New electric vehicles destined for Belgium arrive at a port in Taicang city, east China’s Jiangsu province on January 11, 2025.
Publishing of the future | Publishing of the future | Getty Images
BEIJING – China’s electric car market is headed for a sharp slowdown in 2025, analysts predict, increasing pressure on companies trying to survive.
Sales of new energy vehicles, a category that includes battery-only and hybrid cars, rose 42% last year to nearly 11 million units, according to the China Passenger Car Association. Market leader BYDNEV sales surged — up more than 40% last year to nearly 4.3 million units, well above an internal target of at least 20% growth from 2023.
But looking ahead, HSBC analysts forecast just a 20% increase in new energy vehicle sales in China this year, amid increased industry consolidation. They predict sales growth of BYD units of around 14%.
Strong sales volumes allowed the “strugglers and losers” to hang on despite falling margins, Yuqian Ding, head of China auto research at HSBC, said in a report last week. She pointed out that only BYD, Tesla and Li Car made a profit in 2023.
“In our view, this situation is unsustainable and we expect the pace of industry consolidation to accelerate rapidly,” Ding said.
China’s combination of subsidies and consumer purchase incentives has fueled the rapid growth of new energy vehicles in recent years.
Shenzhen-based laser display company Appotronics didn’t even have a car business until it started manufacturing car projector screen which started deliveries in China early last year. The company shipped more than 170,000 units last year.
But in a sign of a changing market, the company doesn’t expect similar volumes until 2025, Appotronics chairman and CEO Li Yi told CNBC last week. He predicted that the market would not recover until 2026.
“Many customers, the car manufacturers, are not in good financial shape. They have been cutting the research and development budget. This will definitely have a negative effect on this industry,” Li said, also pointing to overcapacity issues.
As automakers piled into China’s fast-growing electric car market, they started a price war in order to attract customers. Smartphone company Xiaomi launched its SU7 electric sedan last year, priced $4,000 less than Tesla’s Model 3, and with claims of greater driving range.
“When BYD and Tesla lower prices, most rivals have no choice but to follow suit. This has obviously reduced overall profits in the auto industry, especially now that electric vehicles are gaining momentum,” HSBC’s Ding said, noting that BYD has a net a profit margin of just 5%, down from the low-teens for top carmakers when traditional fossil fuel cars were at their peak.
NEV penetration of new cars sold exceeded 50% by the second half of the year, the association’s data showed.
Due to the high penetration rate, the growth rate of new NEV car sales is likely to slow to 15% to 20% in 2025, according to Fitch Bohu analyst Wenyu Zhou and his team. They expect so-called smart features to increasingly become the main point of competition.
Car manufacturers in China have more and more turned to in-car entertainment features and driver assistance technology as ways to make their vehicles stand out.
As the electric car market slows its growth, Appotronics plans to introduce a 4K resolution projector into cars in China this year, along with a display that has better contrast and privacy features, Li said.
Looking long-term, the company intends to spend the next two to three years developing new, laser-based ways to use car headlights, Li said. He added that the company is in talks with Tesla about a next-generation in-vehicle projector-type product, but could not say more due to non-disclosure agreements.
