China’s carmakers face profit squeeze amid rising material costs, dwindling demand

The country’s carmakers are expected to report a drop in net profits for October, says the China Association of Automobile Manufacturers (CAAM)

A surge in the factory-gate inflation rate drove up prices of materials used in carmaking, which include steel, aluminium and copper

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From January to September, the industry delivered a total of 14.86 million cars, a drop of 11 per cent on the year. Photo: Xinhua

Published: 8:49pm, 29 Oct 2021Updated: 10:29pm, 29 Oct 2021

China’s automotive industry is facing a profit squeeze because of rising material costs and dwindling consumer demand.

The country’s carmakers and auto component suppliers are expected to report a drop in net profits for October, the China Association of Automobile Manufacturers (CAAM) said in a statement on Friday.

The bearish forecast added to evidence that the mainland’s carmaking sector is heading for a fourth consecutive year of contraction amid a worsening business climate.

The country’s large-scale car assemblers and component suppliers reported a combined net profit of 380 billion yuan (US$59.4 billion) in the first nine months of 2021, up by a scant 1.2 per cent from a year ago, the CAAM said.

It said that net profit in the industry would fall, starting from October.

“The overall Chinese automotive industry is expecting hard times ahead now that material costs are rising sharply,” said Ivan Li, a fund manager at Shanghai-based Loyal Wealth Management. “Electric vehicle, formerly a fast-growing segment, has also hit a blip as surging material prices caused a price hike in batteries.

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