Unprofitable Chinese electric vehicle (EV) makers, ravaged by a discount war at home and higher tariffs abroad, are stepping up cost-cutting measures and new model launches as they strive to survive in the cutthroat market.
Only those that can sustain their operations without resorting to external funding will stay in the country’s EV race as overcapacity woes loom, analysts said.
“As the domestic market becomes saturated and overseas sales in developed economies are hampered by punitive tariffs, the key players will have to be very efficient in cost control and refrain from splashy spending to save powder for the tough business environment ahead,” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, an industry consultancy.
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“The market has entered a new phase, with all companies expected to face a do-or-die moment soon.”
Among the four unprofitable, publicly traded Chinese premium EV builders – Nio, Xpeng, Geely unit Zeekr and Stellantis-backed Leapmotor – only Nio reported a wider net loss in the three months ending September, year on year. All of them have made plans to stem their losses.
The mismatch between capacity and actual demand is stark. By the end of 2023, EV assemblers in mainland China were capable of producing 17 million electric cars annually, and the overall factory utilisation rate stood at 54 per cent, according to Goldman Sachs.
The US bank predicted that additional capacity of 3.2 million units would be added this year, less than the 5.2 million units of capacity added in 2023.
The China Association of Automobile Manufacturers forecast full-year deliveries of more than 11 million units in 2024, which would represent 54.5 per cent of that total capacity of 20.2 million – nearly unchanged from a year earlier.
The mainland is home to about 50 EV assemblers, but He Xiaopeng, CEO of Xpeng, said last year that only eight players would remain by 2027, because smaller players will not be able to survive the fierce competition in the fast-growing industry.
To date, only BYD, the world’s largest EV builder, Li Auto, Tesla‘s nearest rival on the mainland, and Aito, backed by telecoms equipment giant Huawei Technologies, have eked out profits, while the bruising price war is ensnaring most of their domestic competitors.
Manufacturers hoping that international markets would help improve their bottom lines hit a speed bump this year after the US and the European Union decided to slap additional tariffs on Chinese-made electric cars.
