A Chinese rival of Elon Musk’s Tesla said that the world’s auto industry would shrink to just 10 companies in the next decade. This is due to intense competition on the Chinese electric vehicle market, which has spilled over to the global scene.
Brian Gu, vice-chair of Guangzhou-headquartered Xpeng, said for Chinese companies to be among the last carmakers standing, they would need to have annual sales of at least 3mn vehicles, underpinned by global exports. Toyota, the world’s biggest carmaker, sold 10.5mn vehicles in 2022. Tesla sold 1.3mn.
This warning comes at an historic moment for the global auto industry. China is poised to surpass Japan as the largest exporter of automobiles in the world, after overtaking Germany last year. Slowing growth, coupled with an intense battle for price, is driving low-cost automakers in China to the brink.
“To join the ‘3 million club’, you can’t be a China only player. You have to be an international player.” Gu, in an interview, said that in this scenario we think close to half of your volume may come from outside China.
In five to ten years, the market will be much more concentrated. I believe the number of players on the global stage will be less than 10.
Xpeng was hit by fierce competition in China. The company was founded in 2014. It raised $1.5bn through an initial public offering (IPO) in 2020 in New York.
The company, which sold more than 120,000 vehicles in 2022, has seen its first-quarter sales drop by almost 50%. After Tesla cut prices , the company that sold over 120,000 cars in 2022 has seen its first-quarter sales drop by almost 50%. In January, Xpeng had to follow Tesla’s lead and cut the prices on three of its models by up to 13 percent.
Gu, who was formerly JPMorgan’s managing director in Asia and chair, took a defensive stance over the sales slump. He blamed the timing of new model launches by the company. He predicted that the market will stabilize in the second half this year.
He said, “This year I believe we are facing a very competitive environment.” “There is clearly [price-cutting] competition. . . This not only creates competition, but also apprehension among consumers.”
Gu admitted that the deteriorating US China relations had complicated Gu’s plans for overseas expansion.
Xpeng is backed up by Alibaba, has heavily invested in autonomous driving and is targeting Europe for growth this year. However, it does not plan to sell cars immediately in the US.
Gu stated that it may be difficult for Chinese brands to enter the US market today. We need to spend time studying it and finding a way to enter that market.
Gu, despite the challenges faced by the company, said that the company “saw plenty of growth opportunities beyond China”.
, like all Chinese electric car producers , Xpeng depends on US chip designers , including Nvidia, Qualcomm, for advanced semiconductors. The US government has increased restrictions on China’s ability to access cutting-edge US technology. This has led to concerns that Chinese automakers may be exposed.
He said that “so far, none our of our partnerships have been affected by any of the noises in politics”, adding that if the restrictions started to impact the company, the “whole China industry” would find a way out.
Xpeng also has hit speed bumps in China. Customers complained last September about “confusing models” from the automaker. The company had to rename their luxury sport utility vehicle within 48 hours of its launch.
Xpeng started restructuring shortly after the naming dispute. The company hired Wang Fengying as its co-president. He was a former Great Wall Motor chief executive who had helped the company become China’s first group to export local made cars.