They have billions of dollars in funding, backing from China’s biggest tech companies and the world’s largest electric vehicle market at their doorstep. But Chinese EV start-ups face a struggle to survive in the face of intensifying competition and subsidy cuts. Although analysts are reluctant to name companies that could disappear, the two dozen Chinese EV start-ups such as Nio and Xpeng, which have raised more than $1obn in recent years, are expected to be cut down to a handful.
China’s electric vehicle sales have grown tenfold since 2014 and last year it became the first country to see new energy vehicle sales surpass 1m, about three-quarters of which were pure EVs and the rest hybrids. But that growth has been dependent on subsidies averaging at Rmb70,000 ($10,100) per vehicle, allowing companies to lower prices. This month, subsidies will be cut to about Rmb25,ooo for most vehicles. That will force companies to raise prices, wiping away one of the key reasons for their sales at a stroke, or accept lower margins on businesses that are already lossmaking.
The cut is expected to reduce year-on-year growth of EV sales to about 20 percent in the second half of 2019 compared with 60 percent in April, as consumers rush to beat the end of subsidies, according to Yale Zhang of consultancy Auto Foresight.
Three big groups: BYD, Beijing Auto and Shanghai Auto, accounted for half of China’s electric vehicle sales last year. They tend to sell cheap vehicles: The current top seller, BYD’s Yuan, is priced under Rmb99,ooo with a range of 360km. That compares with the price of an imported Tesla Model 3 at Rmb377, ooo with a range more than 400km.