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Pandaily: Chinese NEV manufacturers will face increasing pressure as the 13-year-long subsidies are scheduled to end this year
Chinese article by 爱集微
English Editor 张未名
12-02 21:07

Chinese new energy vehicle (NEV) manufacturers are expected to go under increasing pressure as the NEV subsidies issued by the Chinese government for the past 13 years are scheduled to end this year, reported Pandaily on December 2.

The vast majority of Chinese NEV enterprises have not yet achieved profitability, and are still investing in large-scale research and development program. As subsidies get smaller, making profits is now the primary focus for many of these firms.

Meanwhile, NEV manufacturers have been raising vehicle prices. BYD, for example, announced on November 23 that it would raise the guidance price of models by RMB2,000 to 6,000 ($283 – $850). On November 30, GAC Aion decided to raise the prices of its models by RMB3,000 to 8,000 ($427.2–1139.2), according to Pandaily.

After Tesla announced price cuts, Cui Dongshu, the secretary general of the China Passenger Car Association (CPCA), said that at the end of this year, Chinese NEV makers will not witness large-scale price cuts, but may issue price increase notices.

One of the reasons most frequently cited is the higher battery material price. Battery-grade lithium carbonate jumped more than 10 times from RMB50,000 /ton ($7120/ton) in early 2021. But on November 25, according to data released by market information provider Shanghai Ganglian, the price of some lithium electric materials fell, which will gradually reduce cost pressure on NEV firms.

In the first three quarters of this year, only SAIC-GM-Wuling, BYD and Tesla achieved profits, while the rest of the car companies in China have not reported profits in the new energy vehicle sector, and losses have become normal, Pandaily said.

In the third quarter of 2022, XPeng posted a net loss of RMB2.38 billion($339 million), compared with a net loss of RMB1.595 billion($227 million) in the same period last year. During the same period, NIO’s net loss was RMB4.108 billion($585 million), up 392.1% year on year. In the second quarter of 2022, Li Auto’s net loss was RMB641 million($91.3 million), a year-on-year increase of 172.2%, while the gross margin slipped to 21.5% quarter-on-quarter. But their spending on research and development is increasing.

BYD represents a more successful example in the Chinese market. It has adopted a self-developed strategy in the field of semiconductors, batteries and other core components, effectively avoiding the cost pressure caused by more expensive raw materials and the chip shortage, retaining more profit space.

In this case, increasing product prices is the best choice. Cui Dongshu said bluntly that BYD’s price increases have little to do with battery material prices. Affected by the official withdrawal of new energy vehicle subsidies at the end of this year, another round of price increases will likely emerge, reported Pandaily.

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