China sees increasingly fierce NEV competition for market leaders

Consumers browse NEVs at a car fair in Shanghai on March 23, 2024. Photo: VCG

Consumers browse NEVs at a car fair in Shanghai on March 23, 2024. Photo: VCG

Competition in China’s new-energy vehicle (NEV) industry has intensified as local and international brands rush to announce price cuts and release new models to seek more market share. 

Industry analysts said that the fierce competition comes amid the transition of China’s NEV sector from a period of a large number of investments to a mature market, and the entire market will be further concentrated on a couple of leading firms.

Rather than hyping “overcapacity” in China’s NEV sector to contain China’s high-tech development, Western politicians and media outlets should acclaim China’s contribution to the world because the country’s advantages such as continuous innovation, complete industrial chains and full competition have made NEVs cheaper and more popular around the world.

On Monday, Chinese automaker Li Auto announced price cuts of about 5 percent on four of its models and the company said it would refund the difference to owners who bought those models earlier this year.

The move came one day after US automaker Tesla on Sunday trimmed the price of its Model 3 from 245,900 yuan ($34,630) to 231,900 yuan. It now offers the Model Y from 249,900 yuan onward, compared with 263,900 yuan previously, according to the company’s China website.

So far in April, more than 10 NEV brands have reportedly announced price cuts or other promotional activities.

“In the first quarter [of 2024], the number of car models that had price cuts exceeded 60 percent of the number in all of 2023, most of which were NEV models such as all-electric vehicles and plug-in hybrids,” Cui Dongshu, secretary-general of the China Passenger Car Association, told the Global Times on Monday.

This will be a key year for NEV makers to gain a firm footing in China’s auto market, so competition will be extremely fierce, Cui said. 

However, he said that Chinese NEV makers will likely have more scope to make a profit this year due to price declines in raw materials like lithium carbonate and economies of scale amid the rapid development of the market.

China’s NEV market is undergoing a structural adjustment from a period when companies made a large number of investments to a mature market, and thus competition has become extremely fierce, Cao Heping, an economist at Peking University, told the Global Times on Monday.

However, this does not mean there is “overcapacity” in China’s NEV sector, and the US vehemently hyping “overcapacity” in the Chinese sector is a political trick to build “a small yard, high fence” around the high-tech sector, Cao said.

“Washington is petty and small-minded,” Cao said. In the 1980s, US companies produced a lot of products like computers and digital devices in China. At that time, the US didn’t blame China for “overcapacity.” 

Seeing that China’s industrial chain is climbing from the lower end to the middle and high end today, the US has started to crack down on China by breaking market economy rules, he said.

Washington’s attempt to outcompete China is not benign competition, but vicious competition, in which the US sets traps for the competitor at every turn, according to Cao. He urged the US to maintain an open and cooperative attitude toward China so as to jointly contribute to global technology advance.

China’s vehicle market got off to a good start in the first quarter of 2024, with production and sales each exceeding 6.6 million units, according to the China Association of Automobile Manufacturers. The market share of NEVs remained above 30 percent, the data showed.

Amid the rapid development of the NEV industry in China, the penetration rate of passenger NEVs exceeded 50 percent in the first half of April, as reported by China Central Television on Sunday, outperforming traditional fuel passenger vehicles.

With the approach of the Beijing International Automobile Exhibition on Thursday, domestic automakers have been intensively releasing new models, which are expected to drive up domestic sales in the second quarter. 

After a hiatus of four years, the exhibition will see the global debuts of 117 models, including 30 from multinational producers. Exhibitors include international brands like BMW, Mercedes-Benz and Audi, and new car brands like Nio, Xpeng and Xiaomi, according to the official website of the exhibition.

The event, along with policies to support trade-ins, will be a catalyst for domestic car spending, Cui said, expressing positive projections for China’s auto market in the second quarter.

