Profit Margins Being Squeezed With All Auto Brands Right Now Except ….

Declining Vehicle Margins Highlighted ……. and it not just with Chinese auto brands

Lets put aside for now the European, Japanese and Korean automotive brands as they have enjoyed great margins in Malaysia since the signing of the AFTA agreement in January 1992.

Today its very different! In the first half of 2026, China’s automotive industry produced 15.1 million vehicles, down 4% year-on-year; generated industry revenue of RMB5,189.3 billion, up 1.8% year-on-year; incurred costs of RMB4,610 billion, up 2.8% year-on-year; and recorded profits of RMB195.4 billion, down 20% year-on-year, resulting in an overall profit margin of 3.8%. 

Based on a full-industry-chain statistical approach, revenue per vehicle reached RMB344,000, up 5% year-on-year; cost per vehicle was RMB305,000, up 6% year-on-year; taxes and fees per vehicle amounted to RMB25,000, up 7.1% year-on-year; and gross profit per vehicle stood at RMB13,000, down 17.7% year-on-year. 

It should be noted that the “revenue per vehicle” figure includes double-counting across upstream and downstream segments of the supply chain. It does not represent the average consumer purchase price and should not be directly compared with data from individual automakers. 

Instead, it is primarily intended to track overall industry trends in revenue, costs, and profitability. Although industry revenue maintained positive growth indicating that the sector’s scale and product value have not stagnated and the faster pace of cost increases relative to revenue growth has led to a significant decline in profits, with incremental revenue failing to translate into earnings as effectively as in the past. 

Rising costs stem from multiple factors, including raw material prices and increased investments in chips and electronic components. At the same time, intense market competition has limited the ability to pass these higher costs onto end consumers, prompting a reallocation of profits across different segments of the supply chain. 

The industry can no longer rely solely on expanding production volume to improve returns. Efficiency metrics such as capacity utilization have become more critical than sheer scale expansion. 

Under current profit pressures, simply reducing procurement prices is not a sustainable solution. 

Effective cost collaboration must instead be built on engineering optimization and process improvements. 

Moreover, the rise of new energy and intelligent vehicles has fundamentally altered cost structures, necessitating that traditional cost management approaches evolve to encompass the full lifecycle of both hardware and software. 

The sector is shifting from a scale-driven competition to one centered on operational quality. OEMs must now precisely evaluate the cash flow and configuration value of each vehicle model, while suppliers need to demonstrate their value through capabilities rather than dependency. 

Optimizing the total cost system has become essential for companies to sustain their investment capacity amid intensifying competition.

Meanwhile, which auto brands are not affected by the above in Malaysia? Can you guess?