China Auto Market Semi-Annual Report: Sales Decline Is Just One Aspect of the Pressure

Surprisingly, this year's World Cup soccer tournament actually had a 'negative impact' on car sales.

The market analysis report for June released by the CPCA mentioned that with the World Cup starting, the time and budget of car buyers were diverted. Implicitly, cars aren't selling well, and even the World Cup is to blame.

This is not just passing the buck. In the first half of this year, the China auto market was indeed very difficult, where any minor factor could affect final transactions.

According to data, national passenger car retail sales were 8.701 million units in the first half, a year-on-year drop of 20.2%. The drop in June alone widened to 23.2%. Statistics from CAAM also show that total vehicle sales including exports were 15.017 million units, a year-on-year decline of 4.1%.

Fortunately, just like a football match, halftime does not mean the end. In the first 100 matches of this World Cup, based on 90-minute results, 40 matches had different halftime win/draw/loss outcomes compared to the final result.

The second half for automakers has just begun. Whether they can rewrite the score depends on what cards each company holds. But one thing is unquestionable: Only leading automotive enterprises that seriously 'prepare' and have a stable 'chassis' have the opportunity to continue leading.

More Difficult Than Sales Decline is Profit Squeezing

A retail drop of 20.2% is already enough to catch the eye, but the more troublesome pressure compared to sales decline is hidden in the automakers' profit statements.

Data from the National Bureau of Statistics shows that in the first five months of this year, industrial enterprise profits above a certain scale nationwide increased by 18.8% year-on-year, while automobile manufacturing industry profits fell by 19.8%.

During the same period, the automobile industry achieved revenue of 420.96 billion yuan, a 1.4% year-on-year increase, but the profit margin was only 3.4%. Back in 2017, this figure was around 8%.

Revenue barely grew while profits plummeted, indicating that insufficient demand is only part of the pressure. Price competition continues, raw material prices like lithium carbonate and aluminum have risen, and R&D, channel, and marketing investments are hard to shrink synchronously with sales. For many automakers, even if cars are sold, the profit remaining on the balance sheet is decreasing.

This pressure is more intuitive when falling on specific enterprises.

In the first half, Li Auto delivered a cumulative 193,500 units, down 5.13% year-on-year, and saw single-month sales decline for two consecutive months; XPeng delivered 165,000 units, down 15.8% year-on-year. New force automakers that used to maintain high-speed growth are also beginning to face growth pressure brought by the expansion of sales volume bases and intensified product competition.

The situation on the profit side is even more severe.

On July 12, Seres released performance forecasts, expecting a net loss of 1.5 billion to 1.8 billion yuan in the first half, while the net profit for the same period last year was 2.941 billion yuan. This means its performance decreased by more than 4.4 billion yuan compared to the same period last year. Price hikes in raw materials such as memory chips and lithium carbonate have pushed up costs, compounded by book adjustments of certain existing assets, significantly impacting its profitability.

The pressure is also transmitting to the channel end. In June, the dealer inventory warning index reached 57.2%, continuing to remain above the prosperity-thriving line; more than 70% of dealer stores did not complete their half-year sales targets. Slower inventory turnover and expanded terminal discounts further compressed the profit space for dealers and automakers.

The new energy market is no exception either. The penetration rate of new energy in June has reached 62.8%, but new energy passenger car retail sales still dropped by 14% in the first half. The substitution of new energy for fuel vehicles continues, but no longer naturally equates to the total growth of the auto market.

Insufficient domestic market growth has also made exports an important direction for automakers to seek new growth and diversify operational pressure.

Exports Contribute Growth, Going Overseas Shifts to Local Operation

Data from CAAM shows that in the first half of the year, China's auto exports reached 5.096 million units, a 65.3% year-on-year increase; June alone exports were 1.037 million units, a 75.1% year-on-year increase, with monthly export volume standing at the million-unit level for the first time.

While domestic demand shrinks, exports have become an important fulcrum for many automakers to maintain scale. However, from exporting whole vehicles to building factories overseas to opening channels with international partners, the paths chosen by each company are not the same.

Chery remains the vanguard of exports. In the first half, Chery Group exported 943,800 units, accounting for nearly 70% of total sales; June alone saw exports of 191,100 units, breaking the record for single-month exports by Chinese automakers.

BYD's overseas focus is shifting from whole vehicle exports to local manufacturing. In the first half, BYD sold 789,400 units overseas, a 68% year-on-year increase; June overseas sales accounted for more than 40% of its total monthly sales. With factories in Brazil and Thailand coming into production successively, BYD is gradually spreading capacity 'beyond tariff barriers'.

Geely and Leapmotor's export growth rates are equally outstanding. Geely exported 474,200 units in the first half, a 158% increase year-on-year; first-half export volume has already exceeded that of the full year of 2025. Leapmotor utilized Stellantis' channels and factory layout to go overseas, exporting nearly 100,000 units in the first half, also exceeding the full previous year. Borrowing from a mature global system allowed Leapmotor to save the time needed to build its own channels and capacity.

SAIC's overseas sales in the first half were 735,000 units, a 48.7% year-on-year increase, accounting for about 36% of the group's total sales. Overseas manufacturing, channel, and brand systems accumulated over the years have become an important buffer in this round of domestic market adjustments.

