Who Has It Worse?

The competition in the car market is becoming increasingly fierce, and car companies are making less and less profit.

Last year, the combined net profit of 18 major domestic listed car companies was less than 80 billion yuan, only about one-third of Toyota's, prompting an industry-wide wave of reflection that there is an imbalance between the scale and profitability of China's auto industry. However, after reviewing the half-year financial reports of traditional multinational automakers, it becomes clear that the decline in profitability is not limited to Chinese car companies.

From the performance of several major multinational car companies in the first half of 2025, although the revenue figures of most companies did not show significant fluctuations, net profits collectively experienced a "collapse," with declines exceeding double digits across the board.

Among them, General Motors’ net profit dropped by 20.9%; Porsche, Stellantis, Ford, and Renault were not spared, with their net profits slashed by half; although Audi’s revenue slightly increased, its profit plummeted by nearly 40%; Mazda, in particular, plunged from a profit of 49.8 billion yen to a deep loss of 42.1 billion yen.

The collective collapse of traditional giants in their ability to make money has struck like a thunderclap, leaving people astonished. In our perception, multinational giants have always enjoyed hefty premiums and high profits thanks to their brand aura and technological barriers. However, the drastically changed automobile market is fiercely eroding the profits of these old players, and the era when they could make easy money is quietly coming to an end.

The Predicament of Multinational Giants

Looking at different brands, the rate of decline varies for each.

General Motors' revenue increased slightly by 0.8%, while net profit declined by 20.9%. Porsche's revenue decreased, and net profit plummeted by 66.6%, leaving only 718 million euros. Although Audi's revenue maintained growth, profit fell by nearly 40% to 1.346 billion euros. Mazda's operating performance declined across the board in the second quarter, with net profit attributable to the parent company turning from a profit of 49.8 billion yen in the same period last year to a loss of 42.1 billion yen.

Amidst grim financial data, automakers are announcing reductions in their annual targets. On August 7, Toyota Motor Corporation announced a downward revision of its full-year operating profit forecast from 3.80 trillion yen to 3.20 trillion yen. Audi also lowered its full-year financial forecast, reducing its operating profit margin expectation from the previous 7% to 9% down to 5% to 7%.

Meanwhile, the giants are blaming tariffs for the decline in profits.

As one of the car companies experiencing the most significant decline in net profit, Ford Motor Company stated that the impact of tariff adjustments was greater than expected. In April this year, the "tariff war" initiated by the U.S. caused a strong impact on the global automotive industry, and the effects have continued to this day. Additionally, companies including Mazda, Toyota, and Audi have also stated that U.S. tariffs are the core drag factor.

In April this year, the tariff war initiated by the United States, like a Damocles sword hanging over the global automotive industry chain, has become a direct burden crushing the profits of multinational car companies.

Under the heavy pressure of tariffs, the prices of end products are forced to rise, and consumers' willingness to purchase cars is suppressed. Meanwhile, the supply chain costs of vehicle manufacturers are rising sharply. If core components need to cross tariff barriers to enter the market, the cost increase is significant.

In order to avoid high tariffs, car manufacturers have to hastily initiate a deep restructuring of the global supply chain.

Porsche is considering moving certain production steps from Germany to the United States; BMW has accelerated the transfer of some MINI production lines from the UK to China in recent years; Stellantis is also adjusting its European factory layout... However, production transfer is by no means an easy task.

The selection of the site for the new factory, its construction, equipment commissioning, worker recruitment and training, and the localization and reshaping of the supply chain all require significant capital investment and time costs. Even if the initial relocation is completed, issues such as low efficiency in the initial ramp-up of production capacity and unstable yield rates will continue to erode profit margins.

The restructuring of the supply chain in such a hasty manner is inherently an expensive and uncertain painful process.

Beyond the explicit "visible threat" of tariffs, the deeper "invisible threat" to the profits of multinational car companies comes from the heavy historical burdens and high investment costs associated with their own transformations.

