New electric vehicle (EV) models with advanced features like augmented reality technology, autonomous-driving capability in urban areas and long driving range are piling the pressure on the laggards in China’s car market, the world’s biggest, where many are yet to turn a profit, increasing the chances of consolidation.
The 200 odd EV manufacturers in the country, fighting for a share of the pie, could renew a price war in the coming months in a bid to survive, analysts say.
“The new electric vehicles in the market appear to be competitive in performance and pricing,” said Chen Jinzhu, CEO of consultancy Shanghai Mingliang Auto Service. “A mild sales growth in the overall market will not be enough to ease pressure on the unprofitable carmakers.”
On Tuesday, Aito, an EV brand backed by telecommunications equipment giant Huawei Technologies, said it had booked 54,000 orders for its flagship sport-utility vehicle (SUV) M9 since presale began on September 25, with the first batch of cars likely to be delivered in late January.
Smartphone vendor Xiaomi, which will unveil details of its first EV model, the SU7, on Thursday, plans to begin trial production of the electric sedan in the coming months, according to its CEO Lei Jun.
Geely’s premium EV unit Zeekr will start to hand customers its 007 sedan beginning January 1, after getting 25,000 orders for the model within nine days of its presale starting on November 17.
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China is the world’s largest automotive and EV market, with sales of battery-powered vehicles accounting for nearly 60 per cent of the world’s total.
But massive research and development costs for new models, heavy spending on marketing and branding, as well as price cuts offered to lure customers, make it difficult for most carmakers to post a profit.
EV sales in mainland China, including plug-in hybrid vehicles, could grow by 20 per cent in 2024, slowing from an expected 30 per cent year-on-year increase in 2023, ratings agency Fitch said last month, even as concerns mount over rising overcapacity.
Guangzhou-based Xpeng slashed the price of its bestselling G6 SUV earlier this month by about 5 per cent, following a campaign launched by BYD, which offered discounts of up to 20,000 yuan – or 8 per cent – on its Han-branded car on December 1.
“Normally, a price cut by a major EV maker could lead to a chain reaction with competitors rushing to offer lower prices to sustain sales momentum,” said Tian Maowei, a sales manager at Yiyou Auto Service in Shanghai. “More importantly, Huawei and Xiaomi’s new vehicles fitted with their latest digital technologies can be very competitive in the market and ratchet up pressure on existing players.”