Song Zhiping, president of the China Association of Listed Companies, in a speech at the 2024 China Bridge (7th) Limited Partner Summit, has said that the only car producers making money from new energy vehicles are BYD and Li Auto.
In a keynote speech Song said that electric vehicles were subverting fuel vehicles. Many producers have to produce both fuel and new energy vehicles but the vast majority of large car factories have not made money from electric vehicles.
βBut if you donβt make electric cars, you wonβt have a future. Thatβs the innovatorβs dilemma,β Song said.
Li Auto along with BYD were the two companies that Song singled out as being profitable in the new energy vehicle industry. In 2023 Li Autoβs total revenue was 123.85 billion yuan (17 billion USD), a year-on-year increase of 173.5%. On this Li Auto made a net profit of 11.81 billion yuan (1.6 billion USD) which is a reasonably healthy profit margin of about 9.5%.
Things are not so rosy at the other two standard bearers for the new energy vehicle startup market. Although revenue at Nio was up 12.9% in 2023 at 55.6 billion yuan (7.6 billion USD), losses were up even more at 45% and amounted to 20.72 billion yuan (2.85 billion USD), the average loss per car was 100,000 yuan (13,750 USD).
In 2023 Xpengβs car sales increased but so did its losses. Revenue was 30.68 billion yuan (4.2 billion USD) but the net loss was 10.38 billion yuan (1.4 billion USD).
What a lot of Chinese car producers are doing is trying to gain market share rather than making profits on the sales of their cars. For producers who also make ICE cars the losses from new energy vehicles can be subsidized through the sales of ICE cars. For the new startups, who only produce NEVs, the situation is more difficult as they do not have such a profit source.
There is anecdotal evidence that this race for the bottom is also being extended to suppliers who are being forced to sell to producers at below-cost prices in order to gain volume.
According to GlobalData there were 150 active automobile brands in the Chinese market in 2023 of which 97 were Chinese and 43 joint ventures (presumably the remainder are imported). Factory capacity utilization rate in 2023 was 59% but there were vast disparities between different producers. For BYD utilization rate is around 80% while Tesla is 92%. However, a lot of foreign OEMs are doing badly; Hyundaiβs utilization rate is only 23%. Much of Chinaβs output is controlled by 15% of factories which have a capacity utilization rate of more than 95% and their total output accounts for 47% of Chinaβs total in 2023. On the other hand, 20% of factories produced less than 1,000 cars in 2023 and another 17% produced less than 10,000. It should be noted that these figures are for the industry in general rather than being specific to new energy vehicles.
The China Bridge Summer Summit is known in Chinese as the Rongzhong Summer Summit and is co-organized by Rongzhong Finance and Rongzhong Consulting and sponsored by Rongzhong Media and Rongzhong FOF Research Institute. It runs for four days from July 8 to July 11 at the Four Seasons Hotel Beijing.
Editorβs note:
One of the main arguments by the EU and the US for putting tariffs on Chinese EVs is that they are not being sold for the real cost. Production at a loss is further indication that there may be justification for the tariffs.
Sources: Fast Technology, GlobalData, Lai Times,
