Xpeng co-founder warns of “bloodbath” in the EV market March 1, 2024

Chinese EV manufacturers must prepare for a battle for dominance in the electric car market, according to Xpeng’s co-founder. But one thing is clear: Western competition will emerge as losers.

• He Xiaopeng warns of a life-and-death battle in the EV market
• Xpeng could be one of the winners through VW investment
• Also Tesla boss Elon Musk recently appeared worried

China’s EV rush to the West

Last year, China overtook Japan as the world’s largest car exporter – despite the punitive tariffs imposed. The reason for this, as Fortune explains, is that the Middle Kingdom is seeking profitable growth in the Western Hemisphere. Xpeng co-founder He Xiaopeng now believes Chinese manufacturers have little choice but to engage in a potential life-or-death battle. But no matter who emerges as the winner, his Western competitors will lose, he believes.

But to the chagrin of auto executives like Xiaopeng, Chinese players moved too quickly into the West, triggering a sudden awareness that China could flood foreign markets with a flood of cheap electric cars. A trade investigation in Europe could now affect exports at a critical point.

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Xpeng co-founder warns of “bloodbath”

“This year marks the beginning of fierce competition that could end in a ‘bloodbath,'” the Xpeng co-founder wrote in an employee letter obtained by CNBC on Sunday after the end of the New Year celebrations.

The Middle Country, as Fortune explains, is currently in one Deflationary spiral which, according to some experts, was triggered by an overhang of debt in the real estate sector. This industry is China’s most important driver of the economy and is a popular asset class due to the persistently low deposit interest rates and extensive capital controls in China.

In order to bolster dwindling consumer confidence, Elon Musk also launched a broad price war in the Chinese electric car industry at the beginning of last year, which has been raging for months now.

Then, in January, sales of Xpeng vehicles fell dramatically to just 8,250 units, while a stable monthly sales level of 20,000 vehicles was expected in the final quarter of 2023.

The decline reflects the overall performance of China’s electric vehicle and plug-in hybrid market, according to Fortune, as demand fell nearly 40 percent compared to December – the first month-on-month decline of this magnitude since August.

To revitalize the market, CEO He announced that he plans to hire thousands of new engineers and introduce 30 new models over the next three years.

VW investment strengthens Xpeng

In November, the company’s co-founder and CEO also negotiated a new cash injection with Tesla competitor Volkswagen, which will no doubt be seen as very smart timing in retrospect, explains Fortune.

In return for selling a 5 percent stake in his company, worth around $700 million, to VW, all he had to do was agree to help develop some new electric cars and offer VW a non-voting seat on the board.

Those automakers that survive the changes in China’s electric car market – and VW’s investment suggests that Xpeng may be among them – could potentially band together into a small group of national champions capable of overcoming the competition, like Musk recently warned of “ruining”.

For Xpeng’s He, this could be a kind of sweet revenge. In 2019, Musk accused the Chinese electric car maker of “blatantly imitating Tesla’s design, technology and even business model.”

Tesla boss is also worried

Because of his concerns about Chinese advances, Musk recently even called for trade barriers. “Our observation in general is that Chinese automobile companies are the most competitive automobile companies in the world,” Musk said in a conference call with analysts as part of the figures. They “will have significant success outside of China depending on what kind of tariffs or trade barriers are put in place.” Musk therefore warns: “If there are no trade barriers, they will practically ruin most other car companies in the world. They are extremely good.”

Editorial team finanzen.net

This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.

Image source: helloabc / Shutterstock.com, Postmodern Studio / Shutterstock.com

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