Changan is also accelerating the transformation from product exports to local operations. The 2.0 version of the 'Sea Accepts Rivers' plan released in April proposed long-term, local, and systematic approaches, promoting global business extension into manufacturing, investment, service, and brand operations. With the landing of multiple results such as Brazilian President witnessing the Brazil factory production start, the 20,000th whole vehicle coming off the line at the Thailand factory, and Qiyuan Q05 launching in Uzbekistan, overseas localization layout is gradually showing results. In the first half, Changan delivered 402,000 units overseas, a 35.1% year-on-year increase, accounting for about one-third of the group's delivery volume.

In May, Changan reached a global official cooperation agreement with the Portuguese National Football Team. Carrying out sports marketing in the World Cup year can also be seen as a step where its overseas investment extends from channel construction to brand operations.

As the proportion of overseas sales in the enterprise's total portfolio continues to increase, export numbers are no longer the only standard for measuring the effectiveness of globalization.Tariff policies, certification standards, and consumption habit differences in different markets are significantly distinct. Channels, after-sales, local production, and brand building all require long-term investment, and may not directly translate into profits in the short term.

Therefore, in the second half of the year when evaluating automakers' overseas performance, sales volume is still the foundation, but local operation efficiency, brand recognition, and profit quality will become more important. Whether exports can truly precipitate into long-term growth depends on whether automakers can move from 'selling cars' to 'operating locally'.

Viewing Sales Proportion: Domestic Market Is Still the Main Battlefield

The rapid growth of overseas markets has not changed the basic proportion of the domestic market.

Data from CAAM shows that domestic car sales in the first half were 9.921 million units. Although down 21.1% year-on-year, the scale is still close to twice that of exports, accounting for about two-thirds of total auto sales. Calculated by half-year alone, one percentage point of market share is close to 100,000 units. No mainstream automaker would give up easily.

Domestic market competition is already fierce, but overseas giants have also not chosen to leave.

Data from the CPCA shows that in June, domestic retail of mainstream joint venture brand new energy passenger cars increased by 45% year-on-year. Volkswagen plans to launch more than 20 electrified models in China this year. The locally developed CEA electronic/electrical architecture has entered mass production with the first model, and subsequent models will also be launched successively within the year. As joint venture brands accelerate local R&D and new energy transformation, competition intensity in the domestic market will continue to increase.

Facing internal demand pressure, domestic independent brands are also looking for breakthrough points from different directions such as products, technology, organization, and capacity.

BYD stabilizes the sales basic disk while supplementing infrastructure. June sales reached 403,500 units, achieving year-on-year positive growth again; Megawatt flash charging is also starting to move from conferences to implementation, and charging networks are gradually spreading nationwide.

Geely is asking internal efficiency.Li Shufu proposed 'stopping, merging, transferring, and transforming' redundant entities, compressing repeated brand and R&D investments, and concentrating resources further on main platforms. In the first half, Geely stabilized overall sales volume with 1.423 million units.

New forces in the growth phase have also not stopped expanding. Leapmotor delivered 356,500 units in the first half, a 60% year-on-year increase, becoming the new force with the highest sales volume. The A10 launched in March entered the top three in SUV sales in three months, and the flagship model D19 cut into the fiercely competitive mid-to-large SUV market, promoting volume sales and brand elevation along two lines simultaneously.

Xiaomi delivered more than 180,000 units cumulatively in the first half. Compared to the 550,000 annual target set at the beginning of the year, monthly delivery volume in the second half needs to be increased to above 60,000. Expanding capacity and accelerating deliveries will become the core task of its second half.

Changan Auto achieved deliveries of 1.1956 million units in the first half, with 402,000 units delivered overseas (up 35.1% year-on-year), and new energy deliveries of 456,000 units (up 5.2% year-on-year). In the second half of this year, Changan Auto will concentrate on promoting product launches and technology implementation, continuously promoting the strategic synergy of Avatr and Deepal frontend independence and backend integration, while accelerating the application of self-developed intelligent technology.Currently, the Tiandu intelligent driving assistance function has been successively applied to Qiyuan Q07, A06, and the new Q05. According to the mass production plan announced in May this year, the Qiyuan Q06 launching in the second half will be equipped with Tiandu Pilot on all models, becoming an important node for Changan's self-developed assisted driving solution to further expand its application.

The domestic market still has a semi-annual scale of nearly 10 million units, and replacement demand will not disappear into thin air. The issue is, facing the increasingly dense new car launches and continuously increasing price pressure, automakers not only need to compete for sales but also need to try to repair profits.

In the second half, whether new cars can quickly gain volume, whether technology can be converted into experiences consumers are willing to pay for, and whether scale growth can bring operational efficiency improvements will jointly determine the performance of automakers in the domestic market.

Final Remarks:

In the first half of this year, the pressure on China's auto industry was reflected simultaneously at both sales and profit ends.Exports grew rapidly, providing a new scale fulcrum for automakers; but the domestic market still determines the basic disk of most enterprises and is the most intensely competitive main battlefield in the second half of the year.

The key to follow lies in whether overseas layout can precipitate into continuous orders and local operating capabilities, whether domestic new products can form scale delivery, and whether technology investment can truly be converted into revenue and profit.

For automakers that have completed a certain amount of preliminary layout, subsequent performance depends on whether products, technology, and global reserve can be timely redeemed for sales and income.

For the entire industry, simply pursuing sales volume is no longer enough; delivery speed, cost control, and profit quality will become equally important.

Halftime has passed, but the outcome has not yet been determined.