CPCA Highlights Discounts and Profitability Concerns in China’s EV Market

CPCA Reports Growing Discounts in the Chinese EV Market

In 2024, China's electric-vehicle (EV) manufacturers have significantly increased their price discounting, leading to concerns about profitability amid an intense price war. Major players like BYD, Xpeng, Li Auto, and Geely Auto have cut prices on a staggering 124 EV models, surpassing previous records.

Impact of Discounts on Sales and Margins

According to the China Passenger Car Association (CPCA), these reductions are not just numbers but reflect a dire situation where sales growth is being prioritized over profit margins. Between January and September 2024, price reductions spanned across various models, with all-electric cars seeing an average drop of 13.5%.

• Price cuts ranged from 5% to 20% across numerous vehicle types.
• 71 petrol cars also saw significant discounts, demonstrating the widespread impact.
• Despite these challenges, EV sales have maintained momentum, driven by government incentives and discounts.

Future Sustainability Concerns

As competition escalates, analysts are increasingly worried about the sustainability of China’s EV market. According to Gao Shen, an independent analyst based in Shanghai, the pivotal question remains: How will the industry sustain sales momentum once subsidies and deep discounts fade?

Market Dynamics and Government Incentives

Government initiatives, including subsidies and incentives up to 20,000 yuan, play a crucial role in support of EV adoption. Sales have indeed surged, accounting for 65% of global EV sales in the first half of 2024, with delivery figures advancing significantly.

However, shrinking profit margins could jeopardize smaller manufacturers, potentially leading to financial struggles as cash reserves dwindle. Currently, BYD and Li Auto remain the only profitable players, with others grappling with losses due to high R&D costs.