China’s NEV sector off to strong start in first quarter

This photo taken on Feb 24, 2023 shows the assembly line of GAC Aion, an NEV subsidiary of Guangzhou Automobile Group Co., Ltd. (GAC Group), in Guangzhou, south China's Guangdong Province. Photo: Xinhua

This photo taken on Feb 24, 2023 shows the assembly line of GAC Aion, an NEV subsidiary of Guangzhou Automobile Group Co., Ltd. (GAC Group), in Guangzhou, south China’s Guangdong Province. Photo: Xinhua

A number of Chinese new-energy vehicle (NEV) brands saw their shares continue to rise on both US and Chinese bourses on Tuesday after they posted strong sales figures for March. 

Chinese experts believed that the strong sales performance of some leading NEV brands in March reflected the strong momentum in the further upgrading of China’s manufacturing industry. The strong exports performance, despite headwinds, also reflected the competitiveness of Chinese NEVs, they noted.

Private enterprises continue to demonstrate their innovative capability, reflecting the resilience of the Chinese economy and recovering confidence of private enterprises, analysts pointed out. 

Looking forward, experts believe that China’s NEV sales will continue to post strong gains, with an expected high growth rate of around 20 percent in the first half of the year.

BYD, China’s biggest electric vehicle (EV) maker, reported a 46.1 percent year-on-year rise in its March sales on Monday with 302,459 units sold. For the first quarter, the company sold 626,263 NEVs, up 13.44 percent.

China EV makers Nio, Li Auto and XPeng also reported March and first-quarter deliveries on Monday, meeting or just exceeding low expectations, according to media reports.

The strong sales posted by these brands were accompanied by news of the impressive entrance into the market by new brands such as Chinese smartphone and electronics maker Xiaomi.

The company, having debuted its SU7 electric car last week, now had bookings reaching 40,000 units, with backlog orders piled up for as long as eight months, according to media reports on Tuesday.

Under the spotlight of investors and global media outlets, the robust booking data send the company’s shares up 8.97 percent to 16.28 Hong Kong dollars ($2.08) per share at the Hong Kong bourse on Tuesday. Xiaomi’s market value during intraday trading once reached $7.6 billion, surpassing both GM and Ford, according to Reuters.

Some observers hailed Xiaomi’s successful debut into an already crowded scene featuring fierce competition as one more example of the daring entrepreneurial spirit of the Chinese private sector companies and a demonstration of recovering confidence by private companies.

The China Passenger Car Association (CPCA) said on Tuesday that it expects NEV sales to top 820,000 units in March, an increase of 33 percent year-on-year. Month-on-month, the increase is equal to 84 percent.

According to estimates by a CPCA executive, China’s NEV sales accounted for 62 percent of global NEV sales in January and February, the Securities Times reported. 

“As one of the tech-intensive and green ‘new three’ items, the robust growth of the NEV sector is an indication that the Chinese economy is off to a good start in the first quarter,” Li Chang’an, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, told the Global Times on Tuesday.

In a sign of a further recovery in manufacturing activity, China’s official manufacturing purchasing managers’ index returned to expansion range with a reading of 50.8 in March after running below 50 for five consecutive months, data from the National Bureau of Statistics showed on Sunday.

“The stellar performance of the sector signals China’s global competitiveness when it comes to technology and innovation has further strengthened amid the nation’s broader plan to develop new quality productive forces,” Li said.

“China’s NEV market is a highly competitive sector and the performance by leading NEV brands underlined the resilience of China’s industrial upgrade,” Wu Shuocheng, a veteran automobile analyst, told the Global Times on Tuesday.

“Against protectionist headwinds in some markets, the competitiveness of Chinese companies remained strong,” Wu said.

As the Chinese economy continues to recover, Wu expected NEV sales to register a 20 percent year-on-year growth for the first half of the year with overall sales of passenger vehicles growing by around 5 percent.

Analysts also urged the US and the EU to stop their crackdown tactics against China’s new-energy industry, including the NEV sector, as Chinese NEVs are a contributing, not an undermining, factor for their climate goals.

Protectionist measures taken against Chinese EVs will not improve their competitiveness for their respective auto industries and will undermine their efforts in realizing climate goals, Li said, noting that the noises of decoupling on NEV could not obstruct the rise of Chinese NEV, which is driven by market competition, devotion to innovation and supply chain advantage.

The US and the EU should seek cooperation with China on NEVs so as to tap the great complementarities, rather than taking a protectionist path, analysts said.