Kia is rebooting in China with an electric SUV
Are companies leaving China, the world’s largest electric vehicle market?
In the Chinese electric vehicle industry, ‘brutal cull time’ is expected to continue for several years. Xiaopeng, who founded Xiaopeng, one of China’s three electric car musketeers, diagnosed at a conference in April that Chinese electric car companies are playing a World Cup-like tournament. It is a story that only a handful of electric vehicle companies will survive in the order of 32nd round → 16th round → 8th round in China for the next 10 years. It is expected that the currently overcrowded small companies will exist as several large companies at the end of the merger.
Are there any examples of real failures?
Yes, Aitz Motors, one of the emerging electric car companies, is in financial trouble. According to Chinese media Caixin, the company failed to pay wages and office rent properly, and stopped operating the factory. Hengda Motors of China’s Hengda Group is also in a very difficult position. Sales of electric cars were not cool, and the production line was stopped due to financial difficulties.
Xiaopeng, a major electric car company mentioned earlier, is also concerned. Delivery was first among the three emerging power electric vehicles, but fell to third last year. This year’s performance is also poor. Xiaopeng delivered only 18,230 units in the first quarter of 2023, down 47.3% from a year ago. The second quarter is also expected to deliver around 22,000 units, down 39% from the same period last year.
What is the background of China’s EV industry entering a difficult period?
Electric vehicle manufacturers are not quickly addressing profitability improvement. There is a need to take over the electric vehicle market and compete with internal combustion locomotives, so it is common to drop prices and incur losses. In particular, emerging companies that produce only electric vehicles suffer significant losses. If an internal combustion engine vehicle manufacturer makes an electric vehicle, it loses about 10,000 to 30,000 yuan per unit, but emerging companies are said to lose 40,000 to 120,000 yuan.
The disappearance of subsidies for electric vehicles is also a bad thing. The electric vehicle purchase subsidies given by China’s central and local governments gradually decreased and disappeared completely at the end of last year. For now, only the tax incentives that exempt car purchase tax remain. If the tax benefits are removed, the scale of losses for Chinese electric vehicle manufacturers is expected to increase. In order to maintain a competitive price, we will bear the burden of the buyer’s price.
I heard that a Korean company is entering the cloudy Chinese market.
Kia began to enter the Chinese electric vehicle market. Kia sold 650,000 units per year in the Chinese market in 2016. Since then, as Korea-China relations and the Chinese market environment have changed, it has lost its competitiveness. Last year, it failed to sell even 100,000 units in the Chinese market. However, in March in Shanghai, China, Kia President Song Ho-seong said, “Success in the fastest-changing and most innovative Chinese car market is a key element of Kia’s global strategy, ” and revealed his ambition to grow. into a brand that delights Chinese customers. Kia plans to launch the EV6 and EV5 electric vehicles in China this year, followed by its EV9 flagship electric SUV next year.
Chinese media Caixin said, “The Chinese electric vehicle market is in a tournament, and the market competition is fierce, so it is not easy for Korean automakers to reverse.” In the future, we must support Korean companies to write the ‘World Cup legend’ in the Chinese electric car market where tournaments are held.
This article was served at 14:00 on the Infomax financial information terminal.