China's Car Market Getting Tighter, Nio CEO Predicts Sales Down 20 Percent

Nio CEO Li Bin speaks at an event. Li expects the Chinese car market to face increasingly fierce competition with sales potentially falling 15-20 percent. (Photo: Yicai Global)

JAKARTA - China's automotive market is entering a phase of increasingly intense competition. Nio CEO Li Bin estimates that retail car sales in China this year will fall 15 percent to 20 percent compared to the previous year.

As reported by Yicai Global, quoted Monday, June 15, Li delivered the projection at the China Auto Chongqing Summit on June 13. According to the founder and chairman of Nio, the high growth period of the Chinese car market is coming to an end.

Passenger car ownership in China has surpassed 370 million units. This means that the market is no longer only relying on new buyers. Manufacturers now have to compete to win existing consumers.

Li said competition would be tougher in many lines, from product design, core technology, supply chain, manufacturing, sales, services, to brand building. The supply chain is a network of suppliers of materials, components, and services that make production run.

Chinese data from the Passenger Car Association (CPCA) shows that the pressure is already felt. Car sales in China fell 20 percent to 7.1 million units in the five months to May 31. The decline was triggered by several factors, including changes in taxes on the purchase of new energy vehicles or NEVs and high world oil prices.

In the first week of June, the decline even widened to 23 percent.

NEV is a new energy vehicle, mainly electric cars and other electrified vehicles. In China, this segment is still stronger than oil-fueled cars.

NEV sales fell 15 percent in the first five months to 3.7 million units. However, as the decline in gasoline cars was deeper, the NEV market share rose to 52 percent. In the first week of June, its share even approached 67 percent, a record high according to CPCA data.

Li assessed that car manufacturers are no longer enough to rely on comparisons of specifications, such as mileage, power, or features. As electric cars become more similar to each other, the ability to build a mature and efficient development system will be the differentiator. The development system includes how companies design products, test technology, manage production, and bring vehicles to market.

In the same report, Yicai Global said Li described this year as the most challenging period since Nio entered the automotive industry. Although Nio's sales are still growing, the next few months remain clouded by great uncertainty.

Nio's deliveries, including its Onvo and Firefly brands, jumped 69 percent to 150,526 units in January to May compared with the same period a year earlier.

The Shanghai-based carmaker is targeting sales of 450,000 to 490,000 units this year. That target is up 40 percent to 50 percent from a year earlier.