Will Low-Cost Chinese Cars Boom the Automotive Market?
This page is translated from the original post "Les voitures chinoises à bas prix vont-elle faire exploser le marché automobile ?" in French.
- 31/12/2023 9:30
The proliferation of manufacturers and the emergence of new players such as Xiaomi and Huawei are reigniting concerns over a price war.
A beautiful body will always be a trigger for purchase for an automobile enthusiast, but the heart of a car, what gives it value, is no longer like before a magnificent V10 engine with diabolical roars or a small turbocharged 3-cylinder with exceptional compactness and fuel efficiency. Today, cars are judged by their battery, screens, and voice controls. Does that sound familiar? And if a modern electric car was ultimately not much more complex than a latest-generation smartphone?
Main players in the smartphone market, Huawei and Xiaomi benefit from exceptional expertise in these technological sectors and are therefore capable of offering new electric vehicle models equipped with advanced features such as augmented reality technology, autonomous driving capabilities in urban areas, and long range. All of this is what desperate traditional automakers are chasing after as pressure mounts on their shoulders as latecomers to the new automotive market.
But these two smartphone giants are not the only ones aiming to carve out a place in this high-voltage new Eldorado. Just in China, a land of electric cars, there are about 200 electric vehicle manufacturers! All have made huge investments and may launch a price war in the coming months to try to survive.
However, the massive research and development costs for new models, significant marketing and branding expenses, along with discount pricing offered to attract customers, make it difficult for most automakers to turn a profit. Among the main players, only BYD, the world’s largest manufacturer of electrified vehicles, and Li Auto, a direct rival of Tesla in China, have reported profits since the start of the year. Only 1% of manufacturers are profitable—that’s very few… especially in a market with overcapacity!
And perhaps the traditional automakers will just have to ride it out for a few months until this Chinese bubble bursts just as quickly as it inflated?
READ ALSO: Xiaomi, another rival in Tesla’s way
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