Friday, 4 April 2025
27.2 C
Singapore
30.2 C
Thailand
20.3 C
Indonesia
27.2 C
Philippines

Government subsidies drive a resurgence in China’s EV market

Chinaโ€™s EV makers, such as Nio, Xpeng, and Li Auto, see a promising 2024 ahead, boosted by government subsidies and rising consumer demand.

Chinaโ€™s top electric vehicle (EV) manufacturers are preparing for a promising 2024, buoyed by a resurgence in the sector. This revival, which follows a period of intense competition, is largely attributed to the instrumental role of government subsidies and a renewed consumer interest in EVs.

Market rebound driven by subsidies

Major players in the EV market, including Nio, Xpeng, and Li Auto, have all experienced the effects of a recent price war. This fierce competition, which led to a 10% average price reduction across 50 models from various brands, resulted in the exit of several weaker players. However, with the introduction of new government subsidies, these leading companies are optimistic about a surge in sales for the three months ending in June.

โ€œThe subsidy for EV purchases has significantly boosted the top players,โ€ said Phate Zhang, founder of the Shanghai-based EV data provider CnEVPost. โ€œThere are also rising expectations that the intense price war will soon end, helping these companies to increase their vehicle margins.โ€

In late April, Beijing announced a game-changing move that could accelerate the adoption of EVs in China, the world’s largest EV market. Buyers of EVs replacing their petrol cars would receive a subsidy of 10,000 yuan (US$1,380), available until the end of the year. This significant subsidy is expected to fuel the growth of the EV market, where sales account for about 60% of the global total.

According to a May research note by Everbright Securities, this subsidy could boost EV sales by as many as 2 million units in 2024 as Chinaโ€™s auto industry speeds up its transition to electrification.

Predictions and market strategies

Since the inception of subsidies in 2009, Chinaโ€™s EV market has witnessed a significant fourfold increase in sales. Looking ahead, Shanghai-based Nio anticipates a potential 86.3% increase in deliveries from April to June, reaching 56,000 units. Guangzhouโ€™s Xpeng expects second-quarter sales to rise by up to 46.6%, totaling 32,000 units, while Beijingโ€™s Li Auto projects a 27% increase in quarterly deliveries, potentially reaching 110,000 units.

Only Li Auto has managed to turn a profit among these three leading EV manufacturers. Deutsche Bank has forecasted that margins at Nio and Xpeng will improve this year, driven by higher sales volumes, an improved product mix, and potentially reduced promotional activities.

All three companies produce battery-powered cars with advanced features such as autonomous driving technology and voice-activated control systems.

Nio recently launched its mass-market brand, Onvo, to expand its market reach. The first model, the L60 sport-utility vehicle, is priced at 219,900 yuan, significantly undercutting Teslaโ€™s Shanghai-made Model Y by 30,000 yuan, or 12%. Nioโ€™s CEO, William Li, stated that the new brand will contribute positively to the companyโ€™s profitability once monthly deliveries exceed 20,000 units. The L60 is expected to enter mass production and start deliveries to mainland customers in September.

Similarly, Xpeng plans to introduce a mass-market brand offering more affordable vehicles for middle- and low-income consumers.

Industry consolidation is expected

As the intense competition in the EV market continues, Nick Lai, an analyst with JPMorgan, anticipates a significant shift. โ€œItโ€™s clear that we donโ€™t need 100 brands in the Chinese auto market,โ€ he said. โ€œSome will be forced to exit, and some will stay. We can expect transformative consolidation in the industry.โ€

Chinaโ€™s EV sector, a crucial driver of the economy, is projected to grow by 20% this year, compared to 37% in 2023, according to a November forecast by Fitch Ratings. BYD, the worldโ€™s largest EV maker, initiated the sector’s first significant price cut in February. BYD slashed the prices of nearly all its cars by 5 to 20% to accelerate the shift from petrol to electric vehicles. Since then, prices for 50 models from various brands have dropped by an average of 10%, according to Goldman Sachs.

A further price cut of 10,300 yuan per vehicle by BYD, representing 7% of the companyโ€™s average selling price, could potentially drive the entire industry into losses, warned the US bank.

Hot this week

Samsungโ€™s new AI fridges help find lost phones and control smart homes

Samsung's new AI-powered fridges can help you find lost phones and control smart home devices with voice commands, making life easier and more connected.

Anthropic introduces Claude for Education, a new AI chatbot plan for universities

Anthropic launches Claude for Education, an AI chatbot plan for universities that offers advanced learning tools and administration support.

Chinese EV makers urged to expand globally despite tariff challenges

Chinese EV makers are urged to expand globally despite rising tariffs. Industry experts stress the need for overseas production and strategic partnerships.

Synagie and HKT launch ShopHK to help Hong Kong brands expand into Southeast Asia

Synagie and HKT launch ShopHK, helping Hong Kong SMEs tap into Southeast Asia's booming US$600 billion e-commerce market.

Gmail introduces easier encryption for business emails

Google introduces a new encryption model for Gmail, making it easier for businesses to send secure emails without special software or certificates.

Spotify introduces AI-powered ads and programmatic ad buying

Spotify unveils AI-powered ads and the Spotify Ad Exchange, making it easier for advertisers to reach Gen Z listeners with real-time bidding.

YouTube expands shopping affiliate programme in Singapore through Shopee partnership

YouTube teams up with Shopee to launch its Shopping affiliate programme in Singapore, giving creators new ways to monetise their content.

Misconceptions about STEM careers continue to deter young women in Singapore

New research shows stereotypes and lack of support are deterring young women from STEM careers, posing a risk to Singaporeโ€™s innovation goals.

Synagie and HKT launch ShopHK to help Hong Kong brands expand into Southeast Asia

Synagie and HKT launch ShopHK, helping Hong Kong SMEs tap into Southeast Asia's booming US$600 billion e-commerce market.

Related Articles