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The Knives Are Out in China’s EV Industry – WSJ

China’s new-energy passenger vehicle market nearly doubled in size last year. But 2023 is shaping up quite differently.

Tesla kicked off 2023 in China with aggressive price cuts, and sales got a boost.(Cfoto/Zuma)

Jacky Wong, WSJ

EnergiesNet.com 03 03 2023

Top electric-vehicle firms have paced each other reasonably well in China over the past few years. But 2023 will be a year of intensifying competition—and perhaps, witness the emergence of a durable pack leader.

Tesla TSLA 3.61%increase; green up pointing triangle kicked off 2023 in China with aggressive price cuts: indicative of the way the wind is blowing. The American car maker reduced the prices of its cars between 6% and 13%. And that comes on top of a separate price cut late last year. Tesla’s elbows-out approach has prompted some others to follow suit. 

China's monthtly new -energy vehicle sales
Source: Wind

Tesla’s sales did get a boost from the price cuts. But the overall Chinese EV market started off slow in January, partly because many buyers had opted to buy before purchase subsidies expired at the end of 2022. The Lunar New Year—a weeklong holiday—also fell in January in 2023, and the economy was only beginning to reopen.

Sales bounced back in February as consumption picked up after China’s initially messy reopening. EV makers such as BYD 1211 0.90%increase; green up pointing triangle and Li Auto LI -0.87%decrease; red down pointing triangle reported better sales than the previous month. But sales for the year as a whole will likely grow at a slower pace than in 2022. Growth numbers in the second half of 2023 could look particularly bad compared with late 2022’s torrid growth. China sold 6.5 million new-energy passenger vehicles—including plug-in hybrids—last year, nearly twice the number in 2021, according to the China Association of Automobile Manufacturers. Nearly 30% of the cars sold in the country in 2022 were EVs.

And with prices for raw materials like lithium and cobalt now plummeting, stronger players in the industry will likely take this opportunity to squeeze their weaker competitors and grab market share.

Companies upstream are sharpening their knives too. Domestic media report that Contemporary Amperex Technology 300750 0.38%increase; green up pointing triangle, or CATL, the world’s largest EV battery maker, is cutting prices to secure bulk orders from car manufacturers. CATL is far and away the battery market leader, and is more profitable than its smaller rivals. Battery-grade lithium carbonate prices in China have dropped 19% this year, according to Benchmark Minerals.

Lower battery costs could in turn give the bigger EV makers more room to reduce prices. Market leader BYD is in a particularly strong position given it also makes its own batteries.

EV startups have popped up like mushrooms throughout China in the past few years, feasting on the enormous wave of demand—partly driven by subsidies. This year, the theme looks more like culling and consolidation. Laggards will get eaten—or crushed under foot.

Write to Jacky Wong at jacky.wong@wsj.com

Appeared on the WSJ in the March 4, 2023, print edition as ‘The Knives Are Out In China’s EV Industry’.

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