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China’s 2024 EV Stocks Face Profitability Pressure Amid Price Wars

Chinese electric car manufacturers have experienced a challenging beginning to the new year, with heightened competition and ongoing price wars exerting pressure on their profitability. This trend has contributed to a decline in the share prices of key players.

Specifically, Hong Kong-listed shares of Nio and Xpeng have recorded declines exceeding 18% and 16%, respectively, while Li Auto has seen a 12% decrease in the early part of the year. Additionally, BYD and Zhejiang Leapmotor have registered declines of approximately 2.5% and 12%, respectively, in 2024.

Analysts from Bernstein have emphasized the expectation of sustained intense competition in the domestic market, which is anticipated to impact pricing and overall profitability in the electric vehicle (EV) industry. Similarly, Morgan Stanley has expressed investor caution due to the volatile nature of China’s auto market, marked by persistent competition and macroeconomic uncertainties.

Chinese EV Stocks Decline in 2024: Intense Competition & Price Wars

According to data from the China Association of Automobile Manufacturers quoted by Fitch Ratings, passenger EV sales growth in mainland China decelerated from 108% in the third quarter of the previous year to 28% in the same period of 2023. Fitch Ratings predicts a further slowdown in growth for 2024, citing expectations of modestly increased domestic passenger car demand, reaching nearly 22 million units amidst economic uncertainty.

Also Read: The Electric Drive: 2024 Range Rover Evoque Changing the SUV Game

Despite the cautionary note on the growth slowdown, automakers have been actively working to increase their deliveries. Xpeng, for instance, achieved a milestone by delivering a record 20,115 electric vehicles (EVs) in December, marking a substantial 78% increase compared to the previous year. Furthermore, Xpeng’s fourth-quarter deliveries surpassed 60,000 units, reaching this milestone for the first time. Similarly, Li Auto reported robust performance in the fourth quarter with deliveries totaling 131,805, reflecting a remarkable year-over-year growth of 184.6%.

Chinese EV-maker Nio to slash price of all models amid sales slump -  Hindustan Times

In a notable development, BYD managed to surpass Tesla as the world’s top-selling EV brand in the fourth quarter. BYD achieved this feat by selling more battery-powered vehicles than its U.S. rival during this period, showcasing the competitiveness and success of BYD in the global electric vehicle market.

Competition and price wars

The competition in the Chinese electric vehicle (EV) market is escalating, with some manufacturers meeting their sales targets for 2023 while others fall short. BYD, Li Auto, and Geely have achieved their sales goals, but Xpeng and Nio have not.

Bernstein notes that the competitive landscape is becoming more challenging, anticipating increased pricing pressure. While the demand for EVs is expected to remain strong, the industry faces three significant challenges on the supply side: overcapacity, the launch of new models, and the emergence of new tech players such as Huawei and Xiaomi, indicating a rise in competition.

In 2024, the Chinese EV market is set to see the launch of over 100 new models, according to HSBC China autos analysts. Several domestic EV companies, including Nio, Huawei, and Zeekr, have recently unveiled new EVs. Xpeng, for example, introduced its latest X9 large 7-seater EV on January 1, further intensifying the competition. Even consumer electronics company Xiaomi is poised to enter the market with its first EV.

In response to the competitive landscape, multiple Chinese EV players, including Tesla, have implemented price cuts. This trend, coupled with the launch of new models, is expected to lead to market consolidation, with Fitch Ratings suggesting that smaller niche EV producers may merge with or be acquired by stronger market participants.

As Chinese EV manufacturers strive to attract customers through new offerings and lower prices, their profitability is anticipated to face increased pressure. Morgan Stanley has issued a warning, stating that 2024 will be a tougher year as China’s EV market remains relatively saturated.

John Collins
John Collins
John is an esteemed journalist and author renowned for their incisive reporting and deep insights into global affairs. As a prominent contributor to City Telegraph, John brings over 5 years of experience covering diverse geopolitical landscapes, from the corridors of power in major capitals to the frontlines of conflict zones.

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