Why China's EV makers are facing a shutdown risk
What's the story
China's electric vehicle (EV) industry is on the brink of a major shake-up, with over 50 unprofitable mainland EV makers facing pressure to scale down or shut down operations. The country's automotive sector is expected to witness a sales drop next year, its first since 2020. This downturn is attributed to overcapacity issues and declining government support in the industry.
Market challenges
Market conditions and government policies impact EV makers
The impending market conditions are particularly tough for those EV makers whose products fail to attract young consumers. "Time is against those players whose cars cannot impress young drivers," said Qian Kang, an automotive printed circuit board manufacturer in eastern Zhejiang province. He added that the performance of these companies next year would be critical for their survival in the competitive market.
Market forecast
China's car market braces for delivery slump
The Chinese car market is bracing for a major delivery slump next year, even if manufacturers offer heavy discounts to attract buyers. This prediction comes from a consensus of auto analysts who are closely monitoring the situation. The anticipated decline is largely due to expiring cash subsidies and tax incentives that have been propping up sales in recent years.
Subsidy uncertainty
Beijing's decision on trade-in subsidy could impact EV sales
In January, Beijing will decide whether to extend a trade-in subsidy of CNY 20,000 (₹2.5 lakh). The decision could have a major impact on the country's EV sales. Currently, buyers of electric vehicles are exempt from a 10% purchase tax. However, starting January, these purchases will be subject to a 5% tax until the regular rate of 10% resumes in 2028.