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In recent years, China's automobile industry has developed rapidly, accounting for about one-third of the global automobile market, and its export volume has surpassed Japan to become the first. Especially in the field of new energy vehicles, China has become the world's largest electric vehicle market.

However, compared with foreign-funded automakers, the profitability of Chinese automakers still needs to be improved. According to the latest list of the world's top 500 in 2024 released by Fortune, the overall profit margins of Chinese auto companies (including parts companies) shortlisted in the world's top 500 are relatively low. Cui Dongshu, secretary-general of the China Passenger Car Association, recently issued an article stating that from the perspective of the shortlisted companies, China is at the third level in terms of revenue scale. Compared with other industries that are in a relatively backward state, the automotive industries of Germany and Japan are relatively stronger than China. Among the top 500 companies, Germany, Japan and China will have total revenues of US$936.8 billion, US$727.7 billion and US$678.7 billion in 2023, respectively, with profits of US$53.1 billion, US$53.6 billion and US$17.7 billion, respectively.

Cui Dongshu said that in terms of profit margin, the profit margin of Chinese automobile companies (top 500) is only 3%, which has changed relatively little, while the profit margin of German and Japanese companies is 6%-7%.

However, the profits of China's automobile industry have also diverged. Leading companies in the new energy sectorBYDThe profits of CATL and others are rising, while the overall profits of traditional enterprises are on a downward trend.

There is a big gap in profits between Chinese and foreign companies

Before 2010, SAIC and FAW were among the world's top 500 companies. As the Chinese auto market entered its golden age, Dongfeng,auspicious、BAIC、GACThe Chinese new energy vehicle industry is developing rapidly, and the number of Chinese auto industry chain companies entering the world's top 500 is gradually increasing.

In 2022, BYD entered the Fortune Global 500, and in 2023, automotive new energy parts companies such as CATL and Luxshare Precision entered the list. But at the same time, the industry is also constantly changing. Xinjiang Guanghui withdrew from the Fortune Global 500 this year.CheryBecome a new entrant.

Overall, as the number of enterprises increases, the revenue and profits of Chinese enterprises are gradually increasing. The sales revenue of automobile companies in the top 500 has increased from US$2.4 trillion in 2015 to US$3.48 trillion in 2023. At the same time, the rankings of enterprises have risen and fallen. In terms of profit performance, it has risen from the previous peak of US$13.7 billion (2018) to the level of US$17 billion in 2023. Among them, the recent sales and profits of CATL and BYD have skyrocketed, forming an internal diversion.

It is worth noting that there is still a large gap in profitability between Chinese and foreign-funded enterprises. The overall profit margin of the world's top 500 automobile industry is 6%, while the overall profit margin of Chinese enterprises is 3%.ToyotaThe profit margin of automobiles reached 11%, with Volkswagen and Hyundai Motor's profit margins being 5% and 7% respectively. Among Chinese companies, only CATL achieved a profit margin of 11%, while BYD's profit margin was 5%, while SAIC and BAIC's profit margins were both 0%, Geely and Chery's were 1%, FAW's was 3%, and Dongfeng suffered a loss (-1%).

On the one hand, foreign-funded automakers have adjusted their product structure to allocate resources to produce products with higher profits. At the same time, foreign brands have strong scale effects and cost control capabilities, and their brand premium capabilities are still stronger than those of domestic companies. On the other hand, foreign brands are global automakers, and their performance in mature markets in Europe and the United States is stable. At the same time, there is no excessive competition in these markets. The domestic market is highly competitive, and Chinese brands are not global automakers. Most brands compete mainly in the domestic market and gain market share through price reduction strategies. Especially in the past two years, the automobile industry has launched a price war, and profits have been further compressed under the price reduction strategy.

Although the overall profits and revenues of the top 500 companies are rising. But looking at the domestic automobile industry as a whole, the profit margin has shown an overall downward trend in recent years. From 2015 to 2023, the profit margins of the automobile industry are 8.7%, 8.3%, 7.8%, 7.3%, 6.3%, 6.2%, 6.1%, 5.7% and 5% respectively. Cui Dongshu said that the profits of most companies have fallen sharply, and the survival pressure of some companies has increased. The current fuel vehicle market is profitable, but it is shrinking rapidly; new energy vehicles are growing rapidly, but the overall losses are large, and the contradictions and pressures are great.

