China’s electric car market is on course for a significant slowdown in 2025, according to industry analysts. After years of rapid expansion fueled by a mix of government subsidies and consumer incentives, the market is expected to stabilize with growth resuming only by 2026. This prediction comes as the sales of new energy vehicles (NEVs) previously surged by a remarkable 42% last year, reaching nearly 11 million units, according to the China Passenger Car Association. Leading the charge, BYD’s NEV sales soared by over 40%, amounting to nearly 4.3 million units.
Despite these impressive figures, BYD anticipates maintaining similar sales volumes in 2025. Appotronics Chairman and CEO Li Yi noted that the company intends to focus on developing innovative laser-based technologies for car headlights over the next two to three years. This strategic pivot coincides with the NEV penetration surpassing 50% of new cars sold by the second half of last year.
In an increasingly competitive market, automakers in China have turned to enhancing in-car entertainment features and driver-assist technologies to differentiate their vehicles. A price war has erupted as BYD and Tesla initiated price cuts, compelling other manufacturers to follow suit. Yuqian Ding, head of China autos research at HSBC, acknowledged this impact, stating,
“When BYD and Tesla cut prices, most rivals have little choice but to follow suit. This has clearly squeezed the overall profit pool in the auto industry, especially now that EVs have all the momentum” – Yuqian Ding, head of China autos research at HSBC.
Forecasting Market Deceleration
Fitch Bohua analyst Wenyu Zhou and their team forecast that the growth rate of NEV sales will decelerate to between 15% and 20% in 2025. Only BYD, Tesla, and Li Auto managed to turn a profit in 2023, with BYD’s net profit margin at 5%, significantly lower than the double-digit margins once enjoyed by traditional fossil fuel automakers.
The fierce competition and price cuts have led Yuqian Ding to characterize the current market landscape as one dominated by “strugglers and stragglers.” He further commented,
“In our view, this situation is unsustainable and we expect the pace of industry consolidation to accelerate rapidly” – Yuqian Ding, head of China autos research at HSBC.
Amidst these challenges, companies like Appotronics plan to introduce new technologies such as a 4K-resolution projector and a screen with enhanced contrast and privacy features to vehicles in China this year. Meanwhile, Xiaomi made waves by launching its SU7 electric sedan last year at $4,000 less than Tesla’s Model 3, boasting claims of a longer driving range.
What The Author Thinks
China’s electric vehicle market is entering a critical phase where the rapid growth seen in recent years is likely to give way to more measured, sustainable development. While price cuts and technological innovation remain pivotal in attracting consumers, the industry’s increasingly competitive nature, coupled with shrinking profit margins, signals the need for consolidation. Companies like BYD and Tesla are well-positioned to thrive, but smaller players may struggle to keep up, further accelerating industry consolidation. The slowdown may also give room for new entrants, such as Xiaomi, to disrupt the market with cost-effective alternatives. The next few years will likely be decisive in shaping the future of China’s electric car market.
Featured image credit: Freepik
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Source: https://digitalmarketreports.com/americas/32597/chinas-electric-car-market-braces-for-2025-slowdown/