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Only 10 carmakers will survive EV revolution, China’s Xpeng says

in Business, Environment
Auto sales fell in november
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The world’s car industry will shrink to only 10 companies over the coming decade as manufacturers switch to electric vehicle (EV) production, according to Brian Gu, vice-chair of Guangzhou, China-headquartered Xpeng, a rival to Elon Musk’s Tesla.

Gu said for Chinese companies to be among the last carmakers standing, they would need to have annual sales of at least 3 million vehicles, underpinned by global exports.

The world’s largest carmaker Toyota sold 10.5mn cars in 2022, while Tesla sold 1.3mn.

The warning comes at a historic juncture for the global car industry. China is on the cusp of overtaking Japan as the world’s biggest exporter of cars by volume after passing Germany last year. At the same time, slowing growth and an intense price war is pushing low-cost carmakers to the brink of collapse in China, the world’s biggest car market.

“To be in that ‘3-million club’ you cannot be a China-only player, you have to be a global player. We think in that scenario, maybe close to half your volume is coming from outside of China,” Gu said in an interview with the FT.

“In five to 10 years, it’s going to be a much more concentrated market. I think the [number] of players will probably be reduced to less than 10 at the global stage.”

Xpeng, which was founded in 2014 and raised $1.5 billion in a 2020 initial public offering in New York, has been hit by intense competition in China. It ranked 12th by sales among electric-vehicle makers in China during the first three months of the year.

The company, which sold more than 120,000 vehicles in 2022, has been hit by an almost 50 per cent decline in first-quarter sales this year after Tesla cut prices. In January, Xpeng was forced to follow suit, slashing the prices of three of its four models by as much as 13%.

Gu, formerly JPMorgan’s managing director and chair in Asia, struck a defensive tone over the sales slump, blaming the timing of the company’s new model launches. But he forecast that the market would stabilize in the second half of this year.

‘A very competitive landscape’

“This year, I think we’re faced with a very competitive landscape,” he said. “There’s obviously [price-cutting] pressure . . . which not only causes competition but also creates hesitancy among consumers.”

Gu acknowledged that deteriorating US-China relations complicated the company’s overseas expansion plans. Xpeng, which is backed by Alibaba and has invested heavily in autonomous driving, is targeting growth in Europe this year but does not have immediate plans to sell cars in the US.

Entering the US for Chinese brands “may be difficult today”, Gu said. “We need to take time to study it and find a way to access that market.” Despite the challenges, Gu said the company saw “plenty of growth opportunities outside of China”.

Xpeng, as with all Chinese electric-car producers, depends on US chip designers including Nvidia and Qualcomm for advanced semiconductors. This has fueled concerns that Chinese carmakers could be exposed as the US government expands restrictions on China’s access to cutting-edge US chip technology.

“So far, none of our partnerships has been impacted by any of the political noise,” he said, adding that, if the restrictions did start to have an impact on the company, “the whole China industry will find a solution”.

Domestically, Xpeng has also hit speed bumps. Last September, customers complained about the carmaker’s “confusing” models. The company was forced to rename its luxury sport utility vehicle less than 48 hours after its launch. Shortly after the naming controversy, Xpeng began restructuring.

The company recruited as co-president Wang Fengying, a former chief executive at Great Wall Motor who helped that company become the first Chinese group to export locally made cars.

By Gloria Li in Hong Kong and Edward White in Seoul / Financial Times

Tags: Electric vehiclesTeslaUnited States

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