• 2023 was a "perfect storm" for electric vehicles, one expert says.

• Prices for EVs remain stubbornly high, limiting further growth.

• Chinese automakers have found a way to profit while selling cheaper vehicles to more people.

China EV

Last year marked a dramatic shift for automakers and their transition to electric vehicles.

After years of growth, demand slowed as new competition hit the market, and a wave of early adopters gave way to a more price-sensitive customer.

That's led to some soul-searching among manufacturers, some of whom have reduced their manufacturing plans in step. High interest rates and expensive charging didn't help.

It was all a "perfect storm" on a macroeconomic level for the industry, according to Nikolaus Lang, a senior partner at Boston Consulting Group and expert in the mobility industry.

"Now, we need to do this next step toward much more of a volume segment," he told Business Insider on Wednesday at the World Economic Forum in Davos, Switzerland. "You cannot have EVs that cost $70,000, $80,000, you need to get EVs down to $30,000 or less. I think that's something the industry is still working on."

The average price for a new EV has fallen dramatically, to $50,789 by December 2023 from above $64,000 the year prior, according to Kelley Blue Book. But EV prices are still about 28% more expensive than average gas-vehicle prices, an analysis by CarGurus found.

That's helped usher in a "new realism when it comes to alternative power trains," Lang said. Hybrids have excelled in popularity as an emissions-conscious option at a cheaper price without some of the classic EV worries, like range anxiety or charging.

What the US still can't figure out 

While American automakers continue to churn out massive, heavy EVs that sell for high prices to a small niche of the market, Chinese automakers like BYD have produced mass-market vehicles for a fraction of the cost.

Lang laid out three reasons China is finding success where competitors are struggling:

1. Scale

"The Chinese OEMs are already profiting off a large domestic market," he said. "So they are very quick when it comes to scale, which other OEMs do not yet have because the market in Europe and in the US is limited," he said. (OEMs, or original equipment manufacturers, is an industry term for automakers).

1. Battery technology

"China has always been at the forefront when it comes to battery technology, and that helps these players who are closely connected to the battery production," he said.

1. Regulation 

"The Chinese OEMs have also profited off of a regulatory environment of government incentives, which allowed them to take off, I would say, earlier in a bolder fashion," he said.

"The Chinese EV players are here to stay," he continued.

Chinese automakers have begun exporting their cheaper models to Latin America and parts of Europe. They may eventually try entering the US market, Lang said, but it might not be easy given all the local competition and incentives to buy domestically. 

China reins in electric car makers amid fears they will flood the West

China EV 

China has vowed to stall the expansion of its electric vehicle industry just as the West braces for a flood of exports to enter the market.

Xin Guobin, the country’s vice-minister of industry and information technology, said Beijing would crack down on “disorderly” competition among electric vehicle (EV) projects from local governments and new carmakers.

Mr Xin warned there was “insufficient” demand from consumers to support the volume of new projects and said Beijing would take “forceful measures” to stop “blind” expansion, the Financial Times reported.

It came as China claimed top spot as the world’s biggest car exporter for the first time. Shipments rose 57.9pc to 4.9 million vehicles, outstripping Japan.

China’s electric car industry has been plunged into a vicious price war as competition heats up and the country seeks to flood western markets with cheap vehicles.

Data from Autotrader this week predicted that one in six EVs sold in the UK by 2030 would be made in China. New electric cars were already facing discounts of more than 10pc from their original price amid increased competition.

Surging electric car exports from China, spearheaded by the manufacturers such as BYD, have sparked a trade war with the EU, with the bloc accusing Beijing of distorting the market with illegal subsidies.

Elsewhere, the US intends to block domestic cars from government tax credits if they contain battery parts made by Chinese firms.

China has attacked the EU for using the “poison” of protectionism to shield domestic car makers. On Friday, Mr Xin accused foreign governments of “abuse” of trade dispute rules.

Matthias Schmidt, founder of Schmidt Automotive Research, said China’s decision to curb some production appeared aimed at “reining in government expenditure and avoiding a siphon going to questionable EV projects”.

He added it would also prevent an “over-capacity production bubble, which is potentially already here”.