The price war between the numerous and increasingly numerous electric vehicle brands in China is likely to end with mass closures, according to automotive industry experts.
Bloomberg reports that the consulting firm Alixpartners has found that only 19 of the 137 electric car brands currently operating in China could be profitable by 2030. This puts the more than 85 percent of car manufacturers outside this bubble in a difficult situation.
According to Alixpartners, this could lead to consolidations and mergers with other brands, battles over remaining sales or, for some, even complete closure.
The driving force behind this has been significant price cuts due to an increasingly competitive market. However, some brands have been able to maintain healthy margins, giving them scope for further price cuts.
Data from Alixpartners shows that the average selling price of new cars in China fell 13.4 percent last year, but automakers’ average profit margin rose from 6.3 percent to 7.8 percent between 2022 and 2023.
“As long as big players like BYD still have a gross margin, there is always room for further price wars,” said Stephen Dyer, managing director of Alixpartners, at a briefing last week.
The company listed a handful of key factors behind the rapid growth of China’s auto industry, with the country becoming the world’s largest vehicle exporter in 2023, dethroning Japan.
This includes ensuring minimum safety standards are met before modernisations are carried out, securing government funding and introducing a work culture in which massive overtime is normal.
According to Alixpartners, Chinese brands could account for a third of global vehicle sales by the end of 2030 and have a dominant 45 percent share of the alternative fuel vehicle market (hybrid and electric vehicles).
While the company had previously predicted that China could capture a 15 percent share of the European car market, the recent imposition of tariffs on vehicles from the continent has reduced that estimate to 12 percent.
In Australia, 96,981 Chinese-made vehicles were sold in the first half of 2024, representing 15.3 percent of the market.
This makes China the third largest vehicle exporter to Australia after Japan and Thailand, displacing South Korea.
MORE: Chinese brands to account for a third of global new car sales by 2030 – reportMORE: Why China’s recent auto show showcased our future in Australia