On March 5, 2026, the Chery Xingtu ET5 high-end version will increase its price by 5000 yuan - essentially converting the previously free 28800 yuan smart driving function package into a chargeable one. This is the first time in over two years of price wars that a car company has adjusted its pricing strategy by raising prices. Three months later, this number became 15. BYD has adjusted the optional package for the "Eye of Heaven B" intelligent driving laser version from 9900 yuan to 12000 yuan (+2100 yuan), with the basic car price remaining unchanged; The basic car price of Xiaomi SU7 has increased by 4000 yuan, but the original standard features such as HUD and electric steering wheel have been repackaged into an optional package of 6500 yuan, resulting in an actual increase of 4000-10500 yuan for consumers; Changan Qiyuan has increased its price by 3000 yuan, while GAC Aion has increased its price by 3000-6000 yuan; Tesla has cancelled its seven-year low interest car purchase plan - a disguised price increase. NIO tightens its charging rights, Extreme Krypton shrinks its financial interest free policy, and Zero Run is planning to follow suit. Even the Volkswagen ID series and Toyota bZ4X have joined the price hike, raising prices by 4000-7000 yuan and 6000 yuan respectively. Is the price war really over? Is this price increase a turning point or an episode? To answer this question, it is important to understand the core factors behind this price increase.

01

Cost wise: Lithium doubles, chips triple

The most direct factor for car companies to raise prices is cost. The first cost killer is lithium. The price of battery grade lithium carbonate has skyrocketed from 75000 yuan/ton in July 2025 to nearly 200000 yuan/ton in May 2026, with an increase of over 167%. Batteries account for 30-40% of the total cost of electric vehicles, and the rebound in lithium prices alone has increased the production cost of each medium-sized electric vehicle by about 3800 yuan. This is not a number that car companies can digest - in the first quarter of 2026, the sales profit margin of the entire automotive industry has dropped to 3.2%, and in January and February it was only 2.9%, less than half of the historical average of 6% in the manufacturing industry. The second cost killer is chips, or more precisely, storage chips. In 2026, the price of automotive grade DRAM has increased by about 180% in the past three months, and the price of high-end DDR5 spot has exceeded 300%. Xiaomi founder Lei Jun put it bluntly: "Car memory increased by 40% -50% last quarter, and this alone will cost thousands of yuan more per bike." NIO founder Li Bin's judgment is sharper: "The price increase of storage chips will be the biggest cost pressure in 2026." The root cause of chip price increase is not in the automotive industry, but in AI. Generative AI's infinite thirst for computing power is systematically squeezing the production capacity of automotive grade chips - Samsung, SK Hynix, Micron prioritize the allocation of DRAM and NAND production capacity to AI servers and data centers, while the automotive industry can only queue up. UBS estimates that the price increase of storage chips alone will lead to an increase of 3000-7000 yuan in the cost of smart driving vehicles per bike. The third cost pressure comes from bulk metals. Aluminum has exceeded 25000 yuan/ton, and copper has reached 100000 yuan/ton. Only these two items require an additional cost of about 1800 yuan for medium-sized electric vehicles. The combination of three factors, according to HSBC and UBS estimates, results in a comprehensive cost increase of approximately 6000-14000 yuan per bicycle. There is another layer of policy cost: starting from 2026, the purchase tax for new energy vehicles will be reduced from full exemption to half collection (the tax exemption limit will be lowered from 30000 yuan to 15000 yuan). Taking a 300000 yuan vehicle model as an example, consumers will need to pay an additional purchase tax of about 13000 yuan. The cost side has risen comprehensively, and the profit side has already hit bottom - this is the "forced" side of the price increase. Car companies don't want to raise prices, but if they don't, they will lose money.

02

Profit level: Industry collective blood loss

In the past few years of the price war, the profit margin of the automotive industry has continued to decline: 6.1% in 2021 → 5.7% in 2022 → 5.0% in 2023 → 4.3% in 2024 → 4.1% in 2025 → 3.2% in the first quarter of 2026. The monthly profit margin for December 2025 even dropped to 1.8%. For suppliers, "increasing revenue without increasing profits" has become the norm, but in the first quarter of 2026, Topu Group's revenue increased by 14.92% and net profit decreased by 2.42%; Baolong Technology's revenue increased by 17.57%, with a net profit of -24.87%; Huayu Automobile's revenue is -0.97%, and its net profit is -2.63%. The gross profit margin is also under continuous pressure: Tuopu Group's gross profit margin has dropped from about 23% in 2023 to 19.43% in 2025, a cumulative decrease of 3.6 percentage points over the past two years. Moreover, suppliers are facing a double squeeze: OEM annual price reduction clauses (BYD's "do not reply" 10% price reduction email in November 2024 is the most extreme case) coupled with cost increases. Chengtai Technology is a warning example - this millimeter wave radar supplier's dependence on BYD has risen from 81.9% in 2022 to 96.4% in 2025, with a three-year revenue growth of about 500%, but the company is still operating at a loss. When your clients contribute 96% of the revenue, you don't have the ability to say 'no'. BYD's first price increase may be the strongest signal of the end of the price war, indicating that the industry has crossed the critical point of "price reduction for growth". McKinsey's data supports this judgment: over 80% of car buyers are indifferent to price reductions, and technology driven purchasing intentions are three times higher than price discounts. When price reduction no longer leads to sales, it loses its reason for existence.

