Why Western Carmakers Struggle as China Races Ahead

Welcome to the latest edition of the China EV Pulse Newsletter!

In this issue, we unpack how China’s NEV industry is not just adapting to change - but defining it. While Western automakers struggle with stagnating demand and underperforming EV strategies, Chinese players are rewriting the rules with a bold new operating model focused on speed, agility, and cost-efficiency. The latest AlixPartners Global Automotive Outlook makes it clear: if legacy brands want to stay relevant, they’ll need to catch up fast.

At the same time, China’s EV boom is entering a brutal new phase. Intense price wars, overcapacity, and delayed supplier payments are pushing the industry toward an inevitable shakeout. Only the strongest-like BYD, Geely, Nio, and Xpeng-are likely to survive what some analysts call an "elimination phase."

We also turn our focus south, where Africa is becoming a strategic growth region for Chinese OEMs. Brands like BYD, Chery, and Great Wall Motor are investing in plug-in hybrids and local production, positioning South Africa as a gateway to the broader continent.

Thanks for reading, and enjoy the insights!

- Sebastian, Founder of China EV Pulse

While many legacy automakers struggle with stagnating demand, rising costs, and disappointing EV investments, Chinese NEV manufacturers are quietly flipping the script. According to the latest Global Automotive Outlook from AlixPartners, China’s electric mobility players aren’t just surviving the industry’s upheaval - they’re setting the pace for a global transformation. And it all comes down to one thing: a radically new operating model built on speed, cost-efficiency, and agility.

Chinese NEV manufacturers - spanning battery-electric vehicles, plug-in hybrids, and other alternative drivetrains - are emerging as the most dynamic players in an industry facing serious headwinds. Western automakers continue to wrestle with low growth and underwhelming returns on EV investments, while Chinese brands race ahead with record speed and flexibility. AlixPartners’ report paints a clear picture: suppliers and OEMs in Europe and North America must learn from China's winners if they want to stay relevant.

One of the report’s starkest predictions: Chinese OEMs are set to double their market share in Europe to 10 percent by 2030, aided by local production, while traditional European automakers face underutilized plants and declining capacity. In fact, AlixPartners expects Chinese brands to add 800,000 units of production capacity in Europe by 2030 - just as European automakers may be forced to cut capacity by 400,000 units.

Another driver of this east-to-west momentum: China’s “new operating model.” With it, automakers can launch cars in half the time, cut investment needs by 40 to 50 percent, and slash manufacturing costs by 30 percent, compared to traditional processes. That’s not just good for margins - it’s a game-changer in a world where AI, intelligent factories, and agile decision-making are becoming the new baseline.

But China’s lead isn’t just about cutting costs. AlixPartners highlights that the country is now ahead in vehicle technologies, including ADAS (Advanced Driver Assistance Systems). The global ADAS market is set to hit 50 billion USD by 2030, and China could command a 45 percent share. In a sector where innovation cycles are shrinking, that dominance matters more than ever.

Despite ongoing price wars, Chinese NEV brands are using non-price incentives - such as free insurance, cash bonuses, and 0-percent financing - to stay competitive. At the same time, a massive consolidation is underway. Out of 129 NEV brands that sold vehicles in China last year, only about 15 are expected to remain profitable by 2030. Those few, however, are on track to capture 75 percent of the total NEV market.

Meanwhile, geopolitical tension is prompting many U.S. firms to consider shifting their supply chains out of China. New U.S. tariffs alone could cost the industry 30 billion USD by 2026. Yet this hasn’t stopped China’s export machine entirely - it has simply evolved. Chinese automakers are now exporting their operating model through joint ventures and partnerships, reshaping how and where vehicles are built around the world.

AI and intelligent manufacturing are accelerating this transformation. AlixPartners estimates that development and verification costs could drop by 20 percent thanks to advanced AI applications. As “dark factories” - fully automated, human-free production sites - become a real possibility, OEMs must adapt or risk obsolescence.

The message to Western automakers is clear: agility, speed, and smarter operations are no longer optional. Mark Wakefield, Global Automotive Lead at AlixPartners, warns that clinging to siloed hierarchies and deterministic planning models is a dead end. “What’s needed are modern tools and competitive operating models that allow OEMs and suppliers to respond to one disruption after another - and emerge stronger,” he says.

Andrew Bergbaum, Global Head of Automotive & Industrial at AlixPartners, sums it up with an unsettling image: “Europe is for sale.” As M&A activity picks up and Chinese capital flows into the continent, it’s clear that the rules of the game are being rewritten. For many, survival will depend on how quickly they can adopt - or adapt to - China’s new rules of the road.

_{Source: AlixPartners - AlixPartners Global Automotive Outlook 2025: Europa steht zum Verkauf}

After years of hypergrowth and relentless innovation, China’s electric vehicle market is entering a new and far more unforgiving chapter. With fierce price competition now turning into an all-out survival race, analysts warn of a looming “industry-wide elimination phase.” For many EV makers and suppliers, the question is no longer how to grow - but how to survive.

