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China carmakers face margin squeeze as sales fall 20.2%
Car sales on mainland China dropped 20.2% year on year to 8.7 million units in the first half of 2026, while profit margins for car sales narrowed to about 1.5%.
China’s carmakers are running into tighter profitability as higher raw material costs and weaker demand leave less room for additional discounts, according to SCMP Economy. The outlet highlights that a rollback of purchase subsidies and tax incentives has worsened the pressure on sales.
At an industry conference in Changchun, CAAM deputy secretary general Chen Shihua said net earnings from a 100,000 yuan car were about 1,500 yuan, implying a 1.5% profit margin. That compares with a 3.4% profit margin in May, based on figures from the China Passenger Car Association.
Citing data from the CPCA, SCMP Economy said first-half mainland car sales fell 20.2% year on year to 8.7 million units. The outlet also notes that downstream manufacturing sectors in mainland China had an average profit margin of 6.1% two months earlier.
SCMP Economy reported that industry participants expect further fallout, with Zhejiang dealer and supplier owner Qian Kang saying squeezed margins limit how much carmakers can cut prices to attract buyers, and that smaller players may be pushed out as weak sales persist.