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Fewer Than 20 Chinese EV Brands Will Be Profitable by the End of the Decade – BNN Bloomberg

Fewer Than 20 Chinese EV Brands Will Be Profitable by the End of the Decade – BNN Bloomberg

(Bloomberg) — Only 19 of China’s existing 137 electric car brands will be profitable by the end of this decade, according to consultancy Alixpartners. The rest will have to exit the sector, consolidate or fight for a smaller market share.

A nearly two-year-long price war has put margins under pressure at some Chinese electric vehicle makers and could continue as dominant players such as BYD Co. and Tesla Inc. seek to solidify their dominant positions.

“As long as big players like BYD have gross margin, there’s always room for more price wars,” Stephen Dyer, a Shanghai-based managing director at Alixpartners, said at a briefing on Wednesday.

The average selling price of cars in China fell 13.4% last year, while automakers’ average margin rose to 7.8% in 2023 from 6.3% a year earlier, according to Alixpartners. Manufacturers have cut costs by squeezing suppliers and moving quickly to bring new models to market.

Alixpartners said Chinese automakers will account for 33% of the global car market and 45% of new-energy vehicle sales by the end of 2030. However, the consultancy lowered its forecast for China’s share of the European car market to 12% from 15% due to the European Union imposing additional temporary tariffs.

In other key takeaways from the briefing, Alixpartners said Chinese automakers are gaining an advantage by:

  • Take risks and move fast — meet minimum security and regulatory requirements before making upgrades (most of which can be done with software updates after delivery).
  • Separating hardware and software development, establishing independent NEV brands, and securing financing and local government support.
  • Investing nationally in battery and materials technologies, engaging suppliers early and, in some cases, leveraging vertical integration.
  • Increase productivity with organizational structure and overtime work culture. While employees at traditional automakers work a maximum of 20 hours of overtime per month, staff at Chinese NEV manufacturers can work up to 140 hours of overtime per month.

©2024 Bloomberg LP