How China’s Surprising Move to Cool Down Electric Vehicle Growth Disrupts Big Tech

China’s tech giants are experiencing the consequences of being late to the electric vehicle party. Their entry into the world’s largest car market is hindered by government efforts to control a rapidly growing EV industry that has relied heavily on subsidies. As a result, consumer demand is declining, and strict production license regulations from Beijing persist. Aspiring market entrants are forced to form partnerships with licensed manufacturers or completely change their business plans.

“In this highly competitive market, technology companies need to find their own position,” said Esun Xu, senior consulting director at Frost & Sullivan. “They face multiple challenges such as technological barriers, financial requirements, market competition, regulatory hurdles, and supply chain management.”

The most significant challenge is obtaining the required permit to manufacture an EV. Since July 2017, when China tightened rules to combat overcapacity, only a few permits, including one granted to Hozon New Energy Automobile Co., have been issued. Subsequent changes in 2022 now require both EV makers and the companies they outsource production to possess a manufacturing license, making it even more difficult for external companies to break into the sector.

In practice, it is more complicated than that. People familiar with the matter, who requested anonymity, revealed that the National Development and Reform Commission (NDRC) has been halting approvals for permit transfer deals. The NDRC is one of the two bodies responsible for granting manufacturing permits.

The landscape is changing as companies increasingly focus on technological breakthroughs, such as autonomous driving, to enhance their offerings to consumers. The recent collaboration between Didi Global Inc. and EV maker Xpeng Inc. is a potential indication of the direction the industry is heading. Xpeng’s purchase of Didi’s smart-car development arm strengthens its technological expertise, and the two companies plan to launch a new brand next year targeting the mass market.

For Didi, this collaboration represents a significant shift in strategy. The company initially aimed to acquire stakes in traditional car manufacturers to obtain a production permit. However, due to the dim prospect of obtaining regulatory approval for permit transfers, Didi changed its approach. Representatives for Didi and Xpeng declined to comment.

Over the past decade, billions of dollars have poured into China’s EV sector, leading to a wave of mergers, acquisitions, and high-tech product launches by established automakers and newcomers alike. By 2019, when Tesla delivered its first Chinese-built cars, there were approximately 500 registered EV makers in China.

Xpeng and Li Auto Inc., for example, obtained production permits from their respective acquisitions before the tightened regulations were enforced. Others, like Nio Inc., chose to outsource manufacturing to Anhui Jianghuai Automobile Group, a state-backed company approved for car production.

However, the frenzy has subsided, and consolidation has taken place as intense competition and stricter regulations pushed weaker players out of the market. This has resulted in bankruptcies, abandoned factories, and deserted cars. Today, there are approximately 100 manufacturers remaining.

“With fierce competition, EV makers need to achieve a significant scale to generate profits, which means years of financial investment for new entrants,” said Bloomberg Intelligence analyst Joanna Chen. “Therefore, it makes more sense for tech companies to focus on areas like autonomous driving, connectivity, and mobility services rather than entering the capital-intensive manufacturing business.”


Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
DMCA compliant image

Leave a Comment