by HOU Ruining
China's auto sector posted its weakest profitability in five years in October, adding pressure to manufacturers already squeezed by a prolonged price war and higher battery costs.
Industry sales margins fell to 3.9% in October, down 0.5 percentage point from September and the lowest level for the month since 2019, according to CUI Dongshu of the China Passenger Car Association, which publishes widely used official retail-sales data. For January to October, the sales margin averaged about 4.4%, only slightly higher than last year and still near a multi-year low.
Cui said government trade-in incentives have boosted demand for household goods, but automakers have not seen a similar improvement. Food and beverage producers reported significantly stronger profitability over the same period, highlighting the pressure on carmakers' returns.
Industry revenue rose about 8% in the first ten months, while costs increased at a slightly faster pace. As a result, total profit climbed only around 4.4% year on year, reaching RMB 389.5 billion (about US$55 billion). A value-chain estimate that includes component suppliers put per-vehicle revenue at about RMB 325,000 with gross profit near RMB 14,000, leaving manufacturers with thin margins as factory-gate prices decline and raw-material costs remain elevated.
Earnings diverged among major players. BYD's profit fell 7.6% in the first three quarters, with a sharper drop in the third quarter. Li Auto swung to a loss after revenue fell by more than a third from a year earlier. Xiaomi reported its first operating profit in its EV and AI unit, and Leapmotor returned to the black after a loss in the same period last year. The split reflects differing levels of cost flexibility and exposure to aggressive price competition in the world's largest EV market.
Production and sales remained robust despite the margin squeeze. Data from the China Association of Automobile Manufacturers showed output and deliveries both grew at double-digit rates in January to October. New-energy vehicles led the expansion, with sales rising more than 30% and accounting for nearly half of all new-car sales.
Cui said the market is likely to maintain steady growth in the fourth quarter with continued policy support, though any recovery in profitability may take longer to emerge.
