The transformation of China’s automobile industry is facing a major test. In addition to the large number of closures of traditional gasoline car manufacturers, the price war for electric vehicles has just begun. Experts believe that fierce competition in electric vehicles may last two to three years before stabilizing, and only a few car companies will survive by then. .
The New York Times Chinese website reported today that there was a joint venture between a Chinese company and South Korean auto giant Hyundai Motor on the outskirts of Chongqing, the largest city in western China. The factory was put into operation in 2017 and equipped with robots and other equipment for producing gasoline cars. However, Hyundai sold the park late last year. , the park is currently knee-deep in weeds.
The New York Times pointed out that China’s more than 100 factories can produce nearly 40 million internal combustion engine vehicles every year. That’s about twice as many as the Chinese want to buy, with sales of internal combustion cars falling rapidly as electric vehicles become more popular. In March, the total sales of electric vehicles and gasoline-electric hybrid vehicles in China’s 35 largest cities exceeded those of gasoline vehicles for the first time. Dozens of gasoline-powered auto plants are either barely operating or have stopped production.
The New York Times said that China’s auto industry is transitioning to electric vehicles, and the transformation is scheduled to last for several years, eventually causing many traditional internal combustion engine car factories to close down. There are also warning signs for electric vehicle sales, as growth has halved since last summer as Chinese consumers cut back on spending due to the housing market crisis.
The Wall Street Journal Chinese website reported that China’s electric vehicles are facing a sales slowdown, and rising stars have intensified market competition pressure. After 2023, Chinese electric vehicle manufacturers have been cutting prices on a large scale. In April, Tesla, Li Auto and other Chinese car companies launched an unprecedented price-cutting competition. The electric vehicle price war that has lasted for many months in the Chinese market has continued, and analysts believe that the electric vehicle price war has just begun.
CCB International analyst Qu Ke said that given the current oversupply in the market and Chinese consumers being less willing to spend heavily, competition will become more intense until the third quarter. One possible result of falling electric vehicle prices is that their popularity will continue to rise, but another possible outcome is that the smallest car companies face a greater risk of bankruptcy.
Nomura Securities analyst Joel Ying believes that China’s current competition may last two to three years, and then the market will enter a new stable stage. By then, market competitors may be greatly reduced, leaving only a small number of survivors. Ying Chongxi mentioned that “for popular companies, I think they will find a way out no matter what”, but for small-scale, unlisted, production-produced companies, “they will face more challenges.”
Morningstar equity analyst Vincent Sun said that loss-making companies are likely to continue to burn cash, so financing capabilities are very important for survival.
(First image source: Unsplash)
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