How should we evaluate Seres Group's projected loss of RMB 1.5–1.8 billion for the first half of 2026? Why is it suffering massive losses despite strong sales?

Has Zhihu become a breeding ground for malicious smear pieces? Whenever Seres experiences even minor fluctuations, Huawei is always the first to be scapegoated? Yet when Seres reaps substantial profits, whose credit does that deserve? Is it attributable to individual effort—or to the tide of history? First, let’s examine Seres’ own explanation for the losses: Due to rising prices of key raw materials—including memory chips, industrial metals, and lithium carbonate—the company’s production costs have increased. In accordance with the principle of prudence and to further strengthen overall asset quality, Seres has adjusted the book values of certain legacy assets whose applicability has diminished due to technological iteration and vehicle model upgrades. As a result, the financial performance of its core subsidiary, Avatr Technology, has become volatile—shifting from profit to loss. Avatr’s net loss attributable to shareholders of the listed company for Q2 is projected at RMB 1.9–2.15 billion. Consequently, Seres expects its consolidated net profit attributable to shareholders of the listed company for this period to be negative. Currently, the company maintains ample cash reserves and a sound asset-liability structure, providing solid support for business development, R&D investment, and strategic initiatives—and ensuring robust sustainability and risk resilience. Simplified summary: 1. Raw material prices rose. 2. Molds and components for older vehicle models lost value. How much did raw material prices rise? Steel price increases were modest; the main drivers were memory chips and lithium carbonate. At the 2026 China Automobile Chongqing Forum on June 12, Zhang Xinghai, Chairman of Seres Group, stated that memory chip prices surged nearly fivefold—from RMB 20 per unit to nearly RMB 100 per unit—while lithium carbonate prices climbed from RMB 80,000 per ton a year earlier to RMB 180,000 per ton recently. This translated into an additional cost of RMB 15,000–20,000 per Avatr vehicle. Avatr sold just over 160,000 units in H1 2026; the incremental cost from these two raw materials alone amounted to approximately RMB 2.4–3.2 billion. By comparison, Seres’ net profit in H1 2025 was RMB 2.941 billion—meaning the extra raw-material costs essentially wiped out last year’s entire H1 profit. Next, consider the asset impairment portion. Asset impairment encompasses various items, including molds and spare parts for legacy models. The more frequent the model upgrades, the heavier the impairment impact. In past years, Seres typically conducted its major asset impairment adjustments in the second half of the year: RMB 1.579 billion in 2025 and RMB 2.177 billion in 2024. This year, however, Seres has moved the impairment forward to H1. The exact figure will be disclosed in the semi-annual report in August; current estimates range between RMB 0.7–1.0 billion. Note: Asset impairment differs fundamentally from operating losses. Operating losses occur when selling prices are too low and production costs too high—i.e., each unit sold incurs a loss. Indeed, most domestic new-energy automakers faced similar operating losses in H1 2026, as average selling prices declined while production costs rose. So why did Seres shift its historically H2 impairment activity to H1 this year? My personal analysis: Seres anticipates further memory chip price hikes in H2, leading to continued upward pressure on full-year operating costs—and further erosion of profitability. Additionally, the H2 launch schedule includes model refreshes for the M7 and M8, and the M5 is also due for an upgrade.

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