Prime Highlights:
China’s electric vehicle (EV) market, after experiencing significant growth, is expected to slow down in 2025.
Analysts predict a 20% increase in new energy vehicle (NEV) sales, down from the 42% surge in 2024.
Market leaders like BYD and Tesla are facing mounting pressure as competition intensifies and profit margins shrink.
Key Background:
China’s booming electric vehicle (EV) market, which saw a remarkable surge in sales over the past year, is predicted to experience a significant slowdown in 2025. Industry analysts forecast a dramatic deceleration, with new energy vehicle (NEV) sales expected to grow by only 20%, a stark contrast to the 42% growth reported in 2024. This slowdown is likely to intensify pressure on companies within the sector, particularly those struggling to maintain profitability.
The surge in sales in 2024 resulted in nearly 11 million NEV units being sold, a figure that includes both battery-electric and hybrid vehicles. Leading the charge was BYD, which exceeded its growth target, posting a remarkable 40% increase in sales, reaching almost 4.3 million units. However, despite these strong figures, HSBC analysts predict that the market’s momentum will lose steam in the near future. They expect BYD’s sales growth to decelerate to around 14% in 2025, and point to an overall market consolidation as weaker players are likely to be squeezed out.
The rapid expansion of the EV market has been fueled in part by government subsidies and consumer purchase incentives, but analysts note that these benefits are unlikely to continue at the same pace. Only a few manufacturers, including BYD, Tesla, and Li Auto, managed to post profits in 2023. Analysts at HSBC argue that this unsustainable situation will lead to accelerated industry consolidation, with stronger companies absorbing the weaker ones.
The high penetration of NEVs in China’s automotive market, with NEVs now accounting for more than half of all new cars sold, is contributing to the predicted slowdown. Analyst projections suggest that annual sales growth will dip to between 15% and 20% in 2025. Furthermore, companies are increasingly turning to in-car technology, such as advanced driver-assist features and entertainment systems, as a new avenue for competition.
Despite these challenges, some companies, such as Shenzhen-based Appotronics, are adjusting their business models. Appotronics, which began selling in-car projectors last year, expects 2025 sales to match its 2024 performance. However, the company anticipates a recovery in the market only in 2026, noting that overcapacity and reduced R&D spending are taking a toll on the sector. As competition intensifies, it remains to be seen which companies will successfully navigate these challenges and secure a strong position in the evolving market.