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Category: Business News
Tags: BYDChinaEVMarketSubsidies
Entities: American car manufacturersBeijingBYDEuropeHuaweiITOLee AutoStella LeeTesla
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Our next story is about BYD, the biggest maker of electric cars in the world. BYD has issued a blunt warning.
It is aimed at China's EV industry. It says around 100 car brands in China need to be quote
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unquote pushed out. That's the term they used, pushed out.
BYD says that China's EV market has too many brands and most of them will not survive. Now, this statement was made by Stella Lee.
She's BYD's executive vice president. She
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said, and I quote, "About 100 car makers need to be pushed out." And she said this in Munich at one of Europe's biggest car shows. It's quite a bold statement, but it is rooted in simple economics.
The Chinese market is overcrowded. There is too much supply
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and not enough demand. According to Lee, even 20 car brands may be too many.
And how many EV manufacturers does China have? 129.
Most of them are battling for survival.
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They're slashing prices drastically to do so. And BYD believes it is time to let the weakest fail.
Needless to say, this position suits them. BYD is the biggest EV maker in the world.
It overtook Tesla in 2024, and it is bagged heavily by the Chinese state.
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So when it says some brands should fold up, it means fewer players to compete with. So there is business interest in the statement.
But there's also a fundamental issue here and that is aggress aggressive discounting. It is fueled by government subsidies for
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car makers in China. This has led to a full-blown price war and BYD wants to end that because despite being the biggest, they're not immune to pressure.
There's a strain on the company's profits. Margins are shrinking.
If the weaker brands were to exit,
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brands like BYD would have more pricing power and fewer competitors. In fact, let's look at some data.
Like I said before, China has 129 EV brands, but only 10% of them will be profitable by the year 2030.
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That's less than 1 in 10 brands. In the best case scenario, just 15 companies will survive.
15 companies out of 129. They will command 75% of the EV market in mainland China.
The rest will be
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gone. Reports say many brands are already on the edge.
They sell less than 1,000 cars a month. Some can't even recover their cost.
This is what over capacity looks like when there are more cars than buyers. China can produce 20 million EVs in a
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year. Last year, only half of this capacity was used.
That's 10 million cars. The price cuts make the situation worse.
Car makers in China offer deep discounts, trade-in bonuses, tax exemptions, zero interest loans, all of it. It's great for the buyers, but it's
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unsustainable for the industry. Today, only three Chinese car makers are profitable.
That's BYD, followed by Lee Auto, which is another competitor for Tesla in China, and ITO. This is a car company backed by Huawei.
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Only these three companies are profitable. Everyone else is bleeding cash.
Earlier this year, Beijing stepped up. It tried to re in the deep discounting.
Car makers were warned. They were threatened with penalties and this did lead to some correction.
In July, the average discount was 16.7%
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which is a minor dip from June when car makers were offering more than 17% discount. But the main challenge still remains over capacity.
Until China deals with that, the discounts will not stop. And this is where state subsidies play a
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role. China's EV boom was not driven by innovation.
The state incentivized it. In fact, they engineered it.
In 2015, they launched made in China 2025, a 10-year plan. Beijing's goal was to dominate high-tech sectors, including
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EVs. Massive state subsidies followed.
Some companies got up to 60,000 yuan per car as subsidy. Car makers received this rebate in bulk and in turn they started selling cars at a discount.
So the subsidy boom fueled
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growth but it has also created a bubble and now that bubble is bursting. Why should you care?
Because the fallout won't stay in China. In recent years, companies like BYD have expanded their selling cars overseas.
Last year these EVs became a big issue. American car
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manufacturers have called it an extinction level threat. Europe has accused China of dis distorting the market because Chinese manufacturers are selling cars for cheap and in many cases they're undercutting their Western rivals on price.
The
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American and European governments took action. They slapped tariffs on Chinese EVs and the pressure is showing on companies like BYD.
They're not now offering to build in Europe. We are almost ready to build our cars in
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Europe for Europe. Our new factory in Hungary is on track to start making cars at the end of this year.
This is the real evidence of BYD
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staying in Europe investing in investment in not only our plant but also the supply chain. In July, BYD sold more than 13,000 cars in Europe.
That's more than Tesla. If
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they build their cars in Europe, they can keep their foothold, even expand it without the threat of tariffs. But a global push won't fix what is broken at home.
China's car market is overcrowded, margins are thin, and competition is cutthroat.
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And the state has done little to course correct. First post now available in nine languages on YouTube.
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