Electric vehicle (EV) sales have slowed down in recent months, but the slump is not limited to the U.S. Chinese EV manufacturers saw sales grow significantly for years, but are now watching demand cool down, The Wall Street Journal reports. The recent slowdown has pushed Chinese EV makers to try market their products overseas and take on other large auto manufacturers who are having their own troubles shifting to battery-powered cars.
A wave of subsidies helped China sell more EVs than Europe and the U.S. combined, The Wall Street Journal reports. The boost in sales led to investments in homegrown car manufacturers. The combination of market deceleration, reduced subsidies and consumers spending less brought China’s EV sales numbers below the previously mentioned regions.
Now, a price battle has formed in China among EV startups, as well as with foreign companies like Tesla. A number of Chinese EV manufacturers spent a lot of money to grab a share of the expanding market, but have yet turn a profit. Those companies are now at risk of going bankrupt or needing more capital quickly.
Meanwhile, the downturn in sales puts the Chinese EV market in a position where more cars will be produced than can be sold domestically during the next few years. China’s government is encouraging manufacturers to expand abroad, but analysts believe that trend could result in oversupply both domestically and overseas.
Chinese automakers are currently projected to add capacity for five million cars between 2023 and 2025 — many of them EVs, per Bernstein Research. EV sales in China are expected to grow by approximately 3.7 million during this time, according to the firm.
Meanwhile, automaker BYD has added enough factory capacity in China by December to produce about four million cars annually, Bernstein said. That’s a million more than it sold in 2023. BYD looks to increase its sales overseas in the coming years as well as buy ships to send cars to Europe. BYD began delivering EVs from its Uzbekistan factory and will begin delivering from Thailand in July, The Wall Street Journal reports.
The EV sales slowdown in China has also impacted car manufacturers around the globe. Many of the bigger companies counted on sales from China, but now are having a tough time competing with local car makers — especially at a time when EV demand has decreased in various major markets.
These struggles have lead General Motors and Ford to scale back on their EV production plans. Tesla had already warned of slower EV growth this year during a recent earnings call. More than one million domestically-made EVs were shipped from China in 2023—making it the world’s largest auto exporter to nations like Australia and Thailand.
So far, Chinese automakers have not had as much success in developed markets such as Europe while tariffs have mostly kept them out of the U.S. — as well as their inability to tap green-transition subsidies.
Policymakers’ ability to control the EV revolution as well as they pumped up could determine whether or not China’s EV supply outpaces the demand. Favorable consumption policies led to EV demand in China to move well past supply for three years. Once the government pulled EV-purchase subsidies for consumers in early 2023, growth fell to 21 percent from 74 percent in 2022. Meanwhile, EV sales increased 47 percent in the U.S. and 37 percent in Europe, according to industry analysts.
“Right now in China we already see overcapacity,” Ming Hsun Lee, auto analyst at Bank of America told The Wall Street Journal. “This is because in the past few years many auto brands believe in the immense demand and that they will remain strong,”
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