China's EV market faces slowdown after 42% surge; 20% growth predicted in 2025

China's electric car boom came about primarily because of the country's subsidies and incentives on electric vehicles (EVs).

China's electric car market may be heading towards a sharp slowdown in 2025, CNBC reported citing analysts. This, however, comes after sales of new energy vehicles (A category which includes battery-only and hybrid cars) surged by 42% last year to nearly 11 million units, the report said which cited data from the China Passenger Car Association.

People stand outside an auto shop of the Chinese electric vehicle manufacturer BYD Co. Ltd. in east China's Shanghai on December 27, 2024. (AFP)

This was primarily because of the country's subsidies and incentives for electric vehicles (EVs).

However, according to the report, which cited HSBC analysts, growth is expected to slow to 20%.

Market leader BYD's sales growth is also predicted to slow to 14% from last year's 40% growth, which totalled 4.3 million units.

Strong sales volumes allowed “strugglers and stragglers” to hang on despite their falling margins, the report quoted Yuqian Ding, head of China autos research at HSBC, as having said in a report, pointing out that only BYD, Tesla and Li Auto made a profit in 2023.

This is because of a price war started by BYD and Tesla which squeezed out the profit margins of the entire industry. BYD itself has a profit margin of only about 5%.

“A lot of customers, the automakers, are not in a good financial state. They cut the R&D budget. That will definitely have a negative impact on this industry,” the report quoted Appotronics Chairman and CEO Li Yi as saying, predicting that the market won't pick up until 2026.

Appotronics is a Shenzhen-based laser display company that makes in-car projector screens.