In addition, the current automotive market is highly competitive and product iteration is accelerating. For example, in March this year,ZeekrLaunchedZeekr 001The 2025 model was launched in 2017, but in less than half a year, Zeekr 001 has once again launched a new 2025 model, which has been upgraded in terms of intelligence while keeping the price unchanged. Zeekr's rapid iteration is not an isolated case, and rapid product iteration also places higher demands on R&D investment. If the market is difficult to open up, under high investment, corporate profits will be further compressed. Recently, Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, publicly stated that some companies are eager for quick success and have pushed prices to extremely low levels, resulting in a downward shift in the overall price of the industry. At present, price competition is extremely fierce, and the profit margin of the automobile industry is low, but the automobile industry is an industry that requires high investment. Too low profits will affect the R&D and innovation of the entire industry.

Dramatic changes in profit structure

Although the overall profit margin of Chinese companies in the Fortune Global 500 is relatively low, the profit margins of CATL and BYD are relatively high, close to the international level. In particular, the battery giant CATL has a higher profit margin than Toyota,BMW、BenzAnd other international automobile giants.

Cui Dongshu said that in the profit structure of Chinese automobile companies shortlisted for the top 500 in the world, CATL and BYD accounted for 62% of the profits of the automobile industry among the top 500, occupying an absolute profit scale.

At the same time, the profits of established companies have fallen sharply. FAW's profit share dropped from 36% in 2015 to 17%, SAIC dropped from 42% in 2016 to 12%, while Geely and others performed relatively steadily, falling from a peak of 15% in 2021 to 5%, GAC also dropped from a peak of 7% in 2018 to 2%, BAIC dropped from 11% in 2017 to 2%, and Dongfeng dropped from 14% in 2015 to 2%.

Both BYD and CATL are leading companies in the new energy sector, with outstanding cost advantages under the scale effect. Currently, BYD's annual sales have reached 3 million vehicles, making it the largest automaker in China. With strong sales and cost control capabilities of new energy vehicles, it ranks first in profitability. CATL has become the world's largest battery company, and BYD's battery business shipments are also among the top in the global market.

Since the beginning of this year, with the pressure of cost reduction of complete vehicles transmitted to the upstream, the profitability of most battery companies has declined, but the profit of CATL has still increased. According to a research report released by Soochow Securities, in terms of domestic quotations in July, the price of 523 square battery cells remained at 0.47 yuan/wh, and the price of square iron-lithium battery cells remained at 0.41 yuan/wh, and the prices were basically stable. However, overseas pricing is higher, and the ternary pack is still above 1 yuan/Wh. The price of leading products still has a premium of 5%-15%. CATL is expected to still make a profit of nearly 0.1 yuan/wh, and Yiwei Lithium Energy is expected to make a profit of 0.02-0.03 yuan/wh. China New Energy and Guoxuan High-tech are expected to basically break even. Other second- and third-tier battery factories may have lost cash, and the price war is difficult to continue. It has basically bottomed out. From the perspective of cost differences, CATL has a cost difference of 0.05-0.06 yuan/Wh compared with second-tier battery companies. It mainly comes from several aspects: First, the raw materials, with small usage and low purchase price, can reduce the total cost by 0.01 yuan/Wh; second, the manufacturing cost is 0.01 yuan/Wh low, including large single-line capacity, low labor and less depreciation; third, the yield rate is high and the capacity utilization rate is high, which can contribute to an overall cost advantage of 0.03 yuan/Wh, and this cost leadership advantage will exist for a long time, and it will be difficult for second-tier battery companies to catch up.

"From the rise and fall of the world's top 500 companies and the changes in profits, the dramatic changes in the profit structure brought about by new energy must be strategically considered, and vehicle companies must make batteries." Cui Dongshu said that overall, the profits of traditional car companies have dropped sharply, while the profits of new energy companies have increased sharply, especially the profits of industries such as batteries have skyrocketed, so the industry's profits have been generally stable, but there has been a sharp differentiation within the industry. This sharp differentiation problem will be more serious and prominent in the future.