The Chinese giant BYD announced on Monday that it had sold three million copies Battery-powered cars in 2023 will be more than ever, capping a turbulent year for China's electric vehicle industry.
Although sales figures increased, strong competition and an ongoing price war placed financial strain on many automakers.
But BYD sold 1.6 million fully electric vehicles last year and another 1.4 million hybrid vehicles, which run on both batteries and gasoline. Taken together, that's an increase of 62 percent compared to 2022. BYD is also making money, tripling its profit in the first half of last year to $1.5 billion.
In total, Chinese automakers are expected to have sold about 9.4 million electric and hybrid vehicles last year, up from 6.9 million in 2022, according to the China Association of Automobile Manufacturers. The group said it expects sales to rise again to 11.5 million in 2024.
China is already the largest automotive market in the world and is now also the fastest growing. China is driving a shift to electric vehicles that is upending the global industry. China dominates the supply chain for battery-powered cars — from mining and processing cobalt and other minerals used in batteries to using robots in factories that make cars and trucks. China's electric vehicle manufacturers and their suppliers employ around 1.5 million people.
A key reason for China's early lead in electric vehicles was the government's strong financial support for the industry's development. After consumer financial incentives expired at the end of 2022, automakers cut car prices to attract buyers. Many companies, including BYD, introduced another round of cuts this fall, intensifying the price war.
In November, BYD advertised discounts on five models of up to 18,000 renminbi (US$2,550). Another Chinese electric vehicle maker, Ji Yue, a partnership of Geely and Baidu, cut the price of all versions of its first model by RMB 30,000 (US$4,200) in November.
Last year's price cut was initiated by Tesla, the American automaker with a factory in Shanghai. In January 2023, it cut prices in China for the second time in three months, with more to follow.
Tesla is expected to report a big jump in its global sales this week after cutting prices late last year and allowing customers to benefit from U.S. tax breaks. Founded in 2003, Tesla is on track to sell about 1.8 million battery-powered vehicles this year, up from 1.3 million in 2022. The company makes about half of all electric vehicles sold in the United States.
As Tesla and BYD vie for the spot as the world's most prolific all-electric vehicle maker, both companies face increasing competition from legacy automakers that are spending billions of dollars to catch up.
“I think an industry shakeout is an inevitable trend,” said Cui Dongshu, secretary general of the China Passenger Car Association, which represents the country's domestic industry. “But it is still uncertain who will take the future top position in the long term.”
As sales of electric vehicles rise quickly in China, companies are investing money in factories and research, often supported by loans from state banks and support from municipalities. Nio, a top-selling Chinese electric vehicle brand, said in November that it had laid off 10 percent of its employees.
Over the past year, Tesla has lost market share to rivals such as General Motors, Hyundai, Ford Motor and Volkswagen as they released more electric vehicles.
BYD, which faces prohibitively high tariffs in the U.S. market, sells most of its cars in China but is expanding globally, particularly in Europe.
In December, the company announced it would build an assembly plant in Hungary, its first battery-powered car production site in Europe. In Germany, the home of European automobile manufacturing, BYD introduced three models of electric cars in early 2023. BYD has opened dealerships in Germany, Norway and Sweden.
As global competition for electric vehicles has intensified, the political implications have also intensified. United States policymakers have made it more difficult for foreign companies to become partners with American companies.
And in Europe, lawmakers are examining China's government subsidies, a move that could lead to tariffs by the European Union.
But the European automotive industry cannot ignore China as a customer and business partner.
BMW, which employs more than 30,000 people in China, announced last spring that it would invest about $1.4 billion in battery assembly capacity at its plant in Shenyang, northeast China.
Volkswagen, which counts China as its largest market, is moving more of its supply chain and manufacturing to China. The German giant is hiring thousands of Chinese engineers to develop electric cars at its industrial complex in Hefei, a city in central China.
Keith Bradsher, Melissa Eddy and Jack Ewing contributed reporting.