Summary of Key Points
Saisi is expected to incur a loss of 1.5-1.8 billion yuan in the first half of 2026 (compared to a profit of 2.941 billion yuan in the same period last year), with its core subsidiary, WM Motor, reporting losses of 1.05-1.3 billion yuan. The company had a profit of 754 million yuan in the first quarter but then suffered a loss of 2.254-2.554 billion yuan in the second quarter, showing a significant contrast. The main reasons for the losses are the increase in raw material prices (storage chip costs have risen by five times, and lithium carbonate prices have increased from 80,000 yuan per ton to 180,000 yuan per ton, increasing the cost of each WM Motor vehicle by 15,000-20,000 yuan) and the depreciation of old assets (due to technological advancements that render older equipment and parts obsolete). Additionally, the entire automotive industry is facing profitability pressures: revenue has increased by 1.4%, but costs have risen by 2.3%, resulting in a 20% decline in profits. Other companies such as GAC (lossing 4.06-4.57 billion yuan) and Jianghuai (losing 740 million yuan) are also predicting losses. However, Saisi claims to have sufficient cash reserves to withstand these challenges.
Detailed Analysis
1. **Saisi’s “Performance Rollercoaster”: Profit in Q1, Loss in Q2**
Saisi reported a profit of 754 million yuan in the first quarter, which seemed promising, but the situation turned disastrous in the first half of the year. This means that the loss for the second quarter alone equals the expected loss for the entire first half plus the profit from the first quarter, resulting in a loss of up to 2.554 billion yuan. In just three months, the company went from making a profit to incurring a potential annual loss, reflecting the sudden increase in industry pressures during the second quarter.
2. **Where Did the Losses Go? Two Major Causes: Rising Raw Material Prices and Depreciation of Old Assets**
- Rising Raw Material Prices: The cost of storage chips has increased by five times (for example, a chip that used to cost 100 yuan now costs 500 yuan), and lithium carbonate prices have risen from 80,000 yuan per ton to 180,000 yuan per ton (an increase of 100,000 yuan per ton), directly increasing the cost of each WM Motor vehicle by 15,000-20,000 yuan. Assuming a vehicle sells for 200,000 yuan and the original profit was 30,000 yuan, the new cost reduces the profit to just 10,000 yuan, or even results in a loss.
- Depreciation of Old Assets: With rapid technological advancements, parts and production lines for older models become obsolete and must be valued at their current market value (for example, equipment that was purchased for 1 million yuan may now only sell for 200,000 yuan), resulting in a loss of the difference.
3. **The Entire Industry is Struggling:** Revenue Growth Cannot Keep Up with Cost Increases, Leading to Record-Low Profit Margins
Data from the China Association of Automobile Manufacturers (CAAM) shows that automotive industry revenue only increased by 1.4% from January to May this year, while costs rose by 2.3%, causing profits to decline by 20%. The overall industry profit margin is currently at a historic low of 3.4%, with May seeing a mere 3.6%. Typically, May is a peak sales season, but this year’s profits were even lower—equivalent to making just over 3 yuan from selling a vehicle, which is less than the interest rate on a bank deposit.
4. **Fellow Companies are in Even Worse Straits:**
Saisi is not alone in facing these challenges:
- GAC Group: Expected loss for the first half of the year is 4.06-4.57 billion yuan, with a loss of 3.4-3.9 billion yuan in the second quarter, nearly doubling the 1.8 billion yuan lost last year (equivalent to a daily loss of 37 million yuan).
- Jianghuai Automobile: Lost 740 million yuan in the first half of the year, which is still a loss despite a 32.81 million yuan reduction compared to last year.
These figures indicate that rising raw material prices and cost pressures are common issues across the industry, not unique to Saisi.
5. **Saisi’s Strength: Adequate Cash Reserves**
Despite the losses, Saisi emphasizes having sufficient cash reserves and a stable financial position. This means it has the funds to continue with research and development, new vehicle production, and to cope with future cost increases. For example, it can invest in developing new batteries and models or to address ongoing cost challenges without facing immediate financial difficulties.
Conclusion
Saisi’s losses reflect the broader pressures faced by the automotive industry: rising raw material prices and technological advancements are squeezing profits. However, with its cash reserves, Saisi is able to withstand these challenges for now. For the industry to recover, it may take a decrease in raw material prices or breakthroughs in technology that can reduce costs. For consumers, car prices are unlikely to fall in the short term, and some models might even see price increases as companies strive to remain competitive.