China’s premium electric car makers anticipate smooth road ahead as demand and margins improve

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10th June 2024 – (Shanghai) China’s leading electric car manufacturers, Nio, Xpeng, and Li Auto, are set to benefit from an anticipated boost in sales and profitability in 2024. These companies have recently faced intense competition and price wars, which have negatively impacted their product margins. However, the situation is expected to improve as consumer demand for electric vehicles rises and government subsidies come into effect. China remains the largest market for electric vehicles globally, accounting for approximately 60% of total sales.

The Chinese government announced subsidies of 10,000 yuan (US$1,380) for buyers who replace their petrol cars with electric vehicles, valid until the end of the year. Analysts from Everbright Securities predict that these subsidies could lead to a potential increase of up to 2 million EV sales in 2024, further accelerating the electrification of China’s auto industry.

Despite the challenging market conditions, Nio, Xpeng, and Li Auto are optimistic about their future performance. Nio forecasts a significant jump in deliveries for the second quarter, with estimates of up to 56,000 units. Xpeng anticipates a sales increase of up to 46.6% to 32,000 units, while Li Auto expects a 27% rise to 110,000 units. It is worth noting that among the three manufacturers, only Li Auto has managed to achieve profitability thus far.

China’s electric vehicle sector, a key driver of the country’s economy, is expected to experience 20% sales growth in 2024, compared to 37% in 2023, according to Fitch Ratings. The price cuts initiated by BYD, the world’s largest EV builder, earlier this year influenced the overall market, with the average prices of 50 EV models dropping by 10%. However, further price reductions could potentially drive the industry into losses.