On one hand, the traditional fuel vehicle business used to be a profit cow, but as the global wave of electrification irreversibly advances, its market space is continuously being compressed, and the contribution rates of sales and profits are steadily declining.

However, the massive production capacity, redundant personnel, and fixed operating costs established around fuel vehicles are difficult to reduce instantly. The restructuring costs repeatedly mentioned in the financial reports of some brands are precisely the price of this structural adjustment. Closing redundant factories, laying off employees, and dealing with idle equipment each result in cash outflows amounting to hundreds of millions of euros. These costs directly impact the current period's profits.

On the other hand, massive investments for the future are urgent and cannot be delayed.

The Volkswagen Group plans to launch more than 20 electrified models in the Chinese market by 2027 and to offer around 30 pure electric models by 2030. Companies such as Mercedes-Benz, BMW, and Toyota are all investing heavily in the development of electrification platforms, breakthroughs in battery technology, the building of intelligent software-defined automobile capabilities, and the deployment of charging networks. These investments cannot be converted into substantial sales revenue and profits in the short term, but they continuously drain cash flow like a black hole, illustrating the profit dilemma faced by companies during the transition period.

Adapt to change in competition.

The profit downturn of traditional multinational car companies is not accidental; it is an inevitable manifestation of an unprecedented transformation in the automotive industry in a century. On the surface, it appears as a decline in profits, but behind it lies the restructuring of the industry landscape. The core issue is no longer who earns less, but rather that the old order is collapsing.

Therefore, those who can persist in this marathon until the transformation is complete, economies of scale become apparent, and the new business model matures, will eventually usher in a spring of profits. As for those enterprises that cannot adapt, they may face the risk of being eliminated or integrated.

When traditional profit models seem to be faltering under multiple shocks, the strategic importance of the Chinese market has never been more significant.

Data shows that in the first half of this year, China's automobile sales reached 15.65 million units, an increase of 11% year-on-year, significantly surpassing the global average growth rate of 5%. More critically, in June this year, China's share of the global automobile market had strongly rebounded to 36%, with a cumulative share of 33.8% for the first half of the year. China's role as a major engine in the global car market is becoming increasingly prominent.

Considering the importance of the Chinese market, numerous multinational giants are accelerating their strategic deployment.

Volkswagen Group is betting on the electrification future of China, planning to launch a series of new energy vehicles intensively. The Chairman of the Board of Management of Mercedes-Benz, Ola Källenius, has clearly stated that he remains optimistic about the long-term development of the Chinese automotive market. Even though Porsche's deliveries in China dropped by nearly 30% year-over-year in the first half of the year, the company still invested in operating a newly upgraded research and development center in Jiading, Shanghai, in the second half of the year, demonstrating its determination to deepen its presence in China.

This strategic shift towards the East is not only driven by the allure of market size but also by a comprehensive consideration of the industrial environment, supply chain efficiency, consumer acceptance, and policy guidance. As everyone knows, whoever can better grasp the pulse of the Chinese market and meet the needs of Chinese consumers is more likely to take the lead in future global competition and find new profit support points.

During this period, we witnessed round after round of competition between the giants.

Toyota, BYD, and others are continuously increasing their research and development efforts, with technological breakthroughs set to determine the next stage of influence. At the same time, with the potential trend of the EU following up with tariff policies, car manufacturers need to balance between regionalized production (such as BMW expanding its Mexican plant) and cost transfer. This strategy of reshaping the pricing system through "technology for all" and avoiding trade risks through localized production is precisely one of the countermeasures.

As for whether there is any "effectiveness" and how good the "effectiveness" is, it remains unknown. However, what can be known is that when the profits of brands like Porsche plummet from the clouds, and when Toyota's profits evaporate by a trillion yen overnight due to tariffs, the collapse of these old era orders is declaring: the era where one could rely on brand halo to effortlessly win the global market is gone forever.