03

Competition level: Price war gives way to technology war

Price increases are not without risks. But the market structure in 2026 is completely different from when the price war first broke out in 2023. The first change is permeability. In April 2026, the penetration rate of new energy vehicles in China exceeded 60% for the first time. 60% is a key threshold - the market has entered the 'late mass' stage from the' early mass' stage. New energy vehicles are no longer a minority choice, but the mainstream. This means that growth can no longer be achieved by "converting fuel car owners into electric car owners", but must compete for market share from competitors. But the most effective way to grab market share is no longer price, but product strength. The second change is the comprehensive upgrade of the technological arms race. In May 2026, BYD will soon release the "National Intelligent Driving 2.0" strategy, with the goal of downgrading advanced intelligent driving to 70000 yuan level models, making intelligent driving as standard as air conditioning. Huawei Qiankun has already collaborated with 33 models, and is expected to cover over 80 models by 2026, with a cumulative deployment target of 3 million vehicles. Domestic smart driving chips such as Horizon and Black Sesame are rapidly increasing in volume. This is not a coincidence. The resources of the entire industry are shifting from price subsidies to research and development investment. BYD's R&D expenditure of 63.4 billion yuan in 2025, according to industry media reports, exceeds the total of Geely, Great Wall Motors, and Chery. Huawei's intelligent driving research and development budget for 2026 alone will reach 18 billion yuan, of which 10 billion yuan will be used for computing power. The theme of the 2026 Beijing Auto Show is not "who is cheaper", but "who is smarter" -380000 square meters of exhibition area, 1451 exhibited cars, 181 global premieres, with the core highlights being intelligent driving, AI cockpit, and 5-minute rechargeable batteries. This is almost the same as the evolution path of China's smartphone industry ten years ago. From 2014 to 2016, the Chinese smartphone market experienced a fierce price war, with hundreds of brands competing in the thousand yuan market. The ultimate end to the price war is not a company's "conscientious discovery", but consumer upgrading - when consumers start paying for a better experience, Huawei, OPPO, and vivo successfully break through through through technological differentiation (Leica cameras, fast charging, design), forcing Xiaomi to transform from the mid to low end to the high end. The winner of the price war (Xiaomi, which dominates the market with low prices) is not the ultimate winner. The turning point of prices is often the result of a shift in competitive logic. On May 2026, 15 car companies collectively raised prices, driven by the industry's shift from "price for quantity" to "technology for quantity". It's not because car companies don't want to continue the price war, but because the price war can't continue.

04

How long will the price increase last

Can the price increase continue? There are three factors that determine the answer. One is whether the demand side can accept it. From January to April 2026, the cumulative retail sales of passenger cars decreased by 18.5% year-on-year, and the market has been declining for four consecutive months. There was a brief "panic buying" during the May Day holiday - consumers were worried about further price increases and locked up orders in advance - but this is not sustainable. SCMP quotes analysts warning that 'weak demand may force car companies to adjust prices'. Cui Dongshu, Secretary General of the China Association of Automobile Manufacturers, made a more cautious judgment: "Currently, most car companies are only in the exploratory stage of price increases, and there are still significant obstacles to large-scale implementation in the future." Secondly, whether the cost side can fall back. The sustainability of the skyrocketing lithium prices is controversial - the last time lithium prices dropped from a historical high of nearly 600000 yuan/ton at the end of 2022 to 75000 yuan/ton by mid-2025, it took about two and a half years. If lithium prices fall, the cost logic of price increases will weaken. But the supply and demand gap for storage chips is structural - the demand for computing power from AI will not diminish, and the competition between the automotive industry and data centers for chip production capacity is expected to continue until 2030. The third is the differentiation of the competitive landscape. The high-end market (over 250000 yuan) and technology leading enterprises have the ability to maintain price increases through product strength; Low end markets (below 100000 yuan) and enterprises lacking technological differentiation may be forced to continue trading price for sales volume. This means that price increases will not be uniform - industry differentiation will intensify rather than shrink. For suppliers, price increases are good news, but they need to be interpreted with caution. The reason for OEM price increases is due to rising costs, which does not mean that the increase in profit margins will be transferred to suppliers. In history, even during cost relief periods, OEMs have rarely actively shared profits with suppliers. A more substantial benefit for suppliers may be an improvement in payment cycles - by 2025, 16 car companies have promised to make payments within 60 days. If implemented, the significance would be far greater than a change in unit price of a few hundred yuan. From the perspective of the three tiered growth model, the pricing power of Tier 1 companies (CATL, Fuyao, Sanhua) has benefited them the most during the price increase cycle - CATL's Q1 revenue increased by 52.45% year-on-year, far exceeding the 17% growth rate for the whole year of 2025. The dilemma of the third tier enterprises (Topu, Baolong, Xinquan) will not be automatically solved by OEM price increases - their profit pressure comes from new business investment and customer concentration, not simply a cost transmission problem.

05

In conclusion

The collective price increase of 15 car companies is a real turning point signal. The three-year price war (2023-2025) has changed the fundamental structure of China's automotive industry: it has eliminated weak players (WM Motor, Evergrande Auto), accelerated market integration (the top 10 market shares continue to concentrate), and forced all enterprises to shift resources from marketing to research and development. The cost of price wars is real - industry profit margins have dropped from 6.1% to 3.2%, and over 60 out of 266 listed component companies are "increasing revenue without increasing profits" - but it is also accelerating screening. 2026 is not the 'end' of the price war, but a shift in the mode of competition. McKinsey said that 'the effectiveness of a technology war is three times that of a price war', the theme of the Beijing Auto Show changed from 'who is cheaper' to 'who is smarter', and BYD invested 63.4 billion yuan in research and development instead of continuing to subsidize car prices - these signals are more worthy of attention than price increases themselves. The winners of the previous price war were BYD and Tesla. The winner of the next round of technology war may not necessarily be the same company. For component companies, the real test has just begun. The problem during the price war is whether we can survive, while the problem during the technology war is whether we can keep up. Suppliers who cannot keep up with the iteration speed of OEM technology are not facing a decrease in profit margins, but rather being replaced.