China’s new energy vehicle (NEV) production jumped 25% to 16.52 million units in 2025, while output of internal combustion engine vehicles shrank 1% to 18.25 million. The as the automobile sector also posted record revenue of RMB 11.2 trillion ($1.6 trillion) in 2025, up 7.1% year-on-year, but profit margins were just 4.1%, well below the 5.9% average for China’s industrial sector.
NEVs are now close to dominating the automobile sector, but gas guzzlers are still by a small margin outselling battery-power car. And the shrinking average profit margin for the sector is reflective of a fierce price war. It appears there are well over 100 domestic EV brands selling into the China market, and the small overall profit margin for the sector must mean that most of them are losing money or being heavily subsidized by local governments.
Car manufacturing is one of the key “new productive forces” that China is shifting its economy towards as a replacement for property market and other sectors in trouble. But such low profits suggest making sustainable is difficult.