How China’s EV Manufactures Are Outshining Global Rivals While Struggling to Balance Profitability and Production

As the world’s biggest car market shifts away from gasoline-powered cars towards electric vehicles, China’s car makers are increasing their production of EVs. The intense competition among the country’s huge number of start-up carmakers has unsettled what had been a pillar of the economy in the last few years. The growing confidence of Chinese EV makers is evident in the array of new models on show, from BYD Co.’s Seagull to premium offerings from Li Auto Inc., NIO Inc. and XPeng Inc. 

While foreign joint ventures are struggling to retain their share of the Chinese market, domestic brands are capturing consumer tastes in the booming EV segment. Digital and infotainment features are particularly important for Chinese customers, where domestic players have taken a clear lead over foreign brands. But as the sector grows more crowded, brands must try harder to differentiate their products. Sleek and futuristic exteriors are increasingly hallmarks of premium Chinese EVs that target the same segment of buyers as Tesla. 

However, both local and international manufacturers face challenges such as continuing price wars and issues with efficiently scaling up production. The world’s leading EV maker, Tesla, on Wednesday, reported its operating margin was 11.4% in the first quarter of this year, among the highest in the industry despite dropping from 19,2% last year. 

Meanwhile, three of China’s most competitive challengers—Li Auto, NIO and XPeng, all listed in the U.S.—aren’t consistently profitable. NIO and XPeng had net losses last year, while Li Auto booked an operating loss. As China’s EV makers continue to shine, both local and international brands must find a way to balance profitability with increased production to compete in the booming EV market.  

In essence, the global automotive industry’s shift to EVs offers great opportunities for manufacturers to succeed by differentiating themselves through innovation and cost-efficient production. But will China’s dominance in the EV market continue to grow, or will other countries rise to the challenge?

X3 Quick Takes from April