1% year-on-year. Relying on the 'Hai Na Bai Chuan 2.0' strategy to dig deep into emerging markets, Thai and Brazilian local factories continue to go into production. Building overseas localized operation teams and after-sales systems, focusing on exporting hybrid and smart models, using highly adaptable products to seize incremental markets in Southeast Asia and South America. Overseas sales continue to grow steadily, becoming a stable second growth curve;

Escaping homogeneous price involution through differentiated new product matrices:

In a cycle environment of severe overcapacity and product homogenization, automakers generally abandoned 'full-line low-price involution', turning to multi-brand layering, precise positioning in niche tracks, and product strategies where new and old technologies run in parallel, improving overall profit quality through structural optimization.

BYD insists on full price range coverage. Relying on the Dynasty, Ocean, Denza, Yangwang matrix, it covers household mainstream, mid-to-high-end, ultra-luxury markets. Fuel, hybrid, and pure electric are fully iterated. Solidifying the basic board with an extreme product matrix, it increases the proportion of high-margin products through vehicle structure upgrades. Changan Automobile builds a five-brand collaborative system. Qiyuan focuses on affordable hybrid home markets. Deep Blue focuses on mainstream pure electric. Avatr positions itself in high-end smart pure electric. Changan Passenger Cars stabilizes the fuel basic board. Kaiceng digs deep into commercial markets. Full price range differentiated layout, avoiding internal involution, precisely matching different segmented user demands. Geely relies on Thor Hybrid and Galaxy Pure Electric dual product lines, focusing on high cost-performance home new energy markets. Continuously iterating energy-saving hybrid models, seizing fuel vehicle replacement space. At the same time breaking through upwards with Lynk & Co luxury, optimizing overall product structure.

Building long-term barriers with full-stack technology self-research to stabilize cost advantages:

Second half of industry cycle, short-term competing on cost, mid-term competing on products, long-term competing on technology. Leading automakers continue to increase investment in core technology self-research, achieving autonomy and controllability in three-electric systems, smart driving, chips, and hybrid platforms. Offsetting cost volatility from the root and building differentiated competitiveness.

BYD insists on full industrial chain self-research and self-production. Second-generation Blade Battery, high-voltage flash charging technology fully iterated, achieving fuel and electric same-speed refueling experience. Relying on vertical integrated supply chain advantages, it stabilizes cost advantage during raw material fluctuation cycles, forming unreplicable industrial barriers. Xpeng focuses on full-stack smart driving self-research. Continuously optimizing urban NGP, full-domain intelligent assist driving system. Using smart technology as core label, building differentiated product competitiveness, escaping specification involution. Li Auto focuses on vehicle-mounted large models, self-researched computing power chips. Focusing on smart cockpit and whole vehicle smart interaction upgrades. Relying on high computing power hardware and localized smart ecosystem, building high-end smart experience barriers, supporting brand premium. Changan Automobile continues high R&D investment. Digging deep into three core technologies: Blue Whale Super Engine Hybrid, self-researched Tianshu Smart, Golden Bell Shield Solid-state Battery, achieving autonomy and controllability in hybrid, smart, and battery technologies. Both supporting domestic product differentiated upgrades, also providing core technology endorsement for overseas models.

Comprehensive mainstream automaker cycle response actions show that the current domestic automotive industry is experiencing a round of deep adjustment. This is a natural periodic correction after years of scaled expansion. Narrowed profit space and slowed market sales growth are stage problems faced by the entire industry. This does not mean the development momentum of leading automakers has stalled. Need to view the industry status objectively with a long-term industrial perspective.

Through short-term market pain, the automotive industry's three long-term upward development trends remain stable and unchanging. First, electrification and intelligence transformation are already irreversible core main lines of the industry. New energy and smart cars will continue to replace traditional fuel vehicles, reshaping market patterns. Secondly, the trend of Chinese car exports is strong. Overseas market share steadily climbing. Globalization development dividends are still being released continuously. Finally, industry reshuffling accelerates. Market resources are concentrating on leading enterprises with complete overseas layouts, core self-research technologies, and multi-brand differentiated product matrices. Advantaged automakers will continue to seize the market at the bottom of the cycle.

Leading automakers represented by BYD, Geely, Changan did not passively respond to short-term market pressure. Instead, treated this round of cycle as a key window for strategic power accumulation. Synchronously increasing global layout, new product launch, and underlying core technology R&D. Solidifying long-term competition foundations. Price competition and profit pressure are just inevitable pains of industry survival of the fittest. High-quality automakers with global strategies, full-stack self-research technologies, and layered differentiated product systems possess strong risk resistance capabilities. They are able to safely traverse the industry downturn cycle, welcome greater development opportunities in the next round of industry upswing.