Experts say only 1 in 10 brands will survive 'bloodbath' as competition increases
Chinese cars have been stealing a march on the UK market of late.
Despite their infancy, a number of East Asian newcomers have well and truly stamped their mark this year, latest industry sales figures show.
In June, BYD, officially now the world's biggest electric vehicle maker, sold more cars in Britain than Mazda, Mini, Citroen and Dacia - a remarkable achievement for a brand that launched in the UK only two years ago.
And when you combine its sales with other recent Chinese debutants Omoda (launched August 2024) and Jaecoo (launched January 2025), the trio of relatively unknown marques last month delivered as many motors as Audi.
Given that a decade ago Chinese brands had little to zero presence in the UK, the speed and scale of their recent growth is unprecedented - and largely driven by their cheap, well-equipped EV models.
But as the wave of new battery-powered arrivals from the east continued this week with the confirmation that Geely, Denza and Chery will bring their sizeable profiles to the UK in 2025, a saturation of manufacturers is having a crushing impact on China's domestic market.
Oversupply has resulted in overwhelmed competition, sparking a debilitating price war that some experts say could overflow into the UK market. Others believe it will result in a 'bloodbath' of Chinese brands, with around only one in ten existing marques likely to survive.
So, could the Chinese EV bubble be about to burst?
The noise coming out of China right now suggests the government is on the brink of tightening the reins on its bulging electric car segment.
But it has largely been the maker of its own issues.
Its recent industrial policy has engineered a remarkable transformation to electric vehicles in what is now the world's largest auto market.
But in so doing, Beijing's incentivised backing has spawned far more brands than can possibly survive.
Even as the headline sales numbers soar to new heights and China is projected to produce in excess of 33million cars in 2025, long-simmering concerns about oversupply and a crippling price war is coming to the fore.
Price cuts of more than 30 per cent have been introduced by manufacturers for EVs in their home market.
Industry observers says the sheer volume of makers - which now exceeds 100 different EV manufacturers - and the level of discounting taking place will lead to a 'bloodbath' of brands.
There are now over 100 different electric car makers in China - a making of Beijing's own doing having heavily incentivised its EV sector to become the world leader
BYD, which has become the world's biggest EV producer - is prime example of the problems facing China's electric car segment...
In late May, BYD launched a fresh round of price cuts to 25 different models due to excess inventory. This saw it secure its best monthly sales performance in June, but it has kickstarted another price war in China as rivals have discounted pricing in response
BYD's sales are up 31% in the first half of the year. Some 2.1 million motors branded with Build Your Dreams were bought between January and June, figures show
Fingers pointed at BYD
BYD is prime example of the problems facing China's electric car segment.
It has taken advantage of its dominant position, triggering price wars over four years that has caused losses across the industry, according to Murthy Grandhi, an India-based financial risk analyst at GlobalData.
BYD's sales are up 31 per cent in the first half of the year.
Some 2.1 million motors branded with Build Your Dreams were bought between January and June, with almost a half-and-half split between EVs and plug-in hybrids (having culled combustion engine cars in 2022).
But in late May, it came under thinly veiled criticism when it launched a new round of price cuts to 25 different models due to excess inventory - a move that saw it secure its best monthly sales performance in June.
However, several competitors followed suit, downgrading their pricing to make their vehicles more attractive to customers - further compressing margins for manufaturers.
The chairman of Great Wall Motors said he is growing increasingly concerned that the industry could come under threat if it continues on this trajectory, with the government expected to step in to force a dramatic reshaping on the nation's EV landscape.
On 23 May - the day BYD initiated its price cuts - GWM’s Wei Jianjun said he was pessimistic about what he called the ‘healthy development’ of the EV market, drawing comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover.
'The Evergrande in the automobile industry already exists, but it is just yet to explode,' he said in a video message posted on social media.
Two days later, a BYD executive rejected any comparison to Evergrande.
'To be honest, I am confused and angry and it´s ridiculous,' Li Yunfei,BYD's general manager wrote on social media. 'All these [comparisons] come from the shocking remarks made by Chairman Wei of Great Wall Motors.'
But sector commentators say the finger is understandably being pointed at the world's biggest EV producer.
'When volumes get bigger, it´s just much harder to manage and you become the bullseye,' Lei Xing,an independent analyst who follows the industry,told Associated Press.
He said the Chinese government is now trying to rein in what is called 'involution' - a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere.
The government and an industry association too has weighed in on the argument.
The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic.
And the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a threat to the healthy and sustainable development of the sector.
'That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show,' Lei said.
Could China's problems overflow into the UK?
There's already over a dozen Chinese brands selling cars in Britain today—and more have confirmed their arrival for 2025 or 2026.
While MG is the brand we know best—having relaunched a much-loved British badge in the early 2010s—its rivals have only broken into the market more recently.
Huge manufacturers with various marques under their banners have been drip-feeding new names into the segment—and Britons have been snapping them up at a staggering rate.
But with Chinese manufacturers already imposing average EV discounts of 17 per cent—a new record—in their domestic market, the ripple effects could impact new and used car values across Europe and the UK, experts have said.
BYD has already greatly expanded its EV offering in the UK. Most recently, it launched the new Dolphin Surf—a compact electric city car costing from £18,650
Andy Shields,Indicata's global business unit director,warned:'Chinese OEMs [original equipment manufacturers] are facing massive oversupply and intense competition in their domestic market.
'They need to find markets outside China to sell their vehicles,and Europe represents their most viable and profitable export destination.'
The Indicata analysis also pointed to Chinese manufacturers facing significant new barriers in other major markets.
The US market remains largely inaccessible due to high tariffs,while other global markets outside Europe currently lack suitable charging infrastructure to support mainstream EV adoption.
'Whilst there are tariffs in place for BEVs [battery electric vehicles] in the EU,it’s still possible for Chinese manufacturers to sell BEVs in Europe more profitably than in their home market,'Shields explained.
'The UK market is particularly exposed as there are currently no additional tariffs on Chinese BEVs,'he warned.
Of the 129 Chinese makers currently selling EV and PHEV models,experts believe only 15 will survive a 'bloodbath' of brands linked to the oversaturated market and increased competition
Only 15 out of the 129 brands that currently sell EVs and plug-in hybrids (PHEVs) in China will be financially viable by 2030, as the intensifying competition and market-wide price cuts forces consolidation and some to exit the market, consultancy AlixPartners said last week.
These 15 brands are projected to account for approximately 75 per cent of China's EV and PHEV market by the end of the decade, each averaging annual sales of 1.02 million units, AlixPartners said, without specifying brand names.
However, consolidation in China is expected to proceed more slowly than in other markets, said Stephen Dyer, head of AlixPartners´ automotive practice in Asia, because local governments may continue supporting non-viable brands due to their importance to regional economies, employment and supply chains.
Despite Chinese regulators calling time on the price war,Dyer said it is likely to continue,but through 'hidden' factors such as insurance subsidies and zero-interest financing rather than direct discounting.
Capacity utilisation ratio at Chinese car plants has fallen to an average 50 per cent in China last year,the lowest in a decade,pressuring profits,Dyer added.