Chinese EV makers Li Auto, Nio, Xpeng report sales surge as price war lures buyers but imperils profits

June 2, 2024

12 2 minutes read

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China’s top electric vehicle (EV) makers increased deliveries by up to 36 per cent month on month in May as promotional campaigns and low prices lured consumers, but analysts warned the earnings outlook is dire as a price war rages on.

Shanghai-based Nio handed 20,544 cars to customers in mainland China, beating a monthly delivery record of 20,462 in July 2023. Its May deliveries rose 233.8 per cent year on year and 31.5 per cent month on month. Deliveries by Beijing-headquartered Li Auto rose 23.9 per cent year on year and 35.8 per cent compared with April to 35,020 vehicles – the company’s highest total this year. Xpeng in Guangzhou reported a 35.2 per cent year-on-year jump and an 8 per cent month-on-month rise to 10,146 units.

BYD, the leading EV maker in China and globally, has yet to publish its delivery numbers for May. In April, the company handed over 313,245 electric vehicles, including plug-in hybrids and pure plug-ins, up 49 per cent year on year and 3.6 per cent from March.

“It was expected that [EV] deliveries would rebound in May as the incentives offered by the electric-car makers could lure more customers away from petrol vehicles,” said Phate Zhang, founder of Shanghai-based EV data provider CnEVPost. “More drivers now opt for battery-powered cars and are convinced that they are value-for-money choices, particularly after the major players offer discounts to survive a price war.”

Constant price reductions will exacerbate the earnings outlook for the country’s EV makers, few of which have turned a profit, Zhang said.

Nio’s offer of free battery-swap service for the life of the car bolstered its May deliveries. The proprietary technology, which allows owners to quickly exchange a spent battery pack for a fully charged one, normally costs about 100 yuan (US$13.81) for each swap, with owners getting a free swap after four paid swaps.

In late April, Li Auto, Tesla’s nearest mainland rival, reduced the price of all its vehicles by up to 5.7 per cent as it promised to improve its offerings for families, such as large vehicles fitted with household appliances.

In February, Xpeng offered a 20,000-yuan discount on its bestselling G6 sport-utility vehicle, which is 9.5 per cent off the price tag of 209,900 yuan.

China is the world’s largest automotive and EV market, where 44 per cent of new cars sold between January and April are driven by electricity, 12 percentage points higher than the same period in 2023, according to the China Passenger Car Association.

People look at a Xiaomi SU7 electric car displayed at a store in Beijing on March 26, 2024. Photo: AFP

Shenzhen-based BYD launched a new and improved version of its plug-in hybrid technology on Tuesday, which enables a car to go as far as 2,100km on a single charge with a full tank of petrol, as the world’s largest EV maker encouraged more widespread adoption of battery-powered cars to ratchet up pressure on traditional carmakers like Volkswagen and General Motors.

Since February, the carmaker, which counts Warren Buffett’s Berkshire Hathaway among its shareholders, has slashed prices of nearly all of its cars by 5 to 20 per cent.

The prices of 50 models across a range of brands dropped by 10 per cent on average as other companies responded to BYD’s low price strategy, Goldman Sachs said in a report in April.

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June 2, 2024

12 2 minutes read