Chinese EV Thrive Despite Tariff Hikes, Foreign Rivals Struggle
Despite new tariffs on Chinese electric vehicles (EVs), foreign automakers are struggling to stay competitive in China’s burgeoning EV market.
What Happened: A study by AlixPartners reveals that foreign car companies are falling behind in China’s EV market, which represents over 40% of new passenger cars sold in the country. Stephen Dyer, co-leader and head of AlixPartners’ Asia automotive practice suggests that foreign brands must adopt a different approach and take more risks to make a mark in the market, CNBC reported on Tuesday.
"Unless [foreign car brands] change their mindset of developing and manufacturing cars to one that is more willing to take risks, and consider how to design and manufacture a car from so-called first principles, their position will become increasingly precarious," Dyer, who spoke in Mandarin, was quoted.
Even with the U.S. doubling tariffs on Chinese EVs from 25% to 100% and the EU imposing tariffs of up to 38% on Chinese EV imports, Chinese automakers continue to profit. Dyer believes these tariffs will likely prompt China EV makers to shift towards local production strategies in Europe, thus reducing transportation costs.
Currently, Chinese-made EVs are 35% cheaper to produce than comparable vehicles from foreign automakers. While some foreign firms are trying to penetrate China’s market by partnering with local brands, others are attempting to cut prices. However, Dyer warns that without a significant change in strategy, foreign carmakers may struggle to maintain a long-term presence in the China market.
Last month, a Bank of America analyst recommended that U.S. automakers based in Detroit should exit China “as soon as they possibly can” due to their disadvantage against China’s EV giants. AlixPartners predicts that by 2030, Chinese brands will control over 70% of the NEV market in China and a third of the global auto market.
Why It Matters: Over the past decade, China has invested more than $230 billion in its EV industry. This massive investment, coupled with favorable domestic policies, has given Chinese automakers a significant advantage over foreign competitors.
Furthermore, Chinese EV makers like NIO Inc. (NYSE:NIO) and XPeng Inc. (NYSE:XPEV) are advancing their in-house smart driving chips. This technological advancement could further strengthen their position in the market.
In response to increased tariffs from the EU and the U.S., Chinese EV manufacturers are exploring alternative markets, including Africa. This strategic move could help them mitigate the impact of the tariffs and continue their growth trajectory.
Price Action: According to Benzinga Pro, Nio, Li Auto (NASDAQ:LI), and Xpeng shares listed in the U.S. have lost at least 40% so far this year, while Warren Buffett-backed BYD (OTC:BYDDF) is up 16.22%
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari