Sold 1.2 Million Units, Yet Profits Cut by Two-Thirds: How Should Changan Account for This?

In the first half of the year, nearly 1.2 million vehicles were sold, yet net profit plummeted nearly 60% year-on-year. This situation would hurt anyone's pocket.

On the evening of July 14, Changan Automobile released its semi-annual forecast. Net profit attributable to shareholders was expected to range from 740 million to 970 million yuan, compared to 2.291 billion yuan in the same period last year. Cutting off two-thirds like that. The net profit after deducting non-recurring gains and losses is even worse, remaining only between 230 million and 330 million yuan, a year-on-year decline of 70% to 80%.

But if you look at the sales figures, the data is actually not bad. In the first half of this year, Changan Automobile's cumulative sales were 1.1956 million units. 402,000 units sold overseas, a year-on-year growth of 35.1%. 456,000 units in New Energy Vehicles. Looking at it any way, it doesn't look like a report card from the 'edge of loss'.

Sell more, earn less. How exactly is this account balanced?

Where did the money go? Two holes

Changan itself explained two reasons in the announcement: exchange rate fluctuations and rising raw material prices. The official explanation is indeed the truth.

Let's start with exchange rates. In the first half of the year, Changan's overseas sales exceeded 400,000 units, surging 35.1% year-on-year. Cars were sold to Southeast Asia, Europe, and the Middle East, paid in US dollars and Euros. When converted back to RMB, exchange rate fluctuations shrink the balance sheet. The more sold, the greater the exchange loss. This accounting headache falls on any export enterprise, but Changan ran into a tricky spot during the stage of most intense overseas expansion.

Then there are raw materials. Lithium carbonate prices rebounded, copper and aluminum metals rose, and automotive chips followed suit. Battery and chip costs combined raised the per-vehicle cost significantly. What does over 1.1 million units mean? The difference in this accounting is truly substantial.

But the question is, if costs rise, dare prices rise too? The domestic price war is fierce. Whoever raises prices first might fall behind. Consumers buy cars based on price, while enterprises are trapped in the middle—costs pushed up, prices pressured down, squeezing the profit margin thinner and thinner.

Not just Changan, the entire industry is 'bleeding'

Changan is not shouldering this alone. Data from the China Association of Automobile Manufacturers is even more heartbreaking: In the first half of 2026, the average profit margin for domestic vehicle manufacturing dropped to 1.5%, a ten-year low. In 2023 it was still 4.8%, shrinking year by year. By this year's half, it was halved again. What does that mean? For a 200,000 yuan car, the vehicle manufacturer might only profit 3,000 yuan. Not even as much as a battery manufacturer earns.

The entire passenger car market retail volume declined over 20% year-on-year in the first half. The market is shrinking, price wars are raging, profits are falling. Saying 'the entire industry is struggling in the mud' is not an exaggeration at all.

Three cards for the second half, is it enough to turn the tables?

Changan laid out three cards.

The first card: continue pushing overseas. Qiyuan Q05 goes to Indonesia and Pakistan, Deepal S05 and S07 go to the Philippines and Australia, Avatr 07 heads to Europe. The Brazil factory started production in March with an annual capacity of 90,000 units. From export to local manufacturing, this move is significant. The overseas business proportion has risen to around 33.6%, and profit margins in overseas markets are usually higher than domestic ones—less price warfare and greater premium space.

The second card: heavy launch of new vehicles. Qiyuan Q06, A05L, and Lumin Plus, three brand new products, plus iterations of four old models. Avatr launches the second-generation product line. Deepal upgrades smart driving and three-electric systems. The significance of densely launching new cars is to open incremental space with new products, not to compete on price with opponents on old models. Qiyuan Q06 is positioned as the 'Most Beautiful SUV', launching soon, with pure electric and extended range dual power, clearly aiming to grab the compact SUV market.

The third card, possibly the most imaginative—self-developed smart driving system 'TianShu Pilot'. Divided into Pro, Max, and Ultra three versions. The Pro version comes with LiDAR as standard across the range, identifying obstacles 2 seconds earlier than human eyes at night and in tunnels. The Max version relies on 20 million human driving data points for training. The Ultra version uses the VLM visual-language large model, capable of interacting with humans. Qiyuan Q06 will become the first mass-produced vehicle to equip this system across the entire range.

Regarding smart driving, everyone is competing now. But most automotive solutions either rely on suppliers or require extra payment for options. Changan Automobile chose self-development. Whether it can create differentiation depends on the actual experience, but at least strategically, the direction is correct—using technology to fight the price war from a higher dimension, not using price to bear the technology gap.

Painful though it is, the direction is not off-track

The annual target of 3.3 million units is set there. 36% or more completed in the first half, the second half needs to sell an average of 350,000 units per month, roughly double the first half. To be honest, this task load is quite heavy.

But having said that, while profit decline is painful in the short term, it is not necessarily a bad thing in the long run. Why?

Because Changan's money was not spent recklessly. Overseas factory construction, smart driving R&D, new energy transformation, every investment is aimed at long-term competitiveness. Exchange rate fluctuation is an external shock, raw material price increase is cyclical fluctuation, price war is industry reshuffling. These are not problems unique to Changan; it is the growing pain the entire Chinese automotive industry must experience during the transformation period.

What is truly worth paying attention to is: Can these investments start paying off next year and the year after? Can the profit margins in overseas markets continue to improve? Can the smart driving system form a true technical barrier? New energy 5.2% growth—frankly, this number is a bit low, speed needs to accelerate.

Changan is not without risks. Continuous profit declines will affect cash flow, the continuity of R&D investment, and also capital market confidence. But at least the direction is not off-track. When everyone is shouting 'can't compete anymore', being able to counter the trend to push overseas and invest in technology deserves praise.

Whether the three cards for the second half can turn the tables is hard to say. But at least the cards are all there. The rest depends on how to play them.