China EV automakers are currently facing a double squeeze. Multiple Chinese automakers have issued earnings forecasts for the first half of the year, revealing a troubling trend. Rising costs for raw materials and components are eroding profit margins.

Rising costs from upstream price hikes for materials and components are estimated to increase per-vehicle material costs by at least 4,000 to 7,000 yuan (600–1,000 USD), with some luxury models seeing increases of up to 10,000 yuan (1,500 USD).

There is shrinking demand and intense competition. China’s domestic retail sales of passenger vehicles fell by 20.2% in the first half of 2026. To maintain market share, companies are forced to offer heavy discounts and subsidies, while simultaneously funding a relentless pace of new product launches – averaging 3.6 new models per day in the first five months of the year.