The Chinese motor industry has become one of the major players in the international market. Its manufacturers have gone from competing mainly on price to presenting increasingly sophisticated cars and motorcycles, with an expansion strategy that is changing the landscape of the sector in Europe. However, behind this growth there is a less favorable reality: the automobile business is beginning to show significant symptoms of weakness.
The latest economic data published in China reflects the magnitude of the problem. In September 2026, the automotive industry’s profits fell by 68% compared to the same month of the previous year, while the profitability margin stood at just 1.4%, its lowest level in the last four years.
The difficulties do not only affect small manufacturers. During the third trimester, SAIC Motor recorded a drop in profits of 76.7%, while Changan Automobile recorded losses of approximately 102 million euros. Anhui Jianghuai Automobile Group It also closed the first 9 months of the year in the red, accumulating losses close to 147 million euros.
Behind these results we find a combination of factors: rising costs, weakened domestic demand and, above all, a price war that is forcing manufacturers to continually reduce their margins to maintain sales. Since the beginning of 2023, car prices in China have fallen by about 20%. A strategy that allows you to gain customers and market share, but that can end up compromising the profitability of companies.
Too many factories in China for a market that does not absorb as much production
One of the great problems of the Chinese industry is its enormous productive capacity. According to research published by The Wall Street Journalthe country has facilities capable of manufacturing around 63 million cars per year, more than triple the sales expected in its national market by 2026. The imbalance is considerable. Many factories work well below their capacity and some investments will be difficult to recover. This situation has its origins in years of favorable financing, subsidized loans and public aid that promoted the creation of new facilities, especially for electric vehicles.
Local governments also played an important role, encouraging the arrival of manufacturers with the intention of attracting investment, generating employment and increasing tax revenue. The result has been a proliferation of brands and industrial projects, some of them with sales very far from their initial objectives.
One of the most striking examples is Skyworth Auto. The company announced in 2021 a production capacity of 100,000 electric cars per year, but during the first nine months of 2026 it only marketed 660 units in China. Despite this, it continues to operate with the support of the authorities.
Obviously, closing these facilities is not easy either. It means assuming economic losses, destroying jobs and recognizing that certain investments have not obtained the expected result. For this reason, some local governments continue to support projects whose commercial viability is increasingly questionable.
Export to compensate for the weakness of China’s domestic market
Faced with the difficulty of selling all their production in China, manufacturers have found a fundamental escape route in international markets. Automobile exports have experienced extraordinary growth and forecasts suggest that the country could exceed 11 million units exported in 2026, compared to the approximate volume of 1 million annually recorded at the beginning of this decade.
Europe is among the most important destinations of this expansion. Its traditional manufacturers face increasingly intense competition, especially in the electric and hybrid segments, where Chinese brands use very competitive prices to gain ground.
However, exporting more does not necessarily solve the underlying problem. It also means transferring part of the competitive pressure to other markets, where local manufacturers demand measures to protect their industries.
The parallelism with the real estate crisis (the famous bubble) begins to appear in economic analyses. In both cases we found very high investments, favorable financing and growth expectations that ended up exceeding real demand. It does not mean that both sectors will follow the same path, but there is a risk that some companies will not be able to make their investments profitable and will accumulate losses that are difficult to assume.
And what happens with Chinese motorcycles?
The automobile situation invites us to ask a particularly interesting question for our sector: could this scenario be repeated with motorcycles? The international expansion of Chinese 2-wheel manufacturers is also evident. Their brands are no longer limited to offering small and economical models. As we could see in the EICMA of this year, which ended recently, companies like CFMoto, QJMotor, Voge, Zontes, kove, ZXMoto or Cyclone They are betting on medium and high displacement machines, with increasingly sophisticated mechanics, very complete equipment and a relationship between price and performance that is difficult to match.
The figures support this transformation. According to the data of the China Motorcycle Manufacturers Associationbetween January and August 2026, 16.39 million motorcycles were sold in China, 13.23% more than during the same period of the previous year.
Of that volume, 10.29 million units were destined for export, which represents a growth of 17.77%. In practice, approximately 63% of the sales recorded by the Chinese motorcycle industry were destined for international markets. The behavior of the larger displacement models is also significant. In August, motorcycles over 250cc recorded year-on-year growth of 49.82%, a sign that the transformation of the sector is not limited to access vehicles.
CFMoto is another good example of this evolution. The company increased its sales of combustion motorcycles by 30.62% during the first half of 2026, confirming the good momentum of its business. Its international growth also demonstrates that Chinese manufacturers are managing to position themselves in categories where Japanese and European brands traditionally dominated.
Is the Chinese motorcycle industry facing a new bubble?
At the moment, there is not enough data to affirm that the Chinese motorcycle sector is reproducing the imbalances that affect the automobile. Both businesses have different dimensions, production structures and commercial dynamics. The 2-wheel industry has a long export history and international demand that is allowing its manufacturers to grow beyond their borders. In addition, the arrival of new brands is raising the technological level and competition in segments that until recently were dominated by traditional manufacturers.
That doesn’t mean it’s risk-free. The multiplication of brands and models, pressure on prices and the need to maintain constant growth could end up generating profitability problems if supply exceeds real demand. A situation that should be observed closely, especially taking into account the speed with which exports are growing. China has demonstrated that it has the industrial and technological capacity to compete at the highest level, but the automobile case reminds us that manufacturing and selling millions of vehicles does not necessarily guarantee making profits.
For now, Chinese motorcycles continue to advance strongly in Europe and without showing the same financial problems as the automobile. The big unknown is how long this pace of expansion can be maintained without competition and excess supply also beginning to take their toll on 2-wheeled brands. “We’ll see,” said a blind man.
