Chinese EV brands are facing major tariffs globally, how many will survive this?
A recent report by consultancy Alixpartners highlights a challenging future for China’s electric vehicle (EV) industry, projecting that only 19 out of the current 137 EV brands in the country will achieve profitability by the end of this decade. This forecast suggests that the majority of manufacturers may face tough decisions ahead, including exiting the market, merging with competitors, or contending for a smaller share of the industry.
This situation is only made worse by a prolonged price war, now entering its second year, which has exerted significant pressure on profit margins among Chinese EV makers. This competitive environment is expected to persist as dominant players such as BYD and Tesla solidify their market positions, potentially leading to further pricing battles.
Moreover, Stephen Dyer, managing director of Alixpartners based in Shanghai, pointed out during a recent briefing that while major companies like BYD maintain a gross margin, the industry remains susceptible to continued price competition. This insight underscores the ongoing challenges faced by smaller and less established EV brands in China.
Against this backdrop, Alixpartners reported that the average selling price of cars in China has declined by 13.4 percent over the past year. Despite this, automakers managed to improve their margins, which rose to 7.8 percent in 2023 from 6.3 percent the previous year.
This improvement is attributed to cost-cutting measures implemented through supplier negotiations and rapid introduction of new vehicle models. Looking ahead, Chinese automakers are anticipated to expand their global footprint significantly by 2030, with projections suggesting they could capture 33 percent of the global auto market and 45 percent of NEV sales.
On top of that, Alixpartners revised down its forecast for China’s share of the European auto market from 15 percent to 12 percent due to new provisional tariffs imposed by the European Union. In conclusion, while the Chinese EV market holds promise for growth and innovation, the road ahead remains challenging for many manufacturers.
The need to achieve profitability amid intense competition and pricing pressures underscores the importance of strategic positioning and operational efficiency. As industry dynamics continue to evolve, navigating these challenges will be crucial for the long-term sustainability and success of Chinese EV brands in both domestic and global markets.
We got all this from Bloomberg. Thank you Bloomberg for the information and images.
