J.P. Morgan: Chinese automakers’ third-quarter earnings under pressure in 2026 as falling joint venture profits weigh on state-owned companies’ transformation

Why was third-quarter weakness worse than expected?

GAC, SAIC, Changan and BAIC all reported third-quarter 2026 results below market expectations, with three posting losses or thin profits. JPMorgan says the weakness was not surprising, but its severity exceeded expectations.
Foreign exchange losses, impairments and lower non-recurring gains amplified the pressure on results, but operations were also weak: own-brand profits were insufficient to cover investment in new energy vehicles, technology and distribution channels, while declining foreign-brand market share and capacity utilization weakened joint venture contributions.
Impairments also reflect operating pressures. GAC recorded 1.35 billion yuan in impairments in the first three quarters of 2026, mainly inventory write-downs; SAIC reported credit and asset impairment losses of 1.43 billion yuan over the same period. JPMorgan says these losses involve pricing, inventory realization and auto finance risks.

Management teams cited a higher share of new energy vehicles, new products, overseas expansion and cost reductions, but pricing pressure, input costs and continued investment offset some economies of scale. Meanwhile, joint venture profits that previously funded own-brand expansion are declining.
SAIC’s third-quarter gross margin rose to 13.2% from 11.6% in the second quarter, but the contribution from joint ventures and associates swung from a profit of 1.5 billion yuan to a loss of 1.4 billion yuan. Net profit fell 77% both year on year and quarter on quarter to 486 million yuan.
Changan’s third-quarter revenue rose 10% quarter on quarter, but its gross margin fell 1 percentage point to 13.9%, and both operating profit and net profit attributable to shareholders swung to losses. A weaker product mix, higher chip and battery costs, and continued investment in new energy brands combined to exert pressure; Qiyuan was profitable for a second consecutive quarter, while Deepal and Avatr remained loss-making.

JPMorgan expects results to improve in 2027 from a low 2026 base, but weak joint venture contributions, domestic price competition and transformation spending will limit the pace of recovery; lower export tax rebates and policy risks will also weigh on earnings.
The bank cut its SAIC earnings forecasts for 2026 and 2027 by approximately 38% and 30%, respectively, and adopted more conservative assumptions for overseas earnings and joint venture contributions. Overseas sales account for a relatively high share of SAIC’s sales, and it also faces pressure from lower export tax rebates and possible EU restrictions on imports of Chinese-made plug-in hybrids and hybrids.
For BAIC, JPMorgan expects a limited recovery at Beijing Benz and continued investment needs for its own brands, and therefore forecasts another loss in 2027. The bank believes a lasting recovery requires restructuring and sustained profitability at its own brands.

GAC’s third-quarter revenue rose 18% year on year and 9% quarter on quarter, while its gross margin recovered from negative 0.6% in the second quarter to positive 0.3%. However, although its net loss narrowed quarter on quarter, it remained larger than a year earlier, and the contribution from joint ventures and associates also turned slightly negative.
JPMorgan maintained its Overweight rating on GAC’s A and H shares, citing the long-term restructuring and integration opportunities from the proposed acquisition of FAW’s 50% stake in FAW Toyota, rather than a near-term earnings reversal. The bank forecasts GAC’s adjusted net loss at 9.97 billion yuan in 2026, narrowing to 3.777 billion yuan in 2027.
The transaction is still being advanced: audits, valuations and due diligence have yet to be completed, and board, shareholder and regulatory approvals are still required. FAW Toyota will operate independently after the transaction is completed, so the benefits and timing of synergies remain uncertain.