Surviving on Meager Profits, the Last One Standing Wins

Author | Qin Zhangyong

In June, Chongqing is sweltering with heat, but what’s even more suffocating is the collective anxiety in the automotive industry.

At the 2026 China Automotive Chongqing Forum, numerous automotive executives and industry experts gathered, shedding the hype and flattery of previous years to confront the most genuine market issues:

Declining sales, collapsing profits, ineffective price wars, intensified internal competition...

Every word struck at the industry’s pain points.

This is certainly not doom-mongering but a rational review as the industry reaches a new stage of development. The once high-speed automotive industry has officially bid farewell to the era of incremental dividends and entered the final phase of stock game (stock game). This universal warning unveils the truth of the automotive market’s downturn and outlines the core trends of industry transformation in the coming years.

The market’s chill is best reflected in numbers. Wang Xia, President of the Automotive Industry Committee of the China Council for the Promotion of International Trade, revealed core data at the forum: domestic passenger vehicle retail sales plummeted year-on-year in the first five months of 2026, industry profit margins hit a new low, and overall revenue in the automotive manufacturing sector continued to decline. The triple downturn in sales, revenue, and profits has become the defining theme of this year’s automotive market.

Even more challenging is that the three-year-long price war has lost its effectiveness.

Since the nationwide price cuts began in 2023, automakers have taken turns offering discounts, and new models have flooded the market. However, the threshold for market excitement has risen, and consumers are no longer impulsively buying based on low prices. Automakers are trapped in a vicious cycle: 'cutting prices to boost sales, but with no profits, reducing R&D, resulting in weaker products, and relying even more on price cuts to survive.'

Wang Xia bluntly stated that the diminishing returns of the price war are accelerating, and sales without profit support are merely a numbers game.

Regarding the industry’s future trajectory, William Li, founder of NIO, offered the most straightforward and brutal prediction: the domestic passenger vehicle market could see a 15%-20% decline in 2026, and the automotive industry has entered the most brutal phase of the elimination race.

This is not a short-term market fluctuation but an inevitable result of industrial saturation. Domestic car ownership is nearing its peak, demand for first-time purchases is shrinking, and replacement demand has become more rational. The incremental market has completely closed, leaving everyone fighting over the same slice of the pie, making internal competition inevitable.

At this forum, a strong consensus emerged among participants: the era of extensive industry growth has ended, and the next five years will be a brutal reshuffle period. Survival takes priority, and abandoning reckless expansion is the only choice for all automakers.

As a leader among traditional automakers, Li Shufu, Chairman of Geely Holding Group, made a highly significant statement. He abandoned past expansionist rhetoric and proposed that automakers should proactively downsize. Geely will subsequently and orderly shut down, suspend, merge, or transfer redundant entities within Geely Automobile Group, concentrating resources on core technologies and main platforms.

During the automotive market’s boom period, automakers could capture market share through scale expansion. However, in the era of stock game (stock game), Blind expansion of production (blind expansion) and multi-point layout (strategic layout ) will only dilute strength. Li Shufu’s proactive contraction reflects a logic: scale does not equal strength, and survival is the ultimate priority.

Wang Hui, Chairman of Avatr, directly addressed the pain point of internal competition, stating that relying solely on price competition is a dead end. The biggest issue in the current market is the flood (flood) of homogeneous competition—identical products, similar intelligent configurations, and highly overlapping price ranges have left consumers unimpressed.

Low prices not only fail to boost sales but also erode brand value and raise doubts among consumers about product quality. Relentless price wars will ultimately deplete a company’s R&D capabilities and trap it in a dead-end cycle of low-end internal competition.

Xu Jun, Senior Vice President and Chief Operating Officer of Leapmotor, summarized industry changes with a vivid metaphor: in the past, the automotive market was like climbing a mountain—daring and fast enough could secure an early advantage. Today, it’s like surfing, where the market environment changes rapidly, and courage and speed alone are insufficient. A single misstep could result in being swept away by industry waves.

The collective warnings from these industry leaders are not signs of pessimism but a sober recognition of industrial transformation. Chinese automakers are facing numerous irreversible new trends, and a new industry order is taking shape.

First, meager profits are becoming the norm, and survival is the top priority. Over the past decade, automakers have generally pursued a 'scale first' development logic, prioritizing sales volume even at the cost of thin profits or losses. However, current industry profit margins have fallen below the industrial average, and most automakers are trapped in a dilemma of 'selling more but earning less.'

In the future automotive market, ineffective scale will no longer be tolerated, and profitability will become the core survival threshold for automakers. Shedding inefficient businesses, optimizing cost structures, and refining operations must become mandatory for all automakers.

Second, the price war is fully receding, and the value war is the real battle. The brutal market has proven that low-price internal competition has no winners. Consumer purchasing logic has fundamentally changed—they no longer simply compare prices or specifications but place greater emphasis on product technology, overall vehicle quality, intelligent experiences, and brand services.

Future market competition will completely shift from 'who is cheaper' to 'who offers more value.' Only companies capable of creating differentiated products, building unique brand value, and providing superior user experiences can escape internal competition.

Third, the era of single blockbuster models is over, and systemic capabilities will determine the final outcome. This is easy to understand. Previously, Apple’s blockbuster strategy was like a stimulant for the automotive industry—everyone wanted to replicate it. But cars are not smartphones, and no single trick can dominate indefinitely.

Today, with highly convergent technologies and minimal product differences, single-point advantages can no longer sustain a company’s development. Future competition will be a holistic, systemic contest. Only by comprehensively addressing shortcomings and building collaborative, efficient systemic capabilities can companies withstand market fluctuations.

Fourth, industry reshuffling is accelerating, and weaker players will inevitably exit. The ultimate elimination race predicted by William Li has officially begun. Over the next five years, a large number of small and medium-sized automakers lacking core technologies, brand barriers, or survival strategies based on blindly follow the trend (blindly following trends) will be gradually eliminated by the market. Industry mergers and acquisitions will become the norm.

Market resources, user traffic, and policy dividends will continue to concentrate toward top-tier, high-quality enterprises. The automotive industry will transition from a chaotic landscape of contention of a hundred schools of thought (hundred schools of thought contending) to an oligopolistic competition era where 'the strong get stronger.'

Additionally, global layout has shifted from an optional strategy to a survival necessity.

With intensifying internal competition and shrinking profit margins in the domestic market, going global has become the core way for automakers to break free from predicament (predicaments). Wu Jian, a senior executive at GAC Group, stated that domestic automotive market competition has reached saturation, and automakers must proactively expand overseas, adopting a strategy of 'domestic volume, overseas profits.'

Reviewing the 2026 Chongqing Automotive Forum, all warnings and reflections convey a core message: the era of wild growth in China’s automotive industry has completely ended, and the era of speculation and following trends is gone forever. The current industry downturn is not a decline but an industrial upgrade driven by survival of the fittest.

For automakers, it’s time to abandon illusions. This is the most brutal era for China’s automotive industry but also the highest-quality reshuffling opportunity.

As the tide recedes, impetuosity is washed away, and shortcomings are exposed. Companies with genuine technology, strength, and original aspirations will ultimately weather the cycle and stand firm. The elimination race has begun, and only those who deeply cultivate value and proactively reform will have the last laugh.

Let’s cheer on China’s automotive industry together.