The electric vehicle (EV) sector in China is expected to experience a significant deceleration in 2025, according to expert projections. This could heighten the pressure on enterprises striving to remain profitable in a challenging market.
The China Passenger Car Association reported that the sales of new energy vehicles, which include battery-electric and hybrid cars, soared by 42% to nearly 11 million units in the previous year. Market leader BYD’s new energy vehicle sales experienced a dramatic increase, exceeding 40% last year to almost 4.3 million units, significantly surpassing its internal goal of a minimum 20% growth from 2023.
However, HSBC analysts predict a slower pace going forward, with China’s new energy vehicle sales expected to increase by only 20% this year. Furthermore, they forecast a growth of around 14% in BYD unit sales.
Yuqian Ding, the head of China autos research at HSBC, noted in a recent report that robust sales volumes have allowed struggling companies to stay afloat amidst shrinking profit margins. She highlighted that only BYD, Tesla, and Li Auto reported profits in 2023.
The rapid expansion of new energy vehicles in China has been bolstered by a combination of subsidies and consumer purchasing incentives. For instance, Appotronics, a Shenzhen-based laser display company, ventured into the automotive sector by manufacturing an in-car projector screen that began deliveries in China early last year, shipping more than 170,000 units.
However, the changing market dynamics indicate that similar volumes are expected only in 2025, according to Appotronics Chairman and CEO Li Yi. He anticipates the market will regain momentum only by 2026.
“As automakers have entered China’s booming electric car market, they have initiated a price competition to attract customers. This has considerably shrunk the overall profit pool in the auto industry, especially now that EVs are gaining traction,” Ding said.
Further, the analysts predict that the growth rate of new NEV car sales will likely decelerate to 15% to 20% in 2025, with smart features becoming a significant point of competition.
As the EV market growth slows, companies like Appotronics are focusing on innovation. The company plans to introduce a 4K-resolution projector for cars in China this year, along with a screen that offers enhanced contrast and privacy features.
In the long run, Appotronics aims to spend the next two to three years developing new, laser-based applications for car headlights. The company is reportedly in discussions with Tesla for a projector-type product in a future vehicle.
