Net earnings from selling a 100,000 yuan car have fallen to 1,500 yuan, according to industry data. Profit margins for carmakers dropped to 1.5 per cent from 3.4 per cent in May. Sales in the first half of the year fell 20.2 per cent year on year.
Chen Shihua, deputy secretary general of the China Association of Automobile Manufacturers, reported the 1.5 per cent margin at an industry conference in Changchun last week. The figure marks a decline from the 3.4 per cent recorded in May by the China Passenger Car Association.
Higher raw material costs and the end of purchase subsidies and tax incentives have reduced demand. Sales on the mainland totalled 8.7 million units in the first half of the year, down 20.2 per cent from the same period last year.
Qian Kang, owner of a vehicle circuit board factory in Zhejiang province, said most carmakers face squeezed margins and cannot cut prices further. He added that several small players may be edged out due to weak sales.
Downstream manufacturing sectors reported an average profit margin of 6.1 per cent two months ago.
