China’s electric vehicle market has entered a «bleeding competition» phase due to oversupply. This phenomenon could lead to a drop in global prices, raising concerns that oversupply «nightmare» such as steel, petrochemicals, and solar power in the past will be repeated.
According to a report released by the Korea Automobile Research Institute on the 10th, «The Paradox of China’s Automobile Industry, Inner 卷,» China’s finished car production capacity last year was about 55.7 million units on an annual basis, but domestic sales were only 26.9 million units in the same year. Inner circle means «to be rolled inside,» which means a state in which consumptive competition takes place, but the quality of the industry as a whole is not improved.
In China, 500 finished car manufacturers were established in 2019 alone. China’s National Bureau of Statistics estimated that the average utilization rate of the Chinese automobile industry is currently only around 50%.
In particular, as the Chinese government promoted a large-scale support policy by designating electric vehicles as a key industry, electric vehicle manufacturers flocked, leading to supply and demand imbalances and price cuts.
The average vehicle sales price of major Chinese electric vehicle manufacturers, including BYD and Nio, Xpeng and Li Auto, fell to $24,000 in 2024 from $31,000 in 2021. According to the China Automobile Association, the number of price reduction models increased from 150 in 2023 to 227 last year. When Tesla China cut the price of the Model 3 and Y by 9% in 2023, BYD countered and cut the price of its flagship model by 10-20%.
The profitability of the finished car industry has halved from 8% in 2017 to 4.3% in 2024 due to falling profitability due to price bleeding competition. Of the 130 Chinese electric vehicle manufacturers, only four companies made a surplus last year: BYD, Tesla China, Li Auto, and Geely. Alex Partners, a global consulting firm, predicted that only about 15 companies will survive five years later in 2030.
As China is the world’s largest electric vehicle market, there are concerns that downward pressure from Chinese automakers will shift to overseas markets, including Korea. BYD officially entered the Korean market in January this year and started selling the Ato3 in March.
BYD will soon release a small hatch pack called Dolphin in Korea. The sale price is 99,800~129,800 yuan (about 20.36 million~26.48 million won) in China, and the launch price in Korea is expected to be similar. If electric vehicle subsidies are applied, the actual purchase price is expected to be in the mid to late 10 million won range.
It is cheaper than Hyundai Motor’s Casper Electric, an electric car that is competing in a similar size, and more than 20 million won cheaper than the Kia Niro EV.
Zicker and Xpeng are also preparing to enter the Korean market with the goal of launching new cars in the first quarter of next year.
Chinese electric vehicles are rapidly penetrating the domestic market by launching a low-cost offensive. BYD surpassed 1,000 units in monthly sales in half a year after entering the domestic import car market.
According to the Korea Automobile Importers and Distributors Association, the number of BYD brands sold in September this year was 1,020 units. According to SNE Research, BYD’s overseas new car sales in the first half of this year increased 157.9% year-on-year. It is much higher than the growth rate of the Chinese market (14.7%) during the same period.
Kim Han-sol, a senior researcher at the Korea Automobile Research Institute, said in a report, «There is a phenomenon in which Chinese electric vehicles with price advantages are accelerating their overseas expansion and downward pressure is transferred to overseas markets.»
[Reporter Han Jiyeon]
