Summary of Key Points
This news article focuses on the profit distribution and supply chain dynamics in the new energy vehicle (NEV) industry: Automakers have extremely low profit margins (earning only 3,000 yuan from 200,000 vehicles), with profits concentrating in a few upstream sectors such as batteries and intelligent technologies. Chinese suppliers are gaining global orders due to their strengths in "completeness, speed, and resilience," but they still fall short of becoming the "chain masters" who can define industry standards. It also clarifies the misconception that automakers are at the mercy of suppliers—while profit concentration is a reality, it is not a zero-sum game; rather, it is an inevitable outcome of global supply chain competition.
Detailed Analysis
1. Profits Are Not Being Taken All by Automakers, but Not All Suppliers Are Benefiting Either
- Automakers Are in the Most Difficult Position: In the first quarter of 2026, the average profit margin for the domestic vehicle manufacturing industry was only 1.5% (compared to 5% for the manufacturing sector as a whole). The China Association of Automobile Manufacturers estimates that automakers earned a mere 3,000 yuan from 200,000 vehicles.
- Traditional Suppliers Are Struggling Too: Suppliers of components like wiring harnesses and interior/exterior decorations face pressure from automakers to lower prices and extend payment terms, resulting in very thin profits.
- Profits Are Concentrated in a Few Segments:
- Batteries (Mass Production): CATL earns a net profit of 230 million yuan per day. Although its domestic market share has dropped from 52% to 43%, its profits have increased due to its large scale and overseas business. Automakers try to negotiate price cuts with secondary suppliers (such as Zhongxin Innovation Aviation), but they cannot quickly match CATL's cost advantages (CATL’s production capacity is seven times that of its competitors).
- Platform Repurposing (e.g., Huawei): By selling the same technology to multiple automakers through platforms like HarmonyOS and HI, Huawei can spread R&D costs and achieve a gross margin of 55%.
- Advanced Driving Software: Companies like Horizon and Momenta have gross margins of over 60%, but they require significant investment in research and development and have not yet achieved stable profitability (they often rely on spending heavily to secure orders).
2. Why Are Chinese Suppliers Winning Global Orders? Three Key Factors
- Completeness: China has the highest density of the supply chain, capable of producing an entire electric vehicle from lithium mines to battery packs, chips, and algorithms within a few hundred kilometers. For example, there are 400 suppliers surrounding Tesla’s factory in Shanghai, and parts are delivered within 4 hours of being ordered.
- Speed: The Chinese supply chain can respond at an extremely fast pace. It takes European automakers five years to develop a new platform, while the Chinese supply chain can deliver a solution in 12 months. To meet the delivery requirements for vehicles like the WM9, suppliers have even moved their factories next to automakers (within a 5-minute drive).
- Resilience: Flexible production allows Chinese suppliers to cater to a wide range of vehicle models. For instance, CATL’s production lines can produce batteries for multiple brands like Deep Blue and Changan Qiyuan; Huawei’s advanced driving software offers four different levels of solutions (SE/Pro/Max/Ultra) that suit vehicles ranging from 100,000 to millions of units in sales.
3. The Claim That "Automakers Are at the Mercy of Suppliers" Is Only Half True
- True Part: Profits are indeed concentrated in a few upstream sectors (batteries and intelligent technologies), with automakers accounting for over 50% of the purchase costs.
- False Part: It is not a zero-sum game. Global automakers actively outsource R&D and validation to China because doing so reduces costs and speeds up innovation. A high level of localization does not mean all profits remain in China, but it reflects the recognition of Chinese suppliers’ capabilities.
4. How Close Are Chinese Suppliers to Becoming "Chain Masters"? They Still Lack Some Key Elements
- The Criteria for Being a Chain Master: To be considered a chain master, a company must be able to define technical standards, control key interfaces, set prices, coordinate the entire supply chain, and assume market risks.
- Current Progress: Global automakers are investing heavily in R&D in China (e.g., BMW has 3,000 engineers there). Suppliers have evolved from simply selling components to providing comprehensive solutions (for example, Desay SVW has transformed from a contract manufacturer into a leader in intelligent cockpits).
- Remaining Challenges:
- Automakers still hold significant control over vehicle design (brand, distribution channels, user data).
- Chinese suppliers face pressure on prices (CATL’s market share has decreased by 9%).
- The profit models for advanced driving software have not yet become self-sustaining.
- Globalization is limited by geopolitical factors (access to European and American markets).
In One Sentence
China’s new energy supply chain has moved from a supporting role in manufacturing to a leading position in technology. However, to become the "chain master," it still needs to gain more control over pricing, global markets, and the establishment of industry standards.
(The entire article uses clear language that explains complex financial and business concepts in an easy-to-understand way, suitable for a general audience.)