China’s ruthless EV revolution leaves little margin for profit

As the sun set over Hong Kong's Victoria Harbour, well-dressed social media influencers swarmed a lineup of sleek electric vehicles from Chinese automaker Xpeng, among the buzziest brands in the world’s premier EV market.

- BRIAN THEVENOT VICTORIA WALDERSEE

Xpeng had come to the cruise-ship terminal ahead of this week's Shanghai auto show to unveil its upscale X9 minivan priced from 359,800 yuan ($49,231) with automated-driving features, a drop-down screen to entertain rear-seat passengers, and even a built-in refrigerator.

The biggest crowds surrounded Xpeng’s concept flying car, which sat alongside a six-wheeled van designed to carry it.

At a press conference the next day, Xpeng CEO He Xiaopeng and President Brian Gu bristled with ambition, predicting the company would emerge as one of few survivors from China's hyper-competitive EV industry by expanding globally and building in-house artificial-intelligence capabilities. Like Tesla, it aims to develop robotaxis and humanoid robots.

Unlike Tesla, Xpeng has yet to turn a profit, despite fast-growing sales since its first car debuted in 2018 and an investment from Volkswagen. The same is true of scores of other China EV makers, even as the sector leads a technological revolution that is upending the automotive industry globally. Only a handful make money, most notably BYD, China's biggest EV-and-hybrid producer and Tesla’s leading rival.

The burning question facing China's EV industry as it gathers in Shanghai is how and when it can convert explosive sales of ground-breaking vehicles into sustainable profits. The intense competition driving the sector's innovation has also made China a market with precious few winners, foreign or domestic.

Xpeng President Gu takes a clear-eyed view of the challenge.

“In the past two decades, we can see that only a few companies are performing well,” he said. “I'm very concerned about Chinese automakers... I think in the end, only 10 will survive.”