Has the electric car sector overheated?

We're receiving news about a new electric car nearly every day, but one of the big names in the sector doesn't see this as a positive development.

Has the electric car sector overheated?

During the 2023 China Automobile Forum in Shanghai, Ralf Brandstaetter, the CEO of Volkswagen Group China, shared his apprehensions about the electric car market, hinting at an "overheating" scenario. Brandstaetter identified the considerable capital investments and fierce competition within the sector as factors that could potentially harm consumer interests.

Brandstaetter drew focus to the surging number of competitors in the market, with more than 120 car manufacturers already active in the electric vehicle (EV) sector. He also projected that around 150 new EV models will hit the market in 2023 alone. This relentless competition, alongside high battery prices, has resulted in economic stress and the need for substantial capital investment for short-term sales victories.

The CEO highlighted the financial difficulties many EV startups face, with several leaving the market or in desperate need of new capital investments. Amid these hardships, Brandstaetter underscored the necessity for consolidation within the industry.

Has the electric car sector overheated?

Brandstaetter was particularly critical of the discount strategies of EV manufacturers in China, stating that they could potentially harm consumer interests. He warned against dramatic price reductions, explaining the negative repercussions they might bring about, such as less support and services for retired brands, and lower resale values for consumers.

Drawing a contrast with some competitors, Brandstaetter pledged that Volkswagen Group would focus on profitability rather than chase sales and growth at all costs. He promised the company would avoid getting caught in unhealthy market competition, subtly critiquing Tesla, which has frequently dropped prices to stimulate sales.

Even as he acknowledged the slowdown in sales of internal combustion engine (ICE) vehicles, Brandstaetter reassured that Volkswagen Group remains devoted to the Chinese market. The company intends to launch 17 new ICE models in China by 2030, while also encouraging the advancement of hybrid technology and progressively converting petrol models into plug-in hybrids. As the industry continues to evolve, consolidation and careful market strategies will be vital for the electric car market's long-term prosperity.