FX168 Financial News (Europe) News Under the leadership of billionaire Elon Musk (Elon Musk), Tesla adopted price cuts to deal with competition in the Chinese market, stimulating deliveries in the second quarter of this year to exceed expectations. However, in this fierce competition for electric vehicles, many domestic companies in China seem to have fallen victim. By the end of 2020, fewer than 20 electric vehicle brands in China were profitable.
According to consulting firm Alixpartners, out of 137 existing electric vehicle brands in China, only 19 will be profitable by the end of 2020, while the remaining brands will either exit the industry, integrate, or compete for a smaller market share.
(Source: Bloomberg)
The price war, which has continued for nearly two years, has put pressure on the profit margins of some Chinese electric vehicle manufacturers, and this price war is likely to continue as leading companies such as BYD and Tesla seek to consolidate their dominant position.
Stephen Dyer, managing director of Alixpartners in Shanghai, said at a briefing on Wednesday (July 10): “As long as large companies like BYD still have gross profit margins, there is room for further price wars.”
According to Alixpartners data, although the average sales price of cars in China fell 13.4% in the past year, the average profit margin of car manufacturers will rise from 6.3% in 2022 to 7.8% in 2023. Manufacturers cut costs by squeezing suppliers and quickly bringing new models to market.
According to the agency, by the end of 2030, Chinese automakers will account for 33% of the global automobile market and 45% of NEV sales. However, in light of additional temporary tariffs imposed by the European Union, the consulting firm lowered its forecast for China's share of the European car market from 15% to 12%.
Other conclusions Alixpartners drew from the briefing are that the ways Chinese automakers have an advantage include taking risks and acting quickly, meeting minimum safety and regulatory requirements before upgrading, and most upgrades can be completed through software updates after delivery.
Additionally, Chinese manufacturers can separate hardware and software development, establish independent NEV brands, and receive financing and local government support. There is also investment in battery and material technology at the national level, involving suppliers early on, and in some cases using vertical integration.
Finally, efficiency is improved through organizational structures and overtime culture. Traditional automaker workers work up to 20 hours of overtime per month, while employees of Chinese NEV manufacturers can work up to 140 hours of overtime per month.
“The Economist” (The Economist) reports that the electric vehicle trade war between China and the West is heating up, but Tesla under Musk somehow escaped the worst.
(Source: The Economist)
In May of this year, as part of a widespread attack on Chinese technology, the US imposed 100% tariffs on Chinese electric vehicles. On July 2, Canada began discussions on what it called China's “unfair trade practices” in the electric vehicle industry. Two days later, the EU's 37.6% temporary tariff on Chinese electric vehicles came into effect.
On July 10, a few days after the symbolic move to launch an anti-dumping investigation against European brandy, China's Ministry of Commerce said it would not sit back and wait. China's Ministry of Commerce said it will study whether EU tariffs are a barrier to free trade.