As competition in China's auto market grows fiercer by the day, an analysis said that automakers have entered a phase in which profits fall despite rising sales. As the number of companies increases and the technology gap narrows, oversupply has deepened, severely eroding even the leaders' profitability, while some have slipped into full-year losses, making the slowdown in the industry more evident. Experts predicted that only a handful of companies that solve their profitability problems will survive.
On the 15th, according to China Business News, BYD's 2025 sales came to 803.965 billion yuan, up 3% from a year earlier. However, net profit over the same period fell 19% to 32.619 billion yuan. BYD's net profit rose 446%, 81% and 34% in 2022–2024, respectively. The company said in its earnings report, "The pace of replacing old and new products is accelerating and market competition has become unusually intense. Intensifying price competition and excessive marketing are squeezing profitability across the industry."
Over the same period, Changan Automobile saw net profit fall 44% despite sales rising more than 2%, and Guangzhou Automobile Group Co. (GAC Group) posted a net loss of 8.784 billion yuan, recording its first annual loss since listing. Li Auto, which once achieved quarterly and annual profits, also swung back to a loss. SAIC Motor saw net profit top 10 billion yuan, rising more than 500% from a year earlier, but this was due to a low base from large asset impairment charges the previous year, making it actually the second-lowest net profit since 2021.
The decline in Chinese automakers' profitability has continued into this year. According to the China Passenger Car Association, the auto industry's sales margin in 2025 was 4.1%, down 0.2 percentage points from a year earlier, and fell further to 2.9% in January–February this year. According to the China Association of Automobile Manufacturers, against this backdrop, first-quarter auto sales fell more than 20% from a year earlier.
China Business News attributed the cause to oversupply driven by a growing number of market participants, narrowing technology gaps among companies, and more frequent new product launches as competition intensifies. Wei Jianjun, chair of Great Wall Motor, said last year, "Homogenization among automobile corporations is severe, making it difficult to widen the technology gap, and it is hard for anyone to generate revenue," adding, "The industry is caught in a vicious cycle." Niirij, chair for China at consulting firm McKinsey, also pointed to the excessive number of automakers, saying, "Some companies lack competitiveness to the point that they have no value even for mergers and acquisitions (M&A). During the era of rapid growth, many corporations could survive, but as growth slows, the market is shifting toward profitability."
Experts predicted that corporations that fail to secure competitiveness will be forced out of the market or merged within a few years, leaving only a few players. Zheng Yun, global senior partner at Roland Berger, said, "By 2030, the Chinese auto market will be left with five to seven companies selling more than 2 million units annually, about 10 companies selling more than 1 million units, and a small number of others." In fact, in recent years, startups such as WM Motor and Zhiwei Auto, as well as foreign brands such as Jeep and Mitsubishi, have already exited the Chinese market.
Amid these limits to domestic growth, companies are turning to overseas markets. Chery Automobile Co., China's largest auto exporter, recorded exports of about 1.29 million units last year, up 33%. BYD, in second place, surpassed 1 million overseas sales for the first time last year, offsetting a decline in domestic sales. This year's goal is 1.3 million units.
However, exports also face region-specific risks. Unlike Australia, where Chinese-made new cars are expected to exceed a 40% share by 2030, the European Union (EU) is pushing to impose tariffs and tighten investment regulations, raising entry barriers. In October 2024, the EU imposed anti-subsidy tariffs on Chinese electric vehicles, and in March this year it raised barriers to investment by Chinese corporations.