China's manufacturers are going broke
China's manufacturing sector is struggling, exemplified by the bankruptcy of Hengchi's subsidiaries. The EV maker's sales fell drastically short of its ambitious targets, affecting global supply chains and competition.
Read original articleChina's manufacturing sector is facing significant challenges, highlighted by the recent bankruptcy of two subsidiaries of Hengchi, an electric vehicle (EV) manufacturer owned by the troubled property developer Evergrande. The company had ambitious plans to sell one million EVs annually by 2025 but managed to sell only 1,389 units last year, reflecting intense competition and overcapacity in the market. This situation serves as a reminder that while foreign competitors often worry about the impact of low-cost Chinese goods, Chinese manufacturers are grappling with their own financial difficulties. The broader implications of these bankruptcies could affect not only the domestic market but also global supply chains and competition dynamics.
- China's manufacturing sector is experiencing a wave of bankruptcies due to overcapacity.
- Hengchi, an EV maker, reported the bankruptcy of two subsidiaries amid fierce competition.
- The company aimed to sell one million EVs by 2025 but sold only 1,389 last year.
- The situation highlights the financial struggles of Chinese manufacturers despite concerns from foreign competitors.
- The challenges faced by Chinese manufacturers could impact global supply chains and market competition.
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Xi Jinping (successfully) stimulated EV and semiconductor manufacturing through massive government investment and loans. The problem is that so many companies were funded that they are now viciously driving each other out of business through oversupply.
Because the supply chain networks are so dense, each bankruptcy easily cascades because the company then defaults on contracts with vendors and customers.
None of this, of course, is good news for US competitors like Tesla. With such a large field of vicious competition, it’s almost assured that the small set of businesses that succeed will be able to outcompete globally with extremely low cost structure. We see this happening with BYD.
When you miss sales targets by 99.9% it’s got to be more than a competition problem
This should surely be regarded as an opportunity to install solar panels at low cost while stocks and production capacity still exist.
If you check the National Bureau of Statistics' data on 亏损企业 (月度数据 > 指标 > 工业 > 工业企业主要经济指标), https://data.stats.gov.cn you see that there is a yearly cycle where the number jumps in February: from 67,570 in 2021-12 to 132,371 in 2022-02 (January is skipped), from 91,222 in 2022-12 to 161,892 in 2023-2, and from 103,994 in 2023-12 to 167,895 in 2025-02. By plotting the last available month for every year, 2024 ends up sticking out a bit more than it will once the end-of-year data is out.
Nonetheless, the overall trend is undeniable.
https://www.economist.com/media-assets/audio/062%20Business%...
Some overly subsidized EV companies are going broke, and their inflated housing market crashes. Evergrande. Of course. That's a good thing.
Still stronger growth than everywhere else. And their chip industry will soon be independent. This US war backfired massively.
We want $1 products again at dollar tree (not $1.25 tree), and better quality for less money.
Otherwise we will just make the stuff in the USA ourselves. One day we will get smart and export more TO China because no one in China trusts the quality of anything made in China
I tried to buy an electric golf cart which looked like a Hummer on Alibaba, but importing it (getting it past customs) was challenging. They had me at MP3 player!
If I could buy an EV for $3k, it would be worth the hassle with charging infrastructure and hiding an illegal vehicle from the coppers. </joke>
America: lots of profit, no product.
Maybe we can borrow from each other? I can think of a bunch of sclerotic industries in America that need to have their margins driven to zero.
Considering the market situation and geopolitical factors, it is foreseeable that labor-intensive, low-value-added manufacturers are going bankrupt. Frankly, Europe and the US face similar situations.
Regarding Taiwan and the South China Sea, the distrust of the East among Chinese people is influenced by historical experiences with North Korea, Japan, and Vietnam. However, in today’s world, war is a significant and serious issue, and ordinary citizens do not want to face its bitter consequences. What confuses me is that Western media often portray China as a threat, while Chinese mainstream media exaggerate these reports, deepening mutual hatred.
P.S. I’m Chinese.
Aside overcapacity should be synonymous of low prices, I still wait to see here in EU prices like in the BRICS area for products imported from China. An example a BYD Atto 3 here cost a bit less than 40k€ while in Thailand cost a bit less than 10k€ https://asia.nikkei.com/content/1f9ed40b4b44745e1a39fafaf94b... such price delta have no justification in mere free market economical terms, have only political justifications NONE OF THEM acceptable by the civil society. I still wait to see LFP batteries prices drops like in China to have a well-sized home battery at a price cheap enough to make buying it convenient, let's say 50kWh for 5k€. Let's say 15kW p.v. inverter for 1.5k€ etc.
If China manufacturers goes broke we customers do the same in EU, and I suspect in USA to, simply to enrich some local cleptocrats.
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