scorecard
  1. Home
  2. life
  3. news
  4. China has a problem with electric cars and that's bad news for Elon Musk

China has a problem with electric cars and that's bad news for Elon Musk

George Glover   

China has a problem with electric cars and that's bad news for Elon Musk
  • Sales of electric cars in China are expected to rise at a slower pace this year.
  • That's likely to be a problem for Tesla too.

BYD and Tesla both posted anemic first-quarter sales this week, serving up a reminder that demand for electric cars appears to be stalling around the world.

China, the world's largest EV market, hasn't been immune from the slowdown.

The country's Passenger Car Association expects sales of new-energy vehicles to climb 25% to 11 million this year, according to figures reported by Bloomberg. That's a healthy rise, but still well below last year's growth rate of 36%.

Any signs of weakening demand in China are a red flag for Tesla, which is already struggling to keep up with its local rivals' aggressive price cuts.

"I think a big part of Tesla's first-quarter deliveries miss came from China," Seth Goldstein, an equities strategist for Morningstar who chairs the research firm's EV committee, told Business Insider. "There's a lot of price competition, and we're seeing consumers go to other brands with cheaper offerings."

Tesla waves the white flag

Tesla slashed the prices of the Model 3, S, X, and Y in China last year in a bid to compete with local rivals including market leader BYD, which sells much cheaper vehicles such as the $11,000 Seagull.

The cuts helped Telsa log record delivery numbers, and kept its share price high — but it still lost its title as the world's top EV seller for 2023 to BYD.

CEO Elon Musk appears to have backed away from the price cuts strategy this year, however. That's a sign he knows Tesla can't win the price war and remain profitable, Goldstein said.

"Last year was the year of the price cut, in order to grow volumes, and it worked," he said. "But Tesla now seems to have made the decision that for now, they're happy where their unit profits are at."

Holding prices steady in China appears to have backfired, though. Tesla completely missed Wall Street forecasts for deliveries — and its market share in the world's second-largest economy has fallen to around 7%, per Bloomberg estimates, down from 11% in early 2023.

Bad news for BYD

Americans are shunning electric cars due to concerns about charging and the emergence of cheaper hybrids — but the reasons for the slowdown in China are more complex.

There are plenty of public charging stations — about 2.7 million as at the end of 2023, according to the China Electric Vehicle Charging Infrastructure Promotion Alliance. And the mid-market hatchback options offered by BYD are some of China's best-selling cars.

However, some would-be buyers found local companies' constant price cuts irritating. BYD slashed the cost of one model by a total of 15,000 yuan ($2,100) in a matter of months last year, reducing its value on the secondhand market and making people more hesitant to buy one.

China's economy has also struggled since the end of the pandemic, with deflationary pressures and an ongoing property-market crisis fueling a decline in consumer spending.

BYD makes most of its sales in China — and the tally rose 43% to about 300,000 in the first three months of the year, according to a stock market filing this week. That increase was not enough to stop Tesla from reclaiming its title as the world's top electric car maker despite its own dismal delivery numbers for the same period.

Tesla makes the Model 3 and Model Y at its Shanghai factory and recently reduced production from six-and-a-half days a week to five, Bloomberg reported, in a sign of waning demand for its cars in China.

If China joins the US in loving EVs a little less, both Tesla and BYD could be in for a difficult 2024.



Popular Right Now



Advertisement