Last year saw sales of new energy vehicles, a category that includes cars powered solely by batteries and hybrids, increased by 42%. to almost 11 million piecesaccording to the China Passenger Car Association.
Sales of BYD, a leader among electric vehicle manufacturers, increased by over 40%. Last year BYD sold almost 4.3 million cars, of which over half (almost 2.5 million) had a hybrid drive.
In 2025, demand will weaken
However, the future does not look so optimistic. HSBC analysts predict that sales will increase this year new electric vehicles in China will be only 20%. In the case of the largest manufacturer of electric cars BYD, HSBC analysts predict sales growth of approximately 14%. Therefore, in their opinion, due to weakening demand, the Chinese industry will face increased consolidation.
Yuqian Ding, head of research on the Chinese car market at HSBC, quoted by CNBC, believes that the high sales volumes allowed large and smaller companies to stay on the market despite falling margins. However, this year will be different. “We believe this situation is unsustainable and we expect it to be the pace of industry consolidation will accelerate rapidly“Ding said.
First signs of slowdown
CNBC recalls that in recent years, a mix of subsidies and incentives for consumers to buy have supported the rapid growth of China’s electric vehicle market. As assessed by Appotronics president and CEO Li Yi in a statement for CNBCproduction is unlikely to increase this yearand the market will not recover until 2026.
“Many customers, car manufacturers, are not in good financial shape. They cut the research and development budget. This will definitely have a negative impact on the industry,” Li said, noting overcapacity issues.
Price war
The poor condition of many companies in the industry is also, to some extent, the result of the price war that large companies started to attract customers.
“When BYD and Tesla lowered prices, most rivals had no choice but to follow suit. This has clearly reduced overall profit in the auto industry,” said HSBC’s Ding. BYD has a net profit margin of just 5%.
Last year the company Xiaomi has launched its SU7 electric sedan, which reportedly had a longer range, and a price $4,000 less than Tesla’s Model 3.
High market saturation
Because of the high penetration rate of electric cars in new car saleswhich according to the Chinese Passenger Car Association in the second half of the year it exceeded 50%.the growth rate of sales of new electric cars will probably slow down to 15 to 20 percent. in 2025, according to Fitch Bohua analyst Wenyu Zhou and his team.