Chinese EV brands could fall like dominos as price wars cut profits

Bloombergreports consultancy firm Alixpartners has found just 19 of the 137 EV brands currently operating in China could be profitable by 2030, putting the 85-plus per cent of carmakers outside of that bubble in a tricky position.

According to Alixpartners, this could lead to consolidations and mergers with other marques, fights for the sales scraps or, for some, a full-on closure.

The driving force behind this has been significant price cuts driven by an increasingly competitive industry, though some brands have been able to retain healthy margins which gives them headroom for further reductions.

Alixpartners data shows that China's average new car sale price fell by 13.4 per cent across the past year, but average carmaker profit margins increased from 6.3 per cent to 7.8 per cent between 2022 and 2023. 

"As long as big players like BYD still have a gross margin, there's always room for a further price war," said Stephen Dyer, Alixpartners's managing director, at a briefing last week.

The firm listed a handful of main factors behind China's rapid car industry growth, which saw it become the world's largest vehicle exporter in 2023, dethroning Japan.

These include meeting minimum safety standards initially before introducing upgrades, securing government finance, and introducing a work culture which includes normalising massive overtime.

By the end of 2030, Alixpartners says Chinese brands could account for one-third of global vehicle sales, and have a commanding 45 per cent stake of the new-energy vehicle (hybrid and EV) market.

While the firm has previously forecasted China could take a 15 per cent share of Europe's vehicle market, the recent introduction of tariffs against vehicles from the country on the continent has reduced this estimation to 12 per cent.

In Australia, 96,981 vehicles sold locally in the first half of 2024 were made in China, accounting for 15.3 per cent of the market.

This places China behind only Japan and Thailand as the third-largest vehicle exporter to Australia, having displaced South Korea.

MORE: Chinese brands to reach a third of global new car sales by 2030 – reportMORE: Why China's latest motor show showcased our future in Australia

Content originally sourced from: CarExpert.com.au