BYD and Li Auto Emerge as Profitable Players in China NEV Market
BYD and Li Auto are the only Chinese new energy vehicle (NEV) manufacturers currently turning a profit
Beijing, July 12, 2024- In a keynote address at the 2024 China Bridge (7th) Limited Partner Summit, Song Zhiping, President of the China Association of Listed Companies, highlighted that BYD and Li Auto are the only Chinese new energy vehicle (NEV) manufacturers currently turning a profit.
“Electric vehicles are revolutionizing the automotive industry, and the transition from traditional fuel vehicles is inevitable,” Song emphasized. He noted that while many manufacturers are caught in the crossfire of producing both fuel and NEVs, the majority have yet to see a return on their electric investments.
Song’s statement underscores the “innovator’s dilemma,” where companies must innovate or risk obsolescence. Despite the challenges, Li Auto has managed to thrive, reporting a total revenue of 123.85 billion yuan ($17 billion USD) in 2023, marking a 173.5% year-on-year increase. The company’s net profit reached 11.81 billion yuan ($1.6 billion USD), reflecting a commendable profit margin of approximately 9.5%.
In contrast, other NEV startups are struggling to turn a profit. Nio, for instance, saw a 12.9% increase in revenue to 55.6 billion yuan ($7.6 billion USD) in 2023, yet losses swelled to 45%, amounting to 20.72 billion yuan ($2.85 billion USD). The average loss per car was a staggering 100,000 yuan ($13,750 USD).
Xpeng also experienced increased sales but at the cost of higher losses, with a 2023 revenue of 30.68 billion yuan ($4.2 billion USD) and a net loss of 10.38 billion yuan ($1.4 billion USD).
The race for market share is forcing many China NEV Market car producers to prioritize volume over profit. For those with a foot in both the NEV and internal combustion engine (ICE) markets, the losses from NEVs can be offset by ICE sales. However, for startups solely focused on NEVs, the financial landscape is more precarious, as they lack this buffer.
The competitive pressure is not only affecting manufacturers but also suppliers, who are reportedly being coerced into selling at below-cost prices to secure volume.
GlobalData’s 2023 report reveals that there were 150 active automobile brands in the Chinese China NEV market, with 97 being Chinese and 43 joint ventures. The overall factory capacity utilization rate was 59%, but there were significant disparities among different producers. BYD, for example, boasts an 80% utilization rate, while Tesla’s stands at 92%. Conversely, Hyundai’s rate is a mere 23%.
The top 15% of factories, which have a capacity utilization rate exceeding 95%, account for 47% of China’s total output. In stark contrast, 20% of factories produced fewer than 1,000 vehicles in 2023, and another 17% produced less than 10,000.
The China Bridge Summer Summit, also known as the Rongzhong Summer Summit, is a four-day event co-organized by Rongzhong Finance and Rongzhong Consulting, with support from Rongzhong Media and Rongzhong FOF Research Institute. The summit took place from July 8 to July 11 at the Four Seasons Hotel Beijing.