Key Points
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One study predicts that only 15 of 129 Chinese NEV brands will be viable by 2030.
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Notably, those 15 brands will generate roughly 75% of China’s NEV sales.
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China’s brutal price war will eventually force consolidation.
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10 stocks we like better than Nio ›
For investors, Nio (NYSE: NIO) has always been a swing for the fences. This young electric vehicle (EV) maker took a slightly different route, preferring to spend extensive capital and effort to build out its battery swapping stations. While mostly known for its namesake Nio premium EV brand, the company has recently launched two sub brands, Onvo and Firefly, which are expected to significantly boost deliveries as production accelerates.
All that said, it’s time for Nio to go big with its new brands, because according to one study, it’s end-time in China for a long list of EV brands.
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Dire warning
Consultancy AlixPartners sent a dire warning to anyone interested when it said that only 15 out of the 129 brands currently selling EVs and plug-in hybrids in China will be financially viable by 2030. That’s not great news for just about any automaker outside of China’s own juggernaut, BYD.
Those 15 brands remaining financially viable are predicted to account for roughly 75% of China’s EV and plug-in hybrid market over the same time period. By the consultancy’s count, that means each of the 15 brands would be averaging roughly 1.02 million units in annual sales. This makes the industry a lucrative proposition if you survive the consolidation and bankruptcies.
Nio battery swapping station. Image source: Nio.
What’s the problem?
At a glance, China’s new energy vehicle (NEV) market looks like it’s in fine shape. During June, sales of NEVs climbed 30% and accounted for a staggering 53% of overall new-vehicle sales in China. Of that chunk of the broader market, Chinese EV brands account for 71% of NEV sales.
In a way, China’s EV makers are victims of their own success, and of their government’s subsidies. While the overcrowded and highly competitive market has fostered incredible advances in battery technology and cost efficiency, it’s also left the entire market in a brutal and unsustainable price war. The price war is making it extremely difficult to protect market share and bottom lines.
Time to go big
The current environment in China is ripe for a company such as Nio — with an established premium EV brand and two new brands accelerating production and deliveries — to boost its deliveries and either build the scale to break even, or position itself as an ideal partner for industry consolidation.
Already, Nio is aiming to double its vehicle deliveries from 2024 to this year, leaving them at roughly 450,000 units. Nio is currently slightly behind pace to achieve that. If that target wasn’t ambitious enough, management is also aiming to break even by the end of 2025. That would be a large and impressive task indeed, but Nio has made progress on significantly reducing costs and supporting margins despite the ongoing price war.
The rest of 2025 will tell us a lot about how Nio is positioned for potential mass consolidation in the Chinese EV industry, but it sure looks like a good time to double down on its marketing, incentives, and production efficiencies to really drive its new brands to new heights. For Nio, it’s time to go big and prepare for many competitors to go home.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
