Chinese carmakers are facing growing financial pressure, with a senior Chery executive estimating that around 90% of manufacturers are losing money and warning that many companies will eventually disappear.
The comments come as China’s domestic automotive market experiences declining sales, manufacturers confront rising development costs and Chinese vehicle exports continue expanding rapidly.
For Australia, where Chinese automotive brands are gaining market share and expanding their dealership networks, the longer-term financial sustainability of those manufacturers is becoming an increasingly important consideration.
Chery Warns 90% of Chinese Carmakers Are Losing Money
Speaking with Australian journalists during the Chery Group User Summit in Wuhu, China, Chery International President Zhang Guibing warned that intense competition and rising research and development costs were placing substantial pressure on manufacturers.
Zhang estimated that approximately 90% of Chinese automotive manufacturers were operating at a loss, based on his assessment of publicly available financial reporting.
He also warned that some manufacturers would disappear as the industry consolidates.
His estimate is an executive assessment rather than a comprehensive, independently audited measure of every Chinese automotive manufacturer.
Nevertheless, separate industry research supports the broader concern about profitability.
Only Three of 30 Chinese EV Manufacturers Profitable
Research published in the 2026 AlixPartners Global Automotive Outlook found that just three of China’s 30 new-energy-vehicle-focused manufacturers achieved full-year profitability in 2025.
The category includes manufacturers specialising in battery-electric vehicles, plug-in hybrids and extended-range electric vehicles.
AlixPartners expects that only seven of the 30 manufacturers operating in 2025 will reach break-even by 2030.
The consultancy identified several challenges facing the industry:
- Intense competition and sustained pressure on vehicle prices.
- Excess manufacturing capacity and underutilised factories.
- Increasing expenditure on new vehicle development and technology.
- Difficulty achieving sufficient production volumes to cover fixed costs.
- Continued investment requirements as manufacturers expand internationally.
These pressures can be particularly challenging for smaller manufacturers without the production scale, financial resources or established distribution networks of larger competitors.
NIO’s Financial Results Highlight the Challenge
The financial pressure is evident in the results of several recognised Chinese automotive manufacturers.
NIO reported a net loss of approximately ¥14.94 billion in 2025, despite increasing revenue and improving its vehicle gross margins.
The result represented an improvement from its 2024 loss, but demonstrated the substantial investment required to develop vehicles, technology and supporting infrastructure.
Not every Chinese manufacturer is experiencing the same financial difficulties.
Chery Automobile reported a net profit of approximately ¥9.02 billion for the first half of 2026, although this was lower than the corresponding period in 2025.
The difference highlights the importance of distinguishing between individual manufacturer performance and broader industry conditions.
China Reduces Electric Vehicle Purchase Incentives
Financial pressure is also developing alongside changes to China’s government support arrangements for new-energy vehicles.
Research by the Center for Strategic and International Studies estimated that China provided US$230.9 billion in cumulative support to its new-energy vehicle sector between 2009 and 2023.
That estimate included purchase incentives, tax concessions, charging infrastructure, research funding and government procurement.
From 1 January 2026, China’s purchase-tax concession for eligible new-energy passenger vehicles was reduced.
The previous full exemption, capped at ¥30,000 per vehicle, was replaced by a 50% tax reduction capped at ¥15,000.
Other forms of government assistance remain available, meaning the changes do not represent the complete removal of support.
However, the reduction alters the financial environment in which Chinese manufacturers compete for domestic customers.
Domestic Chinese EV Sales Fall as Exports Surge
China’s domestic new-energy vehicle market has also experienced weaker retail demand.
According to the China Passenger Car Association, domestic retail sales of new-energy passenger vehicles fell 16.7% year-on-year in September 2026, reaching approximately 1.084 million vehicles.
This marked the ninth consecutive month of year-on-year declines.
At the same time, Chinese new-energy passenger vehicle exports increased 163.5%, reaching approximately 558,000 vehicles during September.
The contrasting figures highlight a significant development.
Domestic demand is under pressure, while international markets are becoming increasingly important sources of sales growth.
For manufacturers competing in an already crowded domestic industry, overseas expansion provides an opportunity to increase volumes and improve factory utilisation.
However, building an international business also requires investment in distribution, dealerships, parts supply, technical support and customer service.
What Could This Mean for Australian Dealerships?
Australia has become an important destination for Chinese automotive manufacturers seeking growth beyond their domestic market.
Brands including BYD, Chery, MG, GWM and Geely have established substantial Australian operations, while additional manufacturers continue entering the market.
For Australian dealerships, these brands can provide opportunities to access new products, attract customers and expand their businesses.
However, growing vehicle sales do not automatically guarantee long-term manufacturer profitability.
Dealers investing in new franchises need confidence in vehicle supply, parts availability, warranty reimbursement, technical support and ongoing manufacturer investment.
The financial strength of the manufacturer is therefore an important consideration when assessing the longer-term viability of a dealership relationship.
For customers, the concerns are different but equally relevant.
A manufacturer’s financial difficulties do not automatically invalidate existing warranty obligations, and local distributors or other responsible businesses may continue providing support.
However, restructuring, withdrawal from a market or business failure can create uncertainty around parts supply, servicing arrangements and warranty administration.
Will Chinese Automotive Brands Consolidate?
Chery’s warning does not mean that 90% of Chinese automotive brands will disappear, nor does it establish which manufacturers are most vulnerable.
The industry includes profitable established groups, rapidly expanding businesses and smaller manufacturers still working towards financial sustainability.
Some companies may improve profitability through increased production volumes, cost reductions and international sales.
Others may pursue mergers, acquisitions or restructuring.
The longer-term outcome remains uncertain.
For Australia’s automotive industry, the important distinction is between a manufacturer successfully gaining market share and building a profitable, sustainable business capable of supporting its vehicles for years to come.
As Chinese brands continue expanding into Australia, the financial strength and long-term commitment of the companies behind them will become increasingly important to dealers, customers and the broader automotive industry.
Sources: CarExpert, October 2026; AlixPartners 2026 Global Automotive Outlook; NIO 2025 financial results; Chery Automobile 2026 interim results; Center for Strategic and International Studies; China Passenger Car Association; Chinese government vehicle purchase-tax announcements.
