BMW’s recent announcement about cutting its profit margin forecast due to sluggish demand in China is just the tip of the iceberg. According to analysts, electric vehicles (EVs) are shaking up auto sales in the world’s biggest market, leaving foreign car manufacturers struggling to keep up, reports VOA News.

The Rise of Chinese EVs

In July, a record 50.7% of Chinese cars purchased were new energy vehicles (NEVs), either electric or plug-in hybrids. This shift is happening as foreign brands that once dominated the Chinese automotive industry take a back seat to domestically made cars.

Companies like General Motors have seen their sales halved since 2017, and Stellantis even stopped manufacturing Jeeps in China.

Toyota and Honda are also feeling the heat. Toyota’s Chinese joint venture saw income fall by 73% in the quarter through June, while Honda reduced its forecast for group car sales in China by 220,000.

Why Foreign Automakers Are Struggling

Industry observers point to two main reasons for the decline in foreign companies’ market share: the inability to meet Chinese consumers’ demand for low prices and the need to adhere to Beijing’s strict policies. From 2020 to 2024, the market share of Japanese, German, American, Korean, and French cars all dropped significantly, while China’s market share grew from 43% to 62%.

Ford CEO Jim Farley summed it up at a conference: “We’ve never seen competition like this before.”

The Role of Government Subsidies

China’s success in the automobile market is largely due to its push for electric cars, backed by substantial government subsidies. Clark Packard, a research fellow at the Cato Institute, noted that these subsidies allow Chinese companies like BYD to build cars about 25% more cheaply than global competitors.

“I do think that it is true that the Chinese subsidies are heavier and more sustained than U.S. subsidies for auto,” Packard said.

The Shift from ICE to NEV

The transition from internal combustion engine (ICE) vehicles to NEVs has been rapid.

Tu Le, founder of Sino Auto Insights, reportedly explained, “Because of the significant decrease in ICE demand and significant increase in NEV demand, the legacies are getting squeezed on both sides.”

EVXL’s Take

The rise of Chinese EVs is a clear sign that the future is electric. As foreign automakers struggle to adapt, it’s crucial for them to innovate and embrace the EV revolution. Companies like Tesla have shown that it’s possible to thrive in this new landscape. The bigger picture here is the global shift towards sustainability, and EVs are at the forefront of this change.

We’d love to hear your thoughts on this in the comments section below.