Less than 10 per cent of electric vehicle (EV) brands in China will turn a profit in the next five years, as the industry grapples with a price war and chronic overcapacity, according to AlixPartners.
However, the country’s top EV players were expected to double their market share in Europe to 10 per cent by 2030, the consultancy said in its latest report on the global car industry on Thursday.
Of the 129 EV brands currently produced by about 50 carmakers, only 10 of them - up to 15 in an optimistic scenario - were expected to become profitable by 2030, and they could account for nearly 75 per cent of the mainland’s EV market, said Stephen Dyer, Greater China co-leader and head of Asia automotive practice at AlixPartners.
“China is one of the most competitive new-energy vehicle markets in the world, with intense price wars, rapid innovation and new entrants constantly raising the bar,” he said. “This environment has driven remarkable advances in technology and cost efficiency, but it has also left many companies struggling to achieve sustainable profitability.”
Dyer said the number of profitable EV makers could fall to fewer than 10 by 2030 if the unrelenting discounts continue, further squeezing profit margins.
By 2030, EVs – which comprise pure electric and plug-in hybrids – would account for 76 per cent of the mainland’s new car sales, or 20 million units, AlixPartners estimated.
China was the world’s largest automotive market in 2024, with EV sales accounting for more than 60 per cent of the global total, according to the China Passenger Car Association.
But only half of the nation’s EV production capacity of 20 million units a year was utilised in 2024, according to AlixPartners.
Among the mainland EV builders, only BYD, the world’s largest EV maker; Li Auto, Tesla’s nearest rival in China; and Aito, backed by telecommunications equipment giant Huawei Technologies, are profitable.
Dyer said an ongoing discount war could accelerate the pace of consolidation in China’s EV sector, with players selling fewer than 1,000 units a month likely to be edged out soon.
Chinese carmakers cut prices on a total of 70 EVs and petrol models in the final week of May, according to the 21st Century Business Herald newspaper, capitalising on state subsidies to draw buyers. Beijing offers a 20,000 yuan (US$2,790) trade-in rebate for EV purchases and 15,000 yuan for petrol-powered cars. EV buyers are also exempt from paying a 10 per cent sales tax.
Chinese EV builders were also leveraging cost advantages and other incentives, such as insurance subsidies, cash rebates and zero-interest financing, to maintain market share and improve affordability, Dyer said.
Nick Lai, head of auto research in Asia-Pacific at JPMorgan, told the Post in May that buoyant exports would help shore up Chinese EV makers’ profitability because their cars enjoy bigger margins overseas.
AlixPartners predicted that Chinese EV makers would boost their annual production in Europe by 800,000 units by 2030, without providing details.
Chinese EVs face additional tariffs of 17 to 35.3 per cent in the European Union since October following a year-long anti-subsidy investigation. - SOUTH CHINA MORNING POST
