On January 11, 2025, new electric vehicles were shipped to Belgium at a port in Taicang City, Jiangsu Province, eastern China.
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BEIJING – According to analysts’ forecasts, China’s electric vehicle market will slow down sharply by 2025, putting increasing pressure on companies to survive.
Sales of new energy vehicles, including pure electric vehicles and hybrid vehicles, surged 42% last year to nearly 11 million units, according to the China Passenger Car Association. market leader BYDSales of new energy vehicles have surged, growing by more than 40% last year to nearly 4.3 million units, well above the internal target of at least 20% growth from 2023.
But looking forward, HSBC analysts predict that China’s new energy vehicle sales will only grow by 20% this year, and industry consolidation will also intensify. They expect BYD sales to grow by about 14%.
Ding Yuqian, head of China automotive research at HSBC, said in a report last week that strong sales allowed “struggling players and laggards” to persevere despite falling profit margins. She pointed out that only BYD, Tesla and rickshaw Achieve profits in 2023.
“We believe this situation is unsustainable and we expect the pace of industry consolidation to accelerate rapidly,” Ding said.
In recent years, China’s subsidies and consumer purchase incentives have supported the rapid growth of new energy vehicles.
Shenzhen-based laser display company Guangfeng Technology didn’t even have an automotive business before it started producing cars. Car projector screen Deliveries began in China early last year. The company shipped more than 170,000 units last year.
But Li Yi, chairman and CEO of Guangfeng Technology, told CNBC last week that the company expects sales to reach similar levels in 2025, a sign of changes in the market. He doesn’t expect the market to pick up until 2026.
“A lot of customers, automakers, their financial situation is not good. They have cut their R&D budgets. This will definitely have a negative impact on the industry,” Li said, also pointing to overcapacity issues.
As automakers rush into China’s fast-growing electric vehicle market, they A price war began to attract customers. Smartphone company Xiaomi launched its SU7 electric sedan last year, priced $4,000 less than a Tesla Model 3, and Claimed longer driving range.
“When BYD and Tesla cut prices, most competitors had no choice but to follow suit,” said HSBC’s Ding. “This obviously squeezed the overall profit pool of the auto industry, especially now that electric vehicles are gaining momentum,” he said. pointed out that BYD has a net profit margin of just 5%, lower than the teens achieved by top automakers during the heyday of traditional fossil fuel vehicles.
Association data shows that as of the second half of this year, the penetration rate of new energy vehicles in new car sales has exceeded 50%.
Fitch Bohua analyst Zhou Wenyu and his team said that due to high penetration rates, new energy vehicle sales growth may slow to 15% to 20% in 2025. They expect so-called smart features to increasingly become the main focus of competition.
Chinese automakers are increasingly Moving to in-car entertainment Driver assistance technology is a way to make their vehicles stand out.
Although the growth of the electric vehicle market is slowing, Guangfeng Technology plans to launch a 4K resolution projector in China this year, as well as a screen with better contrast and privacy features, Li said.
In the long term, the company intends to develop new uses for laser-based car headlights within the next two to three years, Li said. He added that the company was in talks with Tesla about projector-type products in next-generation cars, but could not disclose more information due to a confidentiality agreement.
