Tesla’s trio of closest competitors in the Chinese market are NIO, XPeng, and Li Auto, but the advantage they gained in their previous business development is eroding as traditional auto giants head towards electrification of transportation, and they have impressive financial resources and support. Still, traditional automakers have a lot to learn from Chinese startups.
Last year, as noted Caixin Based on data from the China Passenger Car Manufacturers Association, NIO, XPeng and Li Auto have jointly sold about 90,000 vehicles. Local manufacturers as a whole account for about 80% of the Chinese electric vehicle market, which is the largest in the world. NIO is now tasked with preparing the more budget-friendly Alps brand for market launch, with sub-$43,000 EVs under this brand starting in 2024.
XPeng has had to cut the price of its electric vehicles to compete with the other members of the Big Three, but the costs are rising, and the company’s financial performance is hurting badly. Li Auto also ended the first quarter of this year with a net loss of $1.6 million. According to some auto parts manufacturers, success in the electric vehicle market is not enough just to convert traditional cars to electric traction, it is necessary to simultaneously develop active driver assistance systems and telecommunications services. Huawei Technologies in this area is going to use the competence accumulated in the field of telecommunications for cooperation with automakers. Moreover, in the traditional areas of business, “spokes in the wheels” are inserted by American sanctions.
Another problem in the transformation of the classic auto business is its mutual dependence on the new direction of activity. Migration towards electrification often creates a conflict of interest, and some market participants compare this process to “a person trying to saw off his right hand with his left.” Some of the traditional automotive concerns are forced to structurally separate the electric vehicle business. For example, GAC recently spun off its Aion electric vehicle business as a stand-alone entity, allowing it to seek external funding sources, including a public offering of shares on the stock exchange.
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