China’s EV Industry in Peril: High R&D Costs and Price Wars Threaten Profitability Amidst the Launch of Over 50 New Models

Chinese electric vehicle manufacturers are under strain as elevated research and development expenses clash with price competition putting a strain on profit margins. Over 50 new models might be launched this year, however, excessive discounting is eating into profits, which could spell disaster for some companies.

Nonetheless, the steep costs of development and a fierce pricing battle are creating obstacles for the majority of them in reaching profitability.

According to Shanghai-based advisory firm Suolei, it is anticipated that over 50 new entirely electric and hybrid plug-in models will be launched in mainland China by 2024. However, only a small number of these models are projected to generate sufficient sales to cover the costs of their development.

Automobile manufacturers must confront a tough dilemma: is it worthwhile to pour billions into creating a new vehicle that can only secure substantial sales through hefty discounts?" This is a question posed by Eric Han, a high-ranking executive at Suolei, a consultancy business in Shanghai. He further points out that the market is already saturated with comparable products, and intense competition will inevitably force some out.

In the biggest auto and electric vehicle market globally, new designs boasting sophisticated self-driving technology and extended mileage capabilities can attract thousands of pre-orders within a few days of their debut. This is largely due to the growing fascination among young buyers for eco-friendly vehicles over the last couple of years.