China's EV Price Wars Hit Auto Profits, Smaller Players Struggle as Margins Shrink

Acute competition posed a bummer for China’s automotive industry profit margins in 2024, taking a toll on weaker electric vehicle makers like Baidu Inc BIDU and Geely Automobile Holdings GELYF GELYY-backed Jiyue and Human Horizons Group Inc.

Car industry margins in China averaged 4.4% from January through November, down from 5.0% in 2023, Bloomberg cited data from China’s Passenger Car Association on Friday.

The margins still trailed the average profit margin of 6.1% of downstream industrial enterprises, Bloomberg cites PCA.

Also Read: Meta Settles Israeli Job Ad Discrimination Case For $1 Million: Report

The EV industry revenue for the first 11 months of 2024 rose by 3% to 9.5 trillion yuan ($1.3 trillion), Bloomberg cites PCA. Profits declined by 7.3% to 413.2 billion yuan.

Bloomberg cites Cui Dongshu, the PCA secretary general, as saying that the industry must slash costs and boost efficiency due to the dwindling margins.

China’s car market, especially its EV sector, has experienced intense rivalry for at least the last two years, prompting a price war.

BYD Co’s BYDDF BYDDY consolidation wiped out the smaller players.

Reportedly, China is on track to lead global EV adoption by 2025, with electric vehicle sales projected to surpass traditional cars for the first time. The country will likely sell over 12 million EVs in 2025, doubling 2022 figures, while traditional car sales may drop below 11 million.

China’s EV industry progress stems from advancements in domestic technology, securing a global supply chain for lithium and cobalt, and leveraging its large-scale manufacturing to make EVs more affordable for consumers.

Also this week, reports indicated China eying 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to drive consumption through subsidies, equipment upgrades, funding investments in electric vehicle sectors, and more.

Price Actions: At the last check on Friday, NIO is down 0.43% at $4.68. LI is up 1.70%, XPEV is down 3.70%, and ZK is up 0.46%.

Also Read:

• Banks And Business Groups Challenge Fed’s Stress Test Rules