Amid efforts to combat climate change and reduce carbon emissions, more people are buying electric vehicles (EVs).
As EV sales are expected to increase worldwide, the electric vehicles market is witnessing a fierce competition between the world’s largest EV producers, with China asserting itself as a global leader.
Market Growth
According to the latest IEA’s annual Global EV Outlook, the EV global sales are growing and are set to remain robust through 2024, reaching around 17 million by the end of the year. In the first quarter, sales increased 25% compared with the same period in 2023.
The EV sales in China are expected to jump to 10 million, accounting for 45% of all car sales in the country. In the US, about one in nine cars are projected to be electric, while in Europe, EVs are set to remain around one in four cars sold.
Significant investment in the EV supply chains, ongoing policy support, and declines in EV prices are expected to produce more substantial changes in the coming years. IEA Executive Director Fatih Birol said that “the global EV revolution appears to be gearing up for a new phase of growth.”
“The wave of investment in battery manufacturing suggests the EV supply chain is advancing to meet automakers’ ambitious plans for expansion. As a result, the share of EVs on the roads is expected to continue to climb rapidly,” he added.
The Outlook expects that half of the cars sold globally is set to be electric by 2035, under the current policy settings. If countries met their announced energy and climate pledges on time, two in three cars sold would be electric by 2035.
New Players
The EV flourishing market is attracting new players. Saudi Arabia has joined electric vehicles produces in 2022 by announcing it first EV brand, Ceer. It will design, manufacture and sell a range of vehicles for consumers in the Kingdom and the MENA region.
Also, more companies are joining the market. In March, Xiaomi launched its electric car, the SU7 sedan. Last November, Meizu, a smartphone maker, announced a partnership with Geely Auto to launch its first EV, Meizu DreamCar MX, in 2024. In the same month, Huawei launched its first electric sedan, the Luxeed S7.
Overheated Race
China is trying to dominate the EV global market. Some Chinese EV makers, receiving generous support from the government for years, have become global players. For example, BYD is now competing with the American giant Tesla (TSLA) for the leadership of the battery EV market.
This aggressive competition has led to a price war between the largest manufacturers, according to CNN. In October 2022, Tesla slashed the prices of its Model 3 and Model Y cars in China, its largest overseas market, by 9%. Three months later, it slashed prices again, unleashing a wave of price cuts in the Chinese auto industry in 2023.
Amid intensifying pressures, Tesla cut the starting prices of 4 models sold in China by $1,932. This made some Chinese brands, such as Xpeng and Li Auto, to follow suit and offer discounts to attract buyers.
Challenges Ahead
The huge oversupply in China’s EV market has created a fiercely-competitive environment that many smaller companies might not survive. Mark Rainford, an automotive industry commentator based in Shanghai, said “China’s EV industry is only going to go from strength to strength as a whole, but not every player today will see the finish line.”
These challenges have forced some global auto manufacturers to retreat. According to statistics from the China Passenger Car Association, more than a dozen car makers disappeared from the market last year, including popular EV brands such as WM Motor, Byton, Aiways, and Levdeo.
Moreover, price cuts have put additional pressures on some brands, which will not be able to sustain these discounts. “The price war is likely to rage on further into this year, though it’s hard to imagine prices can come down much further than they already have,” Rainford said.
The price cuts have decreased profitability for Chinese companies. In 2023, the average profit margin for China’s car industry declined to 5%, the lowest in a decade, according to the China Association of Auto Manufacturers (CAAM).
Another challenge is the growing number of players in the EV industry that exacerbates oversupply. The National Development and Reform Commission (NDRC) expects over 110 new EV models to be launched this year. By 2024, BYD, Huawei’s Aito and Li Auto are planning to increase their supply by 2.3 million vehicles, whereas the projected total market demand is 2.1 million cars only.
The NDRC said: “The market will be in a state of oversupply for a long time.”
