China’s EV makers feel crunch as high R&D costs collide with price-war margin pressure
More than 50 new models could hit the market this year, but relentless discounting is devouring profit margins, spelling doom for some firms
However, high development costs and a brutal price war are making it difficult for most of them to achieve profitability.
More than 50 new pure electric and plug-in hybrid models are expected to hit the mainland China market in 2024, according to Suolei, an advisory firm in Shanghai. Only a handful will generate enough sales to offset their development costs.
“The carmakers need to ask themselves a hard question: whether it is worth investing billions of yuan to develop a new car that cannot generate handsome sales unless a heavy discount is offered,” said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “After all, the market already abounds with similar products, some of which will be edged out amid fierce competition.”
In the world’s largest automotive and EV market, new models that feature advanced autonomous driving systems and longer driving ranges can draw thousands of orders within days of presale launches, buoyed by young consumers’ increasing interest in environmentally friendly cars over the past two years.
“New models used to give a boost to a carmaker’s sales, but more importantly, it is the price cuts that prove to be attractive to buyers,” said David Zhang, general-secretary of the International Intelligent Vehicle Engineering Association. “Lower prices add pressure to the companies, as most of them need to cut losses to survive the cutthroat market.”
