Chinese EV makers face day of reckoning in 2024 as competition and price war force out underperformers

EV sales growth in China is likely to slow to 20 per cent this year, from the projected 30 per cent increase in 2023, according to a Fitch Ratings report

At least 15 EV start-ups with a total annual production capacity of 10 million units have either collapsed or been driven to the verge of insolvency, a report says

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A billboard displays an ad for an electric vehicle in Wuhan. EV sales in China are likely to slow this year, piling pressure on weaker players. Photo: Bloomberg

Published: 7:00am, 2 Jan 2024

Slowing growth, intensifying competition and a bruising price war will pile pressure on the 200-plus Chinese electric vehicle (EV) makers this year, with some underachieving players likely buckle and fold.

Most of the companies will have to staunch losses to avert a potential capital crunch because of fundraising difficulties, according to analysts.

“Despite the fanfare surrounding China’s EV sector, investors are taking a cautious stance on each company’s business outlook since competition has escalated in the crowded market,” said Cao Hua, a partner at private-equity firm Unity Asset Management, which invests in car supply-chain businesses. “The year 2024 will be a watershed as some electric-car makers will be edged out due to poor performance.”

EV sales in mainland China are seen growing 20 per cent year on year in 2024, according to a Fitch Ratings’ report in November, slowing from the projected 30 per cent increase in 2023.

Xiaomi founder and CEO Lei Jun unveils the company’s SU7 EV in Beijing on December 28, 2023. Photo: Reuters

China is also the world’s largest automotive and EV market, with sales of battery-powered cars accounting for about 60 per cent of the global total. However, only a handful like BYD and Li Auto, a direct rival to Tesla in mainland China, are profitable.

New car launches by newcomers such as smartphone vendor Xiaomi and search-engine giant Baidu also pose a threat to existing players, as their intelligent vehicles divert the interest of young mainland motorists.