Young automakers are facing challenges to sustain operations in China as forecasts show the electric vehicle market will slow down by 2024.
While China may be the world’s largest car market and accounts for about 60% of global electric vehicle sales, domestic automakers are struggling to make profits in the highly competitive environment. A case in point is electric luxury car brand HiPhi – a subsidiary of Human Horizons – which is reportedly forced to halt all production activities for 6 months.
Founded in Shanghai in 2017, HiPhi has only recently delivered its first model in 2021. Currently, the company offers three models: Z, X, and Y, with an upcoming model A focusing on performance. The decision to temporarily suspend production for 6 months was announced after an internal meeting on February 18 and takes immediate effect.
Citing an internal source, local media outlet Jiermian reported that HiPhi employees will receive full payment until February 18, although their January salaries are still pending. Employees remaining with the company until March 15 will face a reduction in basic wages.
It remains to be seen how the production halt and financial difficulties will affect HiPhi’s expansion in Europe and its $5.6 billion joint venture in Saudi Arabia for electric vehicle production and sales.
HiPhi is not the only Chinese brand facing challenges. According to a report by the South China Morning Post, only a handful of electric vehicle manufacturers are profitable in China, including BYD and Li Auto. On the other hand, many electric vehicle startups are facing significant challenges, with over 15 brands collapsing or on the brink of bankruptcy as of September 2023.
The challenging landscape for electric vehicle manufacturers in China becomes clearer when looking at the numbers. The aforementioned 15 startups have a combined annual production capacity of 10 million units, while China’s total electric vehicle sales reached 8.9 million units in 2023, marking a 37% growth compared to 2022. Forecasts indicate that 2024 could pose even more challenges for the Chinese market after an economic downturn. The country’s 47.9% year-on-year decline in January is also a noteworthy concern for the industry.
TT (Tuoitrethudo)
Reference: Carscoops
