JPMorgan's "Prudent" Warning, Did We Misjudge the Auto Industry?

In September 2026, overseas investment bank JPMorgan released the latest industry research report regarding the Chinese passenger car market, giving an overall prudent assessment on the domestic vehicle sector, only prioritizing BYD and Geely, two car companies with scale, diversified products, and globalization capabilities. The underlying motive is the H1 2026 financial reports of domestic car companies just released.

The prudent tone of this report is not groundless speculation, but based on the actual operating results of the domestic auto market in H1 2026. Official data from CAAM is right in front: Total domestic car sales in H1 were 15.017 million, down only 4.1% year-on-year. Market volume remains huge, consumer demand has not collapsed. But opening mainstream car company financial reports, the industry's profit system almost collectively collapsed: net profit basically fell across the board, over half of car companies fell into loss, many old top players shifted from profit to loss.

Many people think the difficulty in the car market is "can't sell". The real status is: cars are still sold, just thinner margins, deeper losses the more it sells.

The biggest abnormal reversal in the H1 car market this year: growth was all in revenue and sales, collapse was all in profit.

Among 16 mainstream listed car companies, only Leapmotor, NIO, JAC, BAIC BluePark had net profit indicators achieve year-on-year positive growth. But this group of bright data is completely a "verbal trap": the latter three didn't profit at all, just loss width narrowed, book still losing money. Only Leapmotor truly profited and profit surged in the whole industry.

More terrifying than losses is profit regression. Seres, Li Auto, Voyah, BAIC Motor four last year still steadily made money. This year H1 collectively shifted from profit to loss, directly fell from profit tier into loss quagmire. Market iteration speed far exceeded everyone's imagination.

More subversive to cognition is: even the industry absolute leader, cannot withstand this profit winter.

Take BYD as example. As the industry profit ceiling, it is still the only one in the whole industry with net profit over 10 billion. Basic market share no one can shake. But vertically compared to same period last year, decline data glaring to the naked eye: H1 revenue 344.815 billion yuan, year-on-year 7.13%; net profit attributable to parents 12.325 billion yuan, year-on-year significantly down 20.54%, gross margin fell back to 18.85%.

Simple calculation reveals the truth: BYD sales still leads globally, but vehicle profitability is continuously shrinking. Domestic price war has precisely pierced the leader's profit floor.

If BYD is "earned less", then Great Wall Motor is "earned it all away", perfectly confirms the dilemma of traditional car companies.

Great Wall this year seems comprehensive improvement: H1 sales 575,800 vehicles, year-on-year slight increase 1.22%; revenue first exceeded 100 billion in H1, reached 102.101 billion yuan, year-on-year realized positive growth. Sales, revenue double increase, should be a favorable report card. Result profit directly halved then halved again: net profit attributable to parents only 2.465 billion yuan, year-on-year plummeted 61.11%.

Car companies have entered the distorted stage of "volume without profit, revenue increase without profit increase". Surface sales red fire, inside profit already riddled with holes.

In the industry full loss tide, uniquely killed out a counter-trend steady outlier, again subvert industry cognition.

Geely Automobile became the head only steady basic market share car company: H1 sales 1.423 million vehicles, year-on-year slight increase 1%; revenue 173.6 billion yuan, year-on-year surged 14.67%; net profit attributable to parents 9.09 billion yuan, only slightly down 1.79%, gross margin stable at 17.90%.

In the large environment of full industry profit plummet, nearly zero decline profit performance appears especially scarce. Its counter-cyclical logic is very clear: Zeekr high-end models volume boost lift product average price, overlay overseas exports continuously increase revenue. Using product upgrade + globalization, hedged against domestic fierce price war. This is also the core direction for subsequent car companies to break the situation.

Many people doubt: Sales didn't drop big, where did the car companies money go lost? Two full industry common reasons, reveal the answer.

First, manufacturing costs fully up, squeeze full industry gross margin. Lithium carbonate, chips, copper, aluminum etc raw material prices rose, directly lift per-vehicle manufacturing cost. NIO's Li Bin openly admitted: compared to end of last year, this year Q2 per-vehicle cost up 14,000 yuan. H2 will also up 2,000 yuan again.

Cost up treat all car companies equally, but leader can rely on scale, supply chain advantage hedge. SMEs, new forces can only hard carry. Loss naturally continuously expand.

Second, currency fluctuation violently, swallow overseas car companies profit. Now head car company overseas ratio extremely high. Chery export ratio about 70%, Great Wall over 50%, BYD, Changan over 40%, Geely, SAIC over 30%.

Great Wall's Wang Xingjun directly points out profit down key: Overseas tax subsidy payment delay, currency fluctuation drag performance. But most key reversal is here: excluding exchange rate, one-time gains/losses, most head car companies real profit actually in big surge.

Data won't lie: SAIC adjusted core net profit 7.87 billion yuan, year-on-year surge 72%; Changan adjusted profit year-on-year growth 12%; Geely adjusted core net profit 9.68 billion yuan, year-on-year big increase 46%.

This means, car companies main business earning ability didn't collapse. Just short-term external factors covered real strength. Globalization long ago not bonus, but car company survival core trump card.

More key incremental fact is: Overseas market not only risk avoid, but also earn higher profit.

BYD H1 overseas revenue 181.268 billion yuan, year-on-year surge 33.9%, account for total revenue half more. JPMorgan precise calculation: BYD domestic vehicle profit about 10,000 yuan, overseas vehicle profit over 20,000 yuan. Profitability is domestic market two times. With Hungary, Indonesia, Brazil overseas factories continuously ramp up, overseas high profit bonus will continue release.

Also precisely saw through this industry underlying logic, JPMorgan gave extremely sober differentiated judgment: Keep prudent on Chinese passenger car industry overall. Not blindly bullish. Only long term firmly first choice BYD, Geely two leaders. At the same time strategy bullish counter-cyclical heavy truck track.

Current car market, long ago said goodbye to "Sales is King" era.

2026 H1 Report given ultimate answer very cruel: Domestic involution kill profit, overseas increment save company. Car companies only can in domestic price cut involution, being market eliminated. Holding scale, diversified product, globalization layout leader, crossing industry winter.

This thunderous car market reshuffle just started: Sales decide hype, profit decide life and death, overseas decide future.

 Source: Car Observer