Chinese automakers are being pushed to the brink by aluminum

The aforementioned entrepreneur in the aluminum automotive parts industry told Auto Business Review: 'Downstream OEMs rarely adjust prices in line with market conditions—either they outright reject price adjustments or simply delay responding. Yet as suppliers, we must still guarantee delivery, making losses inevitable.' He further analyzed that aluminum part suppliers’ manufacturing processes mainly involve melting, die-casting, stamping, extrusion, welding, and assembly. Aside from melting—which could potentially reduce costs by several hundred yuan per ton if plants are relocated to regions with cheaper electricity—other processes offer virtually no room for cost reduction. 'Even between the industry’s top-tier and lowest-performing suppliers, production cost differences rarely exceed two percentage points.' 'Most suppliers can no longer compete on price,' he said. 'When bidding on new projects, they factor in rising aluminum prices; if the target price is too low, they’d rather walk away.' This 'rather walk away' mindset is spreading. Auto Business Review learned that one auto supplier informed a Chinese EV startup it could deliver only 10,000 units per month of a critical component—far short of the customer’s demand for 30,000 units. While citing 'insufficient capacity and labor shortages' as reasons, the real cause was that fulfilling the order at the contracted price would incur losses. This particular component isn’t aluminum-based but is mission-critical; the automaker cannot quickly source qualified alternatives, leaving it in a passive position. Even for aluminum parts, automakers will increasingly struggle to find suppliers willing to accept low-margin orders—because supplying at a loss is unsustainable over time. OEMs’ anxiety is also mounting. According to data from the China Passenger Car Association (CPCA), the Chinese auto industry’s profit margin dropped to 3.4% in January–May 2026—below the downstream industrial average of 6.1%. A major contributing factor is the across-the-board surge in raw material prices, including lithium carbonate, copper, and aluminum. William Li, founder, chairman, and CEO of NIO, revealed that rising costs of memory chips, lithium carbonate, copper, and aluminum have increased NIO’s per-vehicle cost by approximately RMB 10,000—of which copper and aluminum alone account for several thousand yuan. Since the start of 2026, over 15 automakers have announced price hikes or reduced promotional discounts. BYD raised optional package prices for some models by RMB 2,100; Xiaomi SU7’s entire lineup increased by RMB 4,000. For mainstream new-energy vehicles priced around RMB 200,000, comprehensive manufacturing costs have risen RMB 6,000–14,000 year-on-year. European and U.S. automakers face similar pressures: Stellantis’ CEO warned that if raw material prices remain elevated, additional costs could approach 1% of company revenue; Ford estimates its commodity-related costs this year will exceed USD 2 billion. Yet OEMs’ pressure has not translated into greater understanding toward suppliers. Auto Business Review learned that many OEMs continue demanding annual cost reductions of 10% or even 15% from their suppliers. The aluminum-parts entrepreneur caught between these pressures observed: 'What truly needs solving is the broader automotive industry’s structural issue—when will OEMs stop competing solely on price, features, and specs, and instead focus on brand, design, service, and reputation—creating reasonable added value? Only then can suppliers return to healthy, sustainable development.' Rising aluminum prices are exposing a long-concealed structural weakness in China’s auto supply chain: when industry profits are heavily skewed toward OEMs or select core component suppliers—and most Tier 1 and Tier 2 suppliers operate on razor-thin margins or even at a loss—any shock to raw material prices may become the final straw breaking these suppliers’ backs.

[Auto People] Ford and Stellantis: 'Cooling Down' on Electrification

Ford and Stellantis have abandoned unprofitable electrification initiatives, prioritizing profitability and cash flow as core operational objectives. Author: Zhang Heng Recently, Ford and Stellantis both released their Q2 2026 operating results. Globally, both companies posted strong performance—but their operations in China remain deeply troubled. Global Profitability Recovery Ford’s global Q2 2026 revenue totaled USD 48.3 billion, down 3.8% year-on-year; its reported net loss stood at USD 1.3 billion. However, this loss stemmed not from core operations but from a non-cash asset impairment charge of USD 3.6 billion related to dissolving BlueOval SK—the battery joint venture with SK On. Excluding this one-time expense, Ford’s operational health remains solid: adjusted EBIT for Q2 reached USD 2.5 billion, up 17% year-on-year. Consequently, Ford raised its full-year adjusted EBIT forecast to USD 10–11 billion. Interestingly, Ford’s three business segments showed markedly divergent trends. Its internal-combustion and hybrid passenger vehicle division, Ford Blue, generated USD 1.1 billion in Q2 profit—a 72% year-on-year surge—anchored by high-margin models like the F-Series trucks and Bronco, which continue to secure Ford’s North American base. The commercial vehicle sub-brand Ford Pro delivered stable performance, contributing USD 1.7 billion in Q2 profit—serving as a reliable cash-flow pillar for the group. In contrast, its electric vehicle division Model e remained unprofitable, posting a Q2 loss of USD 919 million. Although losses have narrowed for three consecutive quarters, profitability remains distant. Internally, Ford estimates Model e won’t reach breakeven until 2029 at the earliest. Given this reality, Ford has revised its overall strategy: it dissolved its standalone EV division and cut production capacity for first-generation BEVs. Capital allocation has grown more rational, with deliberate shifts toward hybrids and extended-range EVs to safeguard overall profitability. Stellantis’ Q2 2026 performance also improved: group revenue reached EUR 43.5 billion (+13% YoY); adjusted operating profit hit EUR 773 million, with an operating margin of 1.8%—up 120 basis points year-on-year—successfully reversing prior losses to achieve profitability. Stellantis’ regional performance varied dramatically: North America surged, with revenue up 32% YoY, fully leveraging the high-margin advantages of Ram trucks and Jeep SUVs; Europe remained flat and stable; while Asia-Pacific and China continued to languish without meaningful improvement. Stellantis’ strategic pivot closely mirrors Ford’s. Its management has acknowledged having previously overestimated the pace of global electrification. The company has halted blind expansion of its battery supply chain and ceased mass-launching low-value-for-money BEV models. Its current strategy is more pragmatic: retaining ICE vehicles, accelerating hybrid development, and advancing BEVs steadily—using profits from mature businesses to fund transformational initiatives. Over the past two years, persistent volatility in upstream resource costs—including unstable prices for key battery materials like lithium and cobalt—has further inflated the long-term production costs of electric vehicles.

Ford Raises Profit Outlook Despite Rising Commodity Costs

Apr 29, 2026

Ford increased its full-year profit forecast despite warnings that rising commodity costs, including steel and aluminum disruptions, could cut earnings by $2 billion amid geopolitical tensions.

bloomberg

2026-04-29

Ford Raises Profit Outlook Despite Rising Commodity Costs

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Ford Boosts Outlook on Strong Demand for Profit-Rich SUVs

Ford Raises Profit Outlook Despite Rising Commodity Costs

FAQ