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Chinese electric carmaker on the brink of bankruptcy reveals challenges and difficulties faced in China's competitive market
Historically, the automotive industry has been led by Europe, the United States and Japan. Their technological advances have positioned these regions at the forefront of the market. However, the scenario is changing rapidly, with new countries emerging as strong competitors.
First, South Korea gained ground by offering attractive, cost-effective vehicles.benefit. Now, with the popularization of electric cars, China is standing out, to the point of threatening the dominance of traditional manufacturers. However, behind this rise, there are challenges and problems that are not always visible.
The Electric Car Revolution in China
Over the past decade, China has revolutionized its automotive market, focusing especially on electric vehicles and plug-in hybrids. Today, these vehicles have the largest market share in the country, thanks to a combination of massive investment, rapid technological development and competitive prices. For Chinese consumers, buying an electric car is more affordable than in other parts of the world, which is further boosting the sector.
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An example of this competitive offering is the CUPRA Tavascan, a Volkswagen model aimed at the Chinese market, with a lower price compared to similar vehicles in the West. This type of initiative highlights how much the Chinese market has adjusted to popularize electric cars.
Tariff Barriers in Europe
The popularization of electric vehicles in China is accompanied by the growth of local companies. In the country, there are more than 150 brands competing for consumer preference. This market, made up of more than one billion inhabitants, is currently the largest sales focus for European brands, such as Mercedes, whose sales in China represent around 36% of the global total in 2023.
With the increase in competition and the supply of electric vehicles, many Chinese companies have decided to expand their businesses abroad, seeking new markets. However, Europe, an attractive destination, presents challenges, mainly due to import tariffs that make it difficult for Chinese manufacturers to enter the continent.
Neta: A Case of Success and Problems in the Industry
Among the Chinese brands that have sought to stand out, Neta, founded by Hozon Auto in 2018, has quickly gained ground. Focused on affordable electric vehicles, the company surpassed better-known brands such as Li Auto, NIO and Xpeng in sales volume in 2022, with more than 150.000 units sold.
Encouraged by this success, Neta decided to invest in the luxury market, launching more sophisticated and expensive models. Currently, the brand has six models, including the Neta Aya, Neta X and Neta S, all aimed at the public seeking more exclusivity.
However, this change in strategy brought challenges. A significant portion of production was directed to car-sharing services, but this gamble was not well received in China. The company increased its prices, which resulted in a loss of competitiveness and, consequently, a drop in sales. Between January and September 2024, Neta sold only 53.853 units, achieving only 30% of its annual target.
Given this scenario, chinese fonts indicate that the Neta factory, with a capacity to produce 200.000 vehicles per year, has temporarily suspended operations, in addition to making salary cuts. These facts show that, despite innovation and growth, Chinese companies also face serious difficulties.
The International Market as an Alternative
Despite the difficulties in the domestic market, Neta is looking to expand internationally, which could be its lifeline. The company currently has a presence in markets in Central Asia, Southeast Asia, Latin America and South Africa, and plans to expand into Europe. However, EU tariffs represent a significant barrier to entry into one of the most coveted markets.
The Neta case illustrates a broader problem in the Chinese auto industry: although the country has dominated the electric car sector and excels in technology, there is no room for so many brands and models with similar prices in the domestic market. Companies that once seemed promising end up struggling to sustain themselves in an environment of extreme competition and demanding consumers.
Final Thought: The Future of China's Electric Car Industry
The rise of China’s electric car industry raises questions about the sustainability of this growth. While the country has made significant technological progress, not all companies will be able to remain competitive in the long term. Reliance on external markets such as Europe and Latin America is a viable alternative, but it requires adapting to regulations and tariffs.
Will China remain a powerhouse in the automotive sector? The answer seems to be yes, but on the road to consolidation, many challenges still need to be overcome.
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