China’s EV boom has been a story of extraordinary momentum. Brands like BYD, Geely, Nio, and Xpeng have rapidly become household names - not just in China, but increasingly on the global stage. Fueled by government support, strong local demand, and rapid advances in battery tech, dozens of startups entered the market and redefined what innovation meant in the auto industry.

But now, the very conditions that nurtured this rise are turning against it. As InsideEVs puts it, the sector is entering an elimination phase - a shakeout in which only the strongest will survive. According to Yin Xinchi, auto industry analyst at Citic Securities, “China’s auto industry is likely to enter a downsizing phase by 2026. During this process, some companies will die from liquidity crises.”

Signs of this consolidation are already visible. BYD, still a market leader, recently announced new subsidies that bring the price of its Seagull EV below €7000. While consumers may welcome the deal, rivals are raising red flags. Great Wall Motors CEO publicly questioned whether such prices can even cover production costs - suggesting the price war may be entering dangerous territory.

Suppliers, too, are under pressure. As manufacturers slash prices to stay afloat, many are delaying payments to their partners. The result: widespread financial strain throughout the supply chain. Some companies are now operating on IOUs, and even industry giants like BYD have been flagged for payment delays stretching hundreds of days. In early June, leading automakers including BYD and Geely were summoned by regulators - and pledged to pay suppliers within 60 days.

The crisis isn’t just financial - it’s also structural. China’s EV market is grappling with serious overcapacity. Manufacturers have churned out more vehicles than the market can absorb, leading to growing stocks of unsold new cars. In some cases, automakers are turning to the used-car market, selling "zero-kilometer" vehicles - essentially new, but rebranded - in a desperate bid to clear inventory.

InsideEVs reports that regulators are now stepping in. At a recent meeting with 16 of the country’s top automakers, officials warned against overly aggressive discounting and the financial pressure this places on suppliers. They also criticized the flooding of the used-car market with unsold inventory, citing risks to long-term market stability.

A handful of players appear well-positioned. BYD, Geely, Nio, and Xpeng have not only captured large market shares but also built robust ecosystems - including charging networks and, in Nio’s case, a successful battery swapping model. These brands are likely to remain at the core of China’s EV future.

For the other 100+ manufacturers, the picture is far less clear. Many are struggling with mounting debt, unpaid supplier bills, and stalled sales. The coming months may determine who makes it through - and who becomes a cautionary tale in the rise and fall of the world’s largest EV market.

_{Source: InsideEVs - The EV Tax Credit Could Be Dead In Just 180 Days}

As trade barriers tighten in Europe and the U.S., Chinese automakers are shifting focus southward. Africa - and especially South Africa - is emerging as a strategic growth region for brands like BYD, Chery, and Great Wall Motor. With a focus on affordable plug-in hybrids and local production plans, these companies see the continent as both a market opportunity and a potential export base.

According to a recent Reuters report, nearly half of the 14 Chinese auto brands currently active in South Africa launched operations just last year. More are on the way: DongFeng, Leapmotor, Dayun, and Changan are preparing to enter the market. South Africa’s established automotive base and role as a logistics hub make it an ideal entry point for the rest of sub-Saharan Africa.

To benefit from local incentives, several companies are exploring localized production. Chery South Africa’s Managing Director Tony Liu confirmed ongoing talks about partnerships and new plants that could serve not only South Africa, but the wider continent - and potentially Europe. Great Wall Motor, long reliant on complete imports, is also considering semi-knock-down assembly or outsourcing to local suppliers.

With limited charging infrastructure still holding back full battery EVs, Chinese automakers are leaning heavily on plug-in hybrids. Chery, now the second-largest Chinese brand in Africa, plans to launch eight new hybrid models in South Africa, including five range-extender EVs and three full hybrids. It will also introduce two compact crossovers and a pickup truck by 2026.

BYD, meanwhile, doubled its product range in early 2025, adding the Shark pickup and two variants of its Sealion line: the Sealion 6 (plug-in hybrid) and the Sealion 7 (full EV SUV). The approach is pragmatic: meet customers where the infrastructure is - and grow from there.

South Africa’s adoption of alternative drivetrains remains modest but promising. In 2024, EVs and hybrids doubled their share of new car sales to 3 percent, with total volume still at just 15,600 units. Chery’s Tony Liu predicts a tipping point once the share reaches 10 percent. Accenture analyst Greg Cress echoes the optimism, citing competitive pricing: “With starting prices below 400,000 Rand (approx. €19,000), Chinese brands clearly stand out from the incumbents.”

While Toyota and Volkswagen still dominate South Africa’s new car market, Chinese OEMs are betting on broader regional demand. Sub-Saharan Africa sees 3 to 4 million new car sales annually, and the potential for rapid transformation is real. Chery aims to triple sales of its sub-brands Omoda and Jaecoo within 18 months, expanding into new markets such as Zambia and Tanzania. BYD is also ramping up its dealer network across East, West, and Southern Africa - with Tanzania among its next targets.

“Africa has the chance to leap directly from internal combustion to renewable vehicles,” says BYD executive Steve Chang. It’s a bold vision - and one that suggests Africa could soon become more than just a “next frontier” in China’s global EV strategy.

_{Source: Reuters - Facing global headwinds, Chinese automakers make a play for Africa}

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