China is experiencing a reshuffling of the EV market after rapidly scaling the sector. As the situation intensifies, some automotive parts companies have gradually reduced supplies to China's homegrown carmakers, shifting focus to European, US, and other customers.
According to Taiwan-based suppliers who have secured a foothold in China's EV industry, although the duration of the market reshuffling remains unknown, about 80% of the carmakers will likely be eliminated. Lowering the portion of supplies to Chinese companies becomes critical for long-term development, sources added.
Suppliers said capital is the foremost challenge for China's homegrown automakers because EVs require more investment in R&D, production, and sales. Even with government support, carmakers still need a vote of confidence from consumers to grow sales. They must also control the core technology for their vehicle design.
Zhu Yanfeng, the former general manager of China-based FAW Group, has said that homegrown brands might have to wait for 20 years before becoming a major industry player. When government subsidies are no longer available and the sales do not generate enough revenue, an automaker will have difficulties making ends meet.
Suppliers said they tend to charge Chinese automakers half of the total payment as a deposit to protect their interests. However, these customers still often delay the payment, partly explaining why suppliers are no longer eager to work with them.
Huang Jian-Zhong, general manager of Hiroca Holdings, an automotive parts supplier, previously said the portion of the company's Chinese homegrown customers has increased from a single-digit number to about 23%.
Hiroca constantly evaluates the risk of working with those customers, according to Huang. He said that besides the issue of collecting payment on time, some automakers have been forceful and demanded low-priced components. If the proportion of China's homegrown automakers continues to grow in Hiroca's customer base, it will likely pressure the company's operations and funds.
Sources said only a few Chinese carmakers have succeeded in the domestic market and received recognition overseas. In addition, BYD continues to ramp up with an extensive product portfolio. Huawei partners with automakers to expand in the car sector. Xiaomi's EV is also gaining traction, especially among its loyal supporters. Sources added that the shared goal of local auto companies and joint venture carmakers is to survive in the fierce Chinese market.
According to the China Association of Automobile Manufacturers (CAAM), Chinese homegrown passenger car brands achieved a sales volume of over 14.59 million in 2023 with a market share of 56%. The annual growth rate was 24.1%.
