GM CEO: China’s Electric Vehicle Market is Saturated, Price Wars Unsustainable

Illustration: Chinese-made electric vehicles flooding the European market.(video screenshot)

October 31, 2024 — On Tuesday (October 29), Mary Barra, CEO of General Motors (GM), stated that electric vehicle (EV) manufacturers in China are facing intense competition, with too many companies selling EVs, leading to an unsustainable price war.

According to a Business Insider report, Barra made these remarks during the TechCrunch Disrupt conference in San Francisco on Tuesday, in response to a question about the surge in EV sales in China.

In 2023, over 120 brands sold EVs in China, compared to about 60 brands in the U.S., highlighting the intense competition GM and other foreign manufacturers face in China.

Barra stated that the Chinese EV market is already oversaturated. She said China’s EV industry is undergoing “significant changes,” and this level of competition is driving prices “lower and lower,” making it unsustainable.

“From a Chinese perspective, EVs are largely driven by (Chinese government) regulations,” Barra said, referring to the Chinese government’s push to develop the EV market.

“There are currently over a hundred OEMs in China primarily focused on the EV market,” she added. OEMs, or original equipment manufacturers, produce components for products manufactured by other companies.

In recent years, a surge of EV-focused startups in China has promoted low-cost vehicles, posing an increasing challenge to European and American automakers.

“You have to consider what is sustainable business because the current situation is unsustainable,” Barra said. “Out of these hundred-plus companies, fewer than a few are profitable.”

Recent data show that the overall profit margin in China’s auto industry in the first nine months of this year was 4.6%, lower than the average profit margin of 6.1% for downstream industrial enterprises. In September, the total profit was only 32.4 billion yuan, down 28.5% year-on-year, with a profit margin of 3.4%, the lowest this year and the second-lowest month in nearly four years. Jiemian News reported that this trend reflects the fierce competition in China’s auto industry to some extent, as automakers are forced to sacrifice profit margins in exchange for sales volume and market share.

In GM’s Q2 earnings call in July, Barra described the situation in China as a “race to the bottom,” which undermines the residual value of products. “The amount of losses there cannot go on indefinitely,” she said.

European automakers are also struggling in China’s saturated EV market. In its Q3 earnings call earlier this month, Mercedes-Benz reported a significant profit drop of 53% for Q3 2024, reflecting intensified competition, especially in Asia, and an overall slowdown in the Chinese market. The company noted that EV sales fell by 31% year-on-year.

To prevent cheap Chinese EVs from flooding overseas markets, the European Union officially imposed tariffs of up to 35.3% on Chinese EVs on Tuesday, following an anti-subsidy investigation that found Chinese subsidies were undermining European automakers.

Previously, Canada and the United States also imposed tariffs of up to 100% on Chinese EVs.

Editor: Lin Yan