From Boom to Balance: Evolving Dynamics in China’s EV Sector

Chinese EV manufacturers face domestic demand slowdown after rapid growth. Reduction of subsidies leads to market deceleration, falling behind Europe and US. Price war triggered, involving startups and foreign companies like Tesla.

Chinese automakers struggle to enter developed markets due to tariffs and lack of subsidies, while oversupply in the electric-car market depends on effective government management. In 2023, China saw a drop in EV sales after subsidies were withdrawn, leading to a price war and concerns about overcapacity. Beijing is now addressing disorderly competition in the industry.

• BYD, a top EV seller, expands global sales with car shipments to Europe from factories in Uzbekistan and Thailand, with plans for more in Brazil, Hungary, and potentially Mexico.
• Chinese commerce ministry encourages EV manufacturers to partner with foreign companies for global expansion, raising concerns about China’s overcapacity impacting European auto manufacturers.
• GM and Ford face challenges from local rivals in China as the country becomes the world’s largest auto exporter, shipping over one million EVs last year, including brands like BYD, MG, NIO, Tesla, and Polestar. Tesla warns of slower growth in China.

Chinese electric vehicle manufacturers, once beneficiaries of a rapid growth period, are now facing a decline in local demand. This has prompted them to look towards international markets to compete with global automotive giants who are already struggling with the shift to battery-powered vehicles.

In recent years, China’s electric vehicle sales surpassed those of Europe and the U.S. combined, thanks to government subsidies. This led to significant investments in domestic automakers, making them the envy of the global industry.

However, with the reduction of subsidies and a decrease in consumer spending, the Chinese market has slowed down, falling behind Europe and the U.S. in terms of growth rate.

This slowdown has triggered a fierce price competition in China, involving numerous electric vehicle startups and foreign companies like Tesla. Many Chinese manufacturers have spent large amounts of money to capture a portion of the expanding market, yet they struggle to turn a profit despite increasing sales, putting some at risk of bankruptcy or in need of additional funding.

The industry’s overcapacity issue is exacerbated by the slower growth, as China is projected to produce millions more cars than it can sell domestically in the coming years. The government is encouraging automakers to expand overseas to address this challenge, potentially leading to oversupply both in China and abroad.

According to Bernstein Research, Chinese automakers are expected to increase their production capacity by five million cars between 2023 and 2025, with a focus on electric vehicles. However, the estimated growth in EV sales during this period is only around 3.7 million units.

Chinese commerce ministry encourages EV manufacturers to collaborate with foreign partners for global expansion. Concerns about overcapacity in China impacting European auto manufacturers.

Traditional auto giants like GM and Ford facing challenges in China against local competitors. China emerges as world’s largest auto exporter, shipping over one million EVs last year, including brands like BYD, MG, NIO, Tesla, and Polestar. Tesla warns of slower growth in China.