The automotive industry is in for a bloodbath if the CEO of Chinese automaker Xpeng is correct. The executive predicts that the transition to electric vehicles will result in a number of automakers dying off or being acquired, leaving less than 10 groups in total.
“In five to 10 years, it’s going to be a much more concentrated market,” Brian Gu, Xpeng’s CEO, the Financial Times recently. “I think the [number] of players will probably be reduced to less than 10 at the global stage.”
The somewhat pessimistic prediction comes at a difficult time for Xpeng and China’s automotive industry, in general. The automaker’s sales shrank by 50 percent in the first quarter of 2023, and it ranked as only the 12th largest EV manufacturer in China in that period.
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The company was affected by a cooling market in China, as well as price cuts led by Tesla. The price war is placing significant pressure on the makers of lower-cost vehicles in China, which may help explain Gu’s bleak view of the market.
He said that Chinese automakers will need to be able to sell around 3 million vehicles per year in order to survive the coming decade. That’s no easy feat for EV manufacturers, as Tesla’s sales amounted to just 1.3 million in 2022.
“To be in that ‘3 million club’ you cannot be a China-only player, you have to be a global player,” said Gu. “We think in that scenario, maybe close to half your volume is coming from outside of China.”
The good news for Xpeng, and other Chinese automakers, is that exports are booming for the country. It is on pace to become the number one exporter of vehicles on earth in 2023, surpassing Japan.
That growth is being driven by markets like Europe and Asia. However, Gu admits that breaking into the U.S. “may be difficult today” given the political climate. He said that Chinese industry must “take time to study it and find a way to access that market,” which is the second-largest by volume, behind China.
