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The Chinese EV industry may have little choice but to square off in a potential fight to the death,\u00a0according to the billionaire co-founder of Xpeng. No matter who wins, though, their Western peers stand to lose.\u00a0<\/p>\n
As China\u2019s carmakers pursued\u00a0profitable growth<\/a>\u00a0in the West, the country took Japan\u2019s crown as the largest automotive exporter in the world last year despite punitive trade tariffs. <\/p>\n Unfortunately for car executives like Xpeng\u2019s He Xiaopeng, they pushed too hard too fast and sparked a\u00a0sudden awareness<\/a>\u00a0that China could overwhelm foreign markets with a flood of cheap EVs. <\/p>\n Now a\u00a0trade probe<\/a>\u00a0in Europe could diminish exports at a critical juncture.<\/p>\n \u201cThis year marks the beginning of a fierce competition that may end in a \u2018bloodbath\u2019,\u201d the Xpeng co-founder wrote Sunday following the end of the\u00a0Lunar New Year<\/a>\u00a0holiday in a staff letter\u00a0obtained by CNBC<\/a>.<\/p>\n The country has been trapped in what some experts believe is a deflationary spiral triggered by a\u00a0debt overhang<\/a>\u00a0in the real estate sector, the key engine of the economy and a popular investment class due to China\u2019s perennially low deposit rates and extensive capital controls.\u00a0<\/p>\n To stimulate flagging consumer confidence, Elon Musk\u00a0lit a fuse<\/a>\u00a0at the start of last year that would spark a broader price war conflagration across the Chinese EV industry\u2014one that has now been raging for months.<\/p>\n In January, Xpeng vehicle sales fell to just 8,250 cars versus the stable monthly pace of 20,000 vehicles sold in the final quarter of 2023. <\/p>\n The drop proved indicative of the broader Chinese EV and plug-in hybrid market, as demand fell by nearly 40% versus December, the first month-on-month drop\u00a0since August<\/a>.\u00a0<\/p>\n To regain momentum, CEO He told the staff at Xpeng that he aims to hire thousands more engineers and launch 30 models over the next three years.\u00a0<\/p>\n In what will now no doubt be viewed in hindsight as very shrewd timing, the company\u2019s co-founder and chief executive had negotiated fresh financial backing from Tesla<\/a> rival Volkswagen<\/a> Group in November.\u00a0<\/p>\n In exchange for selling a 5% stake in his company worth\u00a0roughly $700 million<\/a>\u00a0to VW, all He needed to do was pledge to co-develop a few new EVs and offer VW a non-voting seat on its board.<\/p>\n Those automakers that do survive the shakeout of China\u2019s EV market\u2014and VW\u2019s investment suggests Xpeng may very well be one of them\u2014could conceivably consolidate into a handful of national champions capable of \u201cdemolishing\u201d the competition, as Musk recently warned.<\/p>\n For Xpeng\u2019s He it could be sweet revenge. In 2019, Musk\u00a0accused<\/a>\u00a0the Chinese EV maker that it had \u201ctransparently imitated Tesla\u2019s design, technology and even its business model.\u201d<\/p>\n<\/div>\nVW investment<\/h2>\n
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