SHANGHAI – China’s electrified-vehicle market took root in 2010 after Beijing rolled out a generous subsidy program. Sales of EVs and plug-in hybrids have expanded at a breathtaking pace ever since.
Yet, except for BYD Co., profits are nowhere in sight for many domestic companies venturing into the EV sector, be they traditional automakers or major EV startups.
Enticed by government subsidies and pushed by industry regulators, traditional Chinese light-vehicle makers have moved in droves to produce EVs.
To date, the EV units at these companies have bled nothing but red ink, with losses mounting by the year.
Take Changan Automobile Co. and GAC Motor Co., two major state-owned carmakers.
Changan started selling electric cars under its namesake brand in 2010. In 2018, it unveiled Avatr, a premium EV marque.
In the first half of the year, the company booked a net loss of 1.5 billion yuan ($210 million) for the business unit producing and marketing Changan-badged EVs. In the same period, Avatr lost a whopping 252 million yuan.
After marketing plug-in hybrid variants for Trumpchi-badged gasoline cars for some time, GAC launched its Aion EV brand in 2017.
From 2019 to 2021, while Aion’s annual sales soared 186 percent to top 120,000, its yearly net loss more than doubled to approach 1.4 billion yuan.
EV startups have sprouted across China since 2014. Many of them have gone belly up after running out of cash.
Some are hanging on with capital raised from international markets. But these startups are all facing the same headache: snowballing losses.
Xpeng, Li Auto and Nio, all incorporated seven years ago, have long been seen as stars among Chinese EV startups.
Sales at the three companies, now listed in Hong Kong, have steadily risen over the years. Sales growth has continued this year. But their losses have grown at a much faster pace.
In the second quarter, deliveries at Xpeng, Li Auto and Nio advanced 98 percent, 63 percent and 14 percent to 34,422 vehicles, 28,687 vehicles and 25,059 vehicles, respectively.
In the same period, the net loss at Xpeng spiked 126 percent to 2.7 billion yuan while that of Nio soared 370 percent to nearly 2.8 billion yuan.
Li Auto, which was selling only one model -- a range-extended SUV, also saw its net loss surge 172 percent to 641 million yuan in the second quarter.
The three companies blame continued price hikes for batteries and semiconductor chips as the main contributor to ballooning losses.
The same factors help to explain why BYD is now the only profitable Chinese EV maker.
BYD is the largest Chinese electrified-vehicle manufacturer. In the first half of the year, it sold 641,350 vehicles globally, more than triple the tally a year earlier. Of that volume, roughly half were EVs and the rest were plug-in hybrids.
More importantly, BYD boasts advantages that no other domestic EV maker has – it is China’s second largest EV battery maker, second only to CATL. In addition, it also produces some semiconductor chips for its own vehicles.
With robust sales growth and a self-sufficient battery supply, BYD’s net profit rallied 206 percent from a year earlier to 3.6 billion yuan in the first six months this year.
GAC, aiming to control snowballing losses, last month disclosed a plan to build its own battery plant with an investment of 10.6 billion yuan.
Other Chinese EV makers including Xpeng, Li Auto and Nio are bent on expanding production and vehicle output to achieve economies of scale.
But such measures, which entail huge capital outlays, are more likely than not to drive up losses in the near term and possibly years to come.