...as I said months ago here, it would not be long before EV growth in China stalls.
...now price cutting is intensifying to keep growth up, and you're expecting lithium prices to go up?
...the final leg down for lithium prices is ahead. China accounts for 80% of global EV growth, when China EV growth stalls, lithium demand would plunge.
...I've been warning on this since March. Prices slashed again in China’s EV sector, threatening unprofitable carmakers
An anticipated sales decline after a subsidy expires is expected to exacerbate the financial squeeze that is throttling smaller players
Daniel Renin Shanghai
Published: 9:30am, 28 Dec 2024
China’s electric vehicle (EV) makers reduced prices a month ahead of expectations, as cutthroat competition and overcapacity threaten unprofitable carmakers amid a race to the bottom in the industry.
An anticipated sales decline after a government subsidy expires at the end of this year is expected to exacerbate the financial squeeze that is throttling smaller EV makers, analysts said.
“Every auto brand understands that it is crucial to retain their market share in 2025 due to an escalation in price competition,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “Most of the companies will have to offer discounts to survive the price war.”
Early this week, BYD, the world’s largest assembler of EVs, said it would slash the price of its Sealion 05 hybrid sports-utility vehicle (SUV) by 11.5 per cent to 99,800 yuan (US$13,673), in an effort to woo more customers ahead of the Lunar New Year holiday. BYD’s promotion will be in force until January 26.
Also this week, Tesla cut the price of its Model Y SUV by 10,000 yuan on the mainland. Based on a 249,900 yuan price tag for its basic edition, the promotion represents a 4 per cent discount.
“The leading players’ low-price strategy will be followed by their smaller rivals because they will lose customers if they keep prices unchanged,” said Tian Maowei, a sales manager at Yiyou Auto Service in Shanghai. “Nowadays, middle-income consumers are more price conscious, as they are concerned about pay cuts in a slowing economy.”
The existing 20,000 yuan subsidy that Beijing gives to EV buyers for replacement purposes expires on December 31.
Gui Shengyue, CEO of Geely Automobile Holdings, told the Post in an interview earlier this month that the government subsidy’s sunset would cause a dip in overall deliveries on the mainland, the world’s largest market for autos and EVs. He added that car sales may have peaked this year when a mild wave of growth was driven by the subsidy.
China’s passenger vehicle sales in the first 11 months of this year increased 4.7 per cent from a year earlier to 20.26 million units, according to data from the China Passenger Car Association (CPCA).
“The imminent discount war because of the phase-out of the subsidy would turn out to be fiercer than the one [that took] place early this year,” Paul Gong, a UBS analyst, said last month. At that time, he expected a new round of price cuts to occur in January.
A total 195 models – including petrol-powered, pure electric and hybrid vehicles – saw their prices cut between January and November of this year, more than the 150 cars that were discounted in 2023, CPCA data showed.
The average price of a pure electric car was reduced by 10 per cent, or 20,000 yuan, while hybrids were discounted by 4.3 per cent, which would save buyers 10,500 yuan per unit, according to CPCA data.
EVs at a Changan Automobile distribution centre in Chongqing, China. Photo: CFOTO/Future Publishing via Getty Images
The previous round of discounts started in February when BYD slashed the prices of nearly all its cars by 5 to 20 per cent. Over the next two months, at least 50 models across a range of brands cut prices by 10 per cent on average. Since July, some car brands like BMW dropped out of the bruising price war.
Among the mainland’s 50 or so major EV players, only BYD, Li Auto and Huawei Technologies-backed maker Aito have been profitable, according to industry data.
The country’s EV sector is capable of producing around 20.2 million units a year, according to Goldman Sachs. The China Association of Automobile Manufacturers said EV deliveries on the mainland will exceed 11 million units this year, accounting for about 55 per cent of the total capacity – nearly unchanged from a year earlier.
As price competition squeezes profit margins, analysts said carmakers should get together to avoid price reductions, which will be detrimental to the industry because lower prices will lead to heavy losses.
William Li, co-founder and CEO of Nio, a Shanghai-based maker of premium electric cars, said last week that carmakers should protect their profit margins and not blindly dive into the price war. Nio has stayed on the sidelines of the war this year, keeping prices of its vehicles nearly unchanged.
Its vehicle margin – the gap between the selling price and tangible costs such as raw materials, labour and logistics – hit 13.1 per cent in the third quarter of 2024, up from 11 per cent a year earlier and 12.2 per cent for the three months that ended in June.
“Nio has to maintain and enlarge gross margin to brave rough weather, even though keen competition makes it difficult to achieve profitability,” Li said.
The carmaker posted a net loss of 5.1 billion yuan between July and September, 11 per cent wider than a year earlier. Li said Nio is aiming to break even in 2026.
