By Yasir Zeb
Copyright researchsnipers
The Chinese electric car manufacturer BYD expects a massive upheaval in the domestic auto industry. A top manager of the company spoke on the sidelines of the IAA car show in Munich that there would be a “bloodbath”.
130 brands in competition
The background to this is a situation in which numerous companies are pushed onto the market and there are enormous discount battles there. This led so far that the state now intervenes so as not to escalate the situation completely. Byd manager Stella Li told the Financial Times that dozens of manufacturers will probably disappear from the market in the coming time. “Even 20 providers are too much,” she said. President Xi Jinping had repeatedly emphasized that the discount battles – known in China under the term Neijuan (Involution) – not only damaged the auto industry, but also the overall economy and strengthened deflation. So far, around 130 brands for market shares in pure electric cars and plug-in hybrids have competed significantly more than in any other country in the world.
Market experts assume that this number will shrink rapidly. The management consultancy Alixpartners expects that only about 15 providers in China can survive financially by 2030. Xpeng, a BYD competitor, had already predicted a strong concentration process, which could only leave a handful of large car companies globally. For BYD itself, the retreat of weaker providers could bring advantages.
In the future, customers would pay more attention to technology, reach and driving comfort, according to LI. Nevertheless, the industry leader will not be spared: analysts refer to falling profits and sales in the second quarter. Above all, the intensified rules of Beijings have a stressful effect against price reductions and long payment periods towards suppliers.
BYD also fights
Bank Citi has significantly reduced its sales forecasts for BYD. If the group originally expected around 5.8 million vehicles sold for this year, Citi now corrected this to 4.6 million – after 4.3 million in the previous year. The forecasts were also adapted down for the following years. At the same time, BYD and other Chinese manufacturers are increasingly relying on foreign markets.
In Europe, they advertise with comparatively cheap electric cars that offer modern software and assistance systems. BYD also plans to start production in Hungary at the end of the year, although a quick run -up remains difficult there. The state company Changan has recently dared to jump to Great Britain. Despite all the challenges, Li was confident: “Our profits remain strong. But the foreign market is not easy.”
