A "life and death race" has begun to unfold in the world's largest market for electric vehicles (EV).
Chinese EV makers showing off their newest models at Auto China, which kicked off in Beijing on Thursday, have enjoyed generous support from the government for years, with some growing rapidly to become global players.
BYD, for example, is now vying with Tesla for leadership of the battery electric vehicle market.
But all of the country's more than 200 EV manufacturers are now grappling with huge oversupply, and experts predict many smaller companies will not survive the fiercely-competitive environment.
From a brutal price war to slowing sales in a weakening economy, the challenges unfolding in China have also forced some global automakers to retreat. And, it doesn't help that the enthusiasm for EVs is waning in other markets around the world.
"China's EV industry is only going to go from strength to strength as a whole, but not every player today will see the finish line," said Mark Rainford, an automotive industry commentator based in Shanghai who hosts the YouTube channel "Inside China Auto."
Even Chinese officials have said that carmakers will need a cast iron stomach to pull through the next few months.
"Competition in the new energy vehicle (NEV) industry will be extremely fierce in 2024," the National Development and Reform Commission (NDRC), the country's top economic planner, said on Monday.
More than a dozen passenger carmakers disappeared from the market last year, according to statistics from the China Passenger Car Association. These include once-popular EV brands, such as WM Motor, Byton, Aiways, and Levdeo.
Some global automakers have also had to restructure their businesses or shut down operations. In October, Mitsubishi Motors announced it would end production of its cars at its joint venture in China. Honda, Hyundai and Ford have also taken steps, including layoffs and factory sales, to cut costs, according to stock exchange filings and state media reports.
By 2030, China could have fewer than five major EV players, Richard Yu, CEO of Huawei's consumer business division, predicted last June. Huawei has formed partnerships with several automakers to produce EVs.
So what makes the industry so difficult for both local and foreign players, and what's ahead for EV makers in the world's second largest economy?
Aggressive price cuts are a major headache.
The price war kicked off in October 2022, when Tesla slashed prices for its Model 3 and Model Y cars in China by as much as 9%. Three months later, it discounted its cars again, triggering a wave of price cuts that engulfed the country's auto industry in 2023, including gasoline car producers.
The pressure just became even more intense.
Just this week, Tesla once again cut the starting prices of four models sold in mainland China, its largest overseas market, by 14,000 yuan ($1,932). Xpeng and Li Auto, China's fastest growing car brands, immediately followed suit, offering steep discounts or tens of millions of dollars in subsidies to attract buyers.
"The price war is likely to rage on further into this year, though it's hard to imagine prices can come down much further than they already have," said Rainford.
The deals available to Chinese car buyers are now very attractive, but some brands will not be able to sustain these discounts forever, he said.
"They're going to need deep pockets and smart marketing to take enough business," he added.
The price cuts have squeezed profitability. In 2023, the average profit margin for China's auto industry slid to 5%, the lowest level in at least a decade, according to data from the China Association of Auto Manufacturers.
Then there's other issues – like overcrowding and intense competition.
Keep reading about what's plaguing the EV makers here.
More on the industry:
No hay comentarios:
Publicar un comentario