Workers inspect vehicle exteriors, interiors and other components at a Seres factory. (Photo/Chongqing Daily)

Chongqing - Recently, Seres Group forecast a net loss of 1.5 billion yuan (approx. 221.46 million U.S. dollars) to 1.8 billion yuan for the first half of 2026, a sharp reversal from the 2.941 billion yuan profit recorded in the same period last year.

Headquartered in Chongqing, Seres Group is an automaker focused on new energy vehicles (NEVs). Through its partnership with Huawei, the group jointly developed AITO, a premium NEV brand, and has gradually established a foothold in China's NEV market.

As AITO sales have continued to grow in recent years, Seres Group's automotive business has shifted toward NEVs represented by the brand. Company data showed that AITO sold 160,770 vehicles in the first half of 2026, accounting for about 81.8% of the group's total sales of 196,580 vehicles.

In 2024, strong sales of AITO models boosted Seres Group’s NEV sales and profitability, helping it turn a profit. The group’s net profit attributable to shareholders reached 5.946 billion yuan, reversing a 2.450 billion yuan loss in 2023, while its AITO-operating subsidiary Seres Auto became profitable for the first time.

However, Seres Auto, Seres Group’s core business unit, returned to losses in the first half of 2026, forecasting a net loss of 1.05 billion to 1.30 billion yuan. The unit’s loss was the main factor behind the group’s shift from profit to loss.

Seres Group said it has ample cash reserves and a sound asset-liability structure, providing solid support for future business development, technological research, and strategic investment. It also said it has strong operational sustainability and resilience to risk.

Notably, Seres' return to a loss was not directly caused by a decline in sales. The group sold 178,800 NEVs in the first half of 2026, up 3.87% year on year. Pressure on profits came mainly from industry-wide factors, including higher raw material costs.

The group attributed the profit decline to two main factors. First, rising prices for key materials, including memory chips, industrial metals, and lithium carbonate, pushed up production costs. Second, product and technology upgrades led the company to adjust the carrying value of some existing assets with limited future applicability.

Across the industry, raw material prices have risen for several reasons. Growing demand from AI servers and data centers has reduced the supply available for conventional memory chips. Stronger demand for energy storage, low inventories, and temporary shutdowns at some lithium mines have pushed up lithium carbonate prices. 

Industrial metal prices have also been affected by supply disruptions, geopolitical tensions, trade restrictions, and rising demand from the new energy, power grid, and data center sectors.

Automakers can reduce some of the pressure through long-term purchasing agreements, supply chain coordination, and technological improvements. However, they have limited control over global chip capacity, commodity markets and geopolitical risks, making rising raw material costs a widespread challenge for China’s auto industry.

Seres Group Chairman Zhang Xinghai said at the 2026 China Auto Chongqing Summit in June that Chinese automakers faced many challenges, with rising costs posing the greatest challenge. 

Zhang said the unit price of memory chips had increased from 20 yuan to nearly 100 yuan, while lithium carbonate prices had risen from 80,000 yuan per metric ton a year earlier to 180,000 yuan per metric ton. As a result, the average cost of each AITO vehicle had increased by 15,000 yuan to 20,000 yuan.

Seres' statement that it had "adjusted the carrying value of existing assets due to product and technology upgrades" means that some equipment, molds, and other assets prepared for older models became less useful following the introduction of new models and technologies, reducing their actual value. 

Under accounting rules, the company must recognize this loss in value as a current-period expense, directly reducing profit.

Cost surge, market rivalry challenge Chinese automakers

Faster product upgrades by Chinese automakers are a direct sign of intensifying market competition. As more models enter the same price segments and intelligent features improve rapidly, automakers are forced to shorten product replacement cycles and launch new or updated models more frequently. 

This increases R&D spending while accelerating the depreciation of assets and inventories associated with older models.

Data from the China Passenger Car Association showed that 82 new passenger vehicle models were launched in China from January to June 2026, up from 80 in the same period of 2025 and 78 in the same period of 2024. The continued increase shows that automakers are accelerating product updates.

Other Chinese automakers are also facing mounting pressure on profitability amid these industry challenges. In addition to Seres Group, major automakers including Changan Automobile, GAC Group, JAC Motors, Great Wall Motor, and BAIC BluePark have released earnings forecasts for the first half of 2026.

A review by Bridging News found that BAIC BluePark and JAC Motors remained loss-making, although their losses narrowed. GAC Group's loss widened, while Changan Automobile and Great Wall Motor remained profitable but reported sharp declines in profit.

Although the companies differ in business structure and the specific reasons for their earnings changes, rising upstream raw material prices and intensifying market competition were repeatedly cited in their earnings forecasts as two major factors weighing on Chinese automakers' profitability.