Quantcast

China's $18 Billion Electric Car Bubble Looks Ready to Burst

Business
Aerial view of electric cars lining up at Kandi Electric Vehicles Group Co., Ltd in Changxing County on Oct. 24, 2017 in Huzhou, Zhejiang Province of China. Tan Yunfeng / VCG

By Jordan Davidson

Electric vehicles will be the stars of the show when the Auto Shanghai 2019 expo opens Tuesday. China wanted cleaner air, reduced dependence on foreign oil and to be a pacesetter in a growing high-tech industry. So, it invested more than $60 billion in electric vehicles over the last decade and plans to keep that investment going over the next decade, according to Quartz.


The downside is the $18 billion electric vehicle industry in China is set to crash.

In 2018, sales of electric cars there outpaced the rest of the world combined. Yet, with more than 486 homegrown electric vehicle manufacturers vying for market share and in-flux of foreign companies ready to grab customers, concern is rising that too many manufacturers are churning out cars for nonexistent demand, according to Bloomberg. When the bubble bursts, only a few companies will survive.

"We are going to see great waves sweeping away sand in the EV industry,'' said Thomas Fang, a partner and strategy consultant at Roland Berger in Shanghai, as Bloomberg reported. "It is a critical moment that will decide life or death for EV startups.''

However, China's goal of having annual sales of 7 million new-energy vehicles by 2025 would barely sustain a few companies, not the hundreds currently in the industry, according to Bloomberg.

The massive growth potential drew investors not only from traditional car markers, but also from companies not known for building cars, such as internet startups, electronics companies and real-estate developers. Two dozen of those companies will show off their vehicles at the Shanghai auto show alongside Renault, Audi, Buick, Volkswagen and several other companies trying to make headway in the Chinese market, according to the automotive journal Overdrive.

"Only companies that have solid technology reserves can stand out amid competition,'" said Wang Chuanfu, founder and chairman of BYD, as reported by Bloomberg. "By owning core technologies, we can see further and deeper.''

The ones facing the biggest risk are the upstarts still seeking their footing. Many are founded or funded by people with an internet or technology background, used to hefty cash-burn rates but still not necessarily fully aware of the massive investment needed for car manufacturing, Roland Berger's Fang said, according to Bloomberg.

The dangers of creating oversupply were evident in March when an electric car "graveyard" was photographed on the outskirts of Hangzhou. Thousands of electric cars divided into three sections sit idle in the photographs. The cars belong to Microcity, a ride-sharing company. Yet ride-sharing companies, which have bought heavily into the electric vehicle market, have faced a tough road. Several folded in 2018 and the state media, CCTV, questioned not only the business model, but also whether the companies add to congestion by putting more cars on the road, according to Abacus News.

EcoWatch Daily Newsletter

Gina Lopez, the Philippine secretary of the environment, at a meeting with residents affected by a mine tailing disaster. Keith Schneider

Gina Lopez, a former Philippine environment secretary, philanthropist and eco-warrior, died on Aug. 19 from brain cancer. She was 65.

Read More Show Less
Trump speaks to contractors at the Shell Chemicals Petrochemical Complex on Aug. 13 in Monaca, Pennsylvania. Jeff Swensen / Getty Images

Thousands of union members at a multibillion dollar petrochemical plant outside of Pittsburgh were given a choice last week: Stand and wait for a speech by Donald Trump or take the day off without pay.

Read More Show Less
Sponsored
Regis Lagrange / EyeEm / Getty Images

By Ariane Lang, BSc, MBA

Lemon (Citrus limon) is a common citrus fruit, alongside grapefruits, limes, and oranges (1).

Read More Show Less
Aerial view of lava flows from the eruption of volcano Kilauea on Hawaii, May 2018. Frizi / iStock / Getty Images

Hawaii's Kilauea volcano could be gearing up for an eruption after a pond of water was discovered inside its summit crater for the first time in recorded history, according to the AP.

Read More Show Less
A zero-emission electric car in Vail, Colorado on July 31. Sharon Hahn Darlin / CC BY 2.0

By Simon Mui

States across the country are stepping up to make clean cars cheaper and easier to find. Colorado's Air Quality Control Commission (AQCC) voted Friday to adopt a Zero Emission Vehicle (ZEV) program that will increase the availability of electric vehicles in the state, improve air quality and increase transportation affordability.

Read More Show Less
Sponsored
An internally displaced woman flees from drought in Dollow, Somalia. Zohra Bensemra / Reuters

By Annemieke Tsike-Sossah

World Humanitarian Day offers an opportunity to take stock of where the world stands on addressing humanitarian issues and highlight lessons for how to improve in the future. Here are five ways we all can commit to driving positive change for the world.

Read More Show Less
A view from the top of Ok volcano in Iceland, where the Okjokull glacier used to be located. Drepicter / Getty Images Plus

Officials, activists and scientists gathered in Iceland Sunday for the funeral of the nation's first glacier to fall victim to the climate crisis.

Read More Show Less
picture-alliance / Xinhua / Then Chih Wey

Some 183 nations are set to discuss possibly loosening elephant and ivory exports at the World Wildlife Conference on trade in endangered species, known as CITES, which is meeting in Geneva, Switzerland.

Read More Show Less