SAIC Motor's Profitability Dilemma Amid Revenue Growth and NEV Expansion

SAIC Motor’s strategic pivot to new energy vehicles (NEVs) has delivered impressive sales growth, but its profitability remains under severe pressure. In 2024, the company reported a record 1.368 million NEV deliveries, a 29.9% year-on-year surge in the first half alone [3]. This shift has positioned SAIC as a leader in China’s rapidly electrifying automotive market, where NEVs accounted for 45% of passenger vehicle sales by early 2025 [4]. However, the company’s net profit attributable to shareholders fell 88.2% year-on-year to RMB 1.666 billion in 2024, while operating margins contracted to 1.67%—a stark decline from 3.49% in 2023 [2]. The question now is whether SAIC’s NEV-driven growth is sustainable or if margin erosion will undermine its long-term viability.

The NEV Boom and Its Costs

SAIC’s NEV expansion is undeniably robust. In 2024, NEVs represented 26.5% of its total vehicle deliveries, with sales of self-owned brands like IM and MG growing by 5 percentage points year-on-year [2]. The company’s R&D investments, totaling nearly RMB 150 billion over the past decade, have fueled innovations such as second-generation solid-state batteries and end-to-end intelligent driving systems [4]. These advancements have helped SAIC capture market share in both domestic and international markets, including a breakthrough in Europe’s hybrid electric vehicle segment [2].

Yet, the cost of this innovation is steep. While government subsidies for R&D and infrastructure have reduced some production costs, the broader industry is grappling with “involutionary competition”—a race to the bottom driven by fixed nominal subsidies that incentivize lower-priced NEVs [1]. For example, China’s 2024 trade-in subsidies allowed consumers to receive up to RMB 15,000 toward a new NEV, pushing automakers to prioritize affordability over profit margins [5]. SAIC’s own financials reflect this trend: despite a 7.7% organic revenue growth in Q4 2024, its adjusted EBITDA margin fell to 9.0% of revenue, down from healthier levels in prior years [1].

Margin Pressures and Strategic Risks

The profitability dilemma stems from two key factors: production cost dynamics and joint venture drag. While NEVs benefit from economies of scale and government support, their production costs remain higher than traditional vehicles due to battery technology and supply chain constraints [6]. SAIC’s joint ventures, particularly SAIC-GM, have exacerbated this issue. The company reported significant asset impairment provisions from these partnerships, contributing to a 15.73% year-on-year revenue decline and a net profit drop to RMB 30.23 billion [2]. In contrast, NEV-focused rivals like BYD and Geely saw revenue and profit growth, underscoring the competitive disadvantage of SAIC’s hybrid strategy [3].

Government subsidies, while initially supportive, are also creating long-term risks. China’s 2025 subsidy policies are shifting from direct purchase incentives to sustainability-focused measures, such as charging infrastructure and battery recycling [5]. This transition could reduce short-term cost advantages for NEVs, forcing automakers to rely on innovation rather than subsidies to maintain margins. SAIC’s R&D-heavy approach—while forward-looking—requires sustained investment, which may strain profitability if market conditions shift.

Assessing Sustainability

For SAIC’s NEV pivot to be sustainable, it must address three critical challenges:
1. Cost Efficiency: The company needs to close the production cost gap between NEVs and traditional vehicles. While solid-state battery technology and modular design could reduce costs over time, immediate margin pressures persist [4].
2. Subsidy Dependency: As subsidies phase out, SAIC must demonstrate that its NEVs can compete on price and performance without government support. The European Union’s proposed 37.6% countervailing duties on Chinese EVs highlight the risks of over-reliance on domestic subsidies [5].
3. Joint Venture Restructuring: SAIC’s underperforming partnerships, such as SAIC-GM, require strategic reevaluation. Divesting or restructuring these ventures could free up capital for NEV R&D and reduce drag on profitability [3].

Conclusion

SAIC Motor’s NEV expansion is a testament to its adaptability in a transforming industry. However, the company’s profitability dilemma—marked by declining margins and joint venture losses—raises concerns about the sustainability of its current strategy. While government subsidies and R&D investments have fueled short-term growth, the path to long-term success will require cost optimization, innovation, and a reevaluation of its hybrid business model. Investors must watch closely as SAIC navigates these challenges, balancing market share gains with margin preservation in an increasingly competitive landscape.

Source:
[1] SAIC Announces Fourth Quarter and Full Fiscal Year 2024 Results [https://investors.saic.com/news-releases/news-release-details/saic-announces-fourth-quarter-and-full-fiscal-year-2024-results]
[2] SAIC Motor reports 2024 sales record, driven by reform [https://www.saicmotor.com/english/latest_news/saic_motor/60416.shtml]
[3] Top 3 Most Profitable Automakers in China in 2024 [https://www.metal.com/en/newscontent/103328247]
[4] Government subsidy strategies for power batteries of new energy vehicles [https://www.nature.com/articles/s41599-025-05103-4]
[5] China's Subsidies Are Fueling “Involutionary” Competition in the Auto Sector [https://rhg.com/research/chinas-subsidies-are-fueling-involutionary-competition-in-the-auto-sector/]
[6] The impact of subsidy withdrawal on new energy vehicle [https://www.sciencedirect.com/science/article/abs/pii/S0301421524004865]