[Beijing Diary] The Ideals and Reality of China's High-Quality Growth

The production line of the premium electric vehicle brand HiPhi, located in Yancheng, Jiangsu Province, China, has been halted for three months since the end of last year. This site was once the first factory of Weda Kia, which produced Kia models such as the Sportage and Cerato. However, due to deteriorating local sales performance, Kia handed over the factory to its joint venture partner, Weda Group, on a long-term lease in 2019.

Until a month before the factory shutdown (November 2023), HiPhi invited foreign journalists to the factory to showcase its premium electric vehicles, the HiPhi X and HiPhi Y, priced in the hundreds of thousands of dollars. Although it was only recently revealed externally that Hualun Yuantong (Human Horizons), the electric vehicle manufacturer behind the HiPhi brand, would suspend production for six months, industry insiders say the factory actually stopped operating at the end of last year. Some sources explained, "Although the production halt is said to be six months, in reality, the HiPhi business should be considered over."

The Haipai exhibition hall building in Yancheng, Jiangsu Province, China, visited last November. Even when production was on the verge of being halted, Haipai introduced its main models to foreign journalists and conducted test drives to experience the maximum output. (Photo by Hyunjung Kim)

The crisis is not limited to just one or two companies. In October last year, electric vehicle startup WM Motor filed for bankruptcy in court, and in August, Chidian Auto was liquidated after bankruptcy. The promising startup Byton, once called the Tesla of China, followed the same path. According to a tally by China Business News, as of September last year, at least 15 electric vehicle startups in China had either gone bankrupt or were on the brink of bankruptcy. Internally, as companies closed their doors before even starting full-scale production, a self-deprecating criticism emerged that they had "only made cars on PPT (PowerPoint presentations)."

Experts predict that the domino effect of bankruptcies in the industry will accelerate this year. With new vehicle sales declining, a fierce battlefield lies ahead. According to the China Passenger Car Market Information Joint Conference, retail sales of passenger cars in China last month totaled 2.035 million units, a 13.9% decrease compared to the previous month. The once abundant investment funds are drying up one by one. An industry insider said, "Many Chinese electric vehicle companies are startups, and if investment stops, they have no choice but to close immediately," adding, "A rapid restructuring is an expected step."

The price competition triggered by BYD, the world's largest electric vehicle manufacturer, is like pouring fuel on a fire. Recently, BYD announced the launch of the plug-in hybrid sedans ‘Qin Plus DM-i’ and ‘Destroyer 05’ Owner Edition at 79,800 yuan (approximately 14.78 million KRW). After initially dropping the Qin Plus DM-i price below 100,000 yuan in February last year, BYD lowered it by another 20,000 yuan within a year.

[Image source=Reuters Yonhap News]

Turning attention to the opposite market, PDD Holdings, which is rapidly expanding worldwide almost as fast as BYD, is worth noting. Known domestically as Pinduoduo and internationally as Temu, it dominates the online shopping market. Its weapon is 'ultra-low-priced' consumer goods. Alibaba’s Taobao, Kuaishou, and Douyin online platforms, threatened by PDD Holdings, recently launched even more cost-effective low-price channels to counterattack. These platforms are collectively referred to as 'DouKwaiTao.' To offer cheaper products, manufacturers and distributors are expected to adopt aggressive cost-cutting strategies.

The trend of lowering prices, appearing at both ends of the consumer market?from small household items to complete vehicles?seems far from the Communist Party’s persistent call for 'high-quality development.' The universal experience that "there is no such thing as cheap and good" is well known worldwide. Extreme competition ultimately leads to a decline in industry vitality and quality in the mid to long term.

This content was produced with the assistance of AI translation services.