As automakers worldwide scramble to future-proof themselves in the electric era, China has been comfortably in the lead, cranking out next-gen EVs packed with cutting-edge tech and advanced battery systems one after the other at record pace. But behind the buzz and impressive new models, there’s a financial reality dragging at the wheels: most of China’s EV brands are still burning cash, not banking it.

At last count, there were around 50 EV brands competing for space on Chinese roads. Out of those, just three of them are thought to be profitable. These include BYD, Li Auto, and Seres. Despite this, brands continue to offer generous discounts to grow their footprint, forgoing financial security in the pursuit of sales.

Discounts Keep Climbing

According to a JP Morgan study cited in a South China Morning Post report, industry-wide discounts averaged a record high 16.8% in April, up from an already steep 16.3% in March. The China Passenger Car Association puts the average discount for 2024 at 8.3%. To top it off, average EV prices were trimmed by 10% back in December. That’s not just aggressive, it’s unsustainable.

Last year, the difference between the selling price of an EV and an automaker’s costs, including raw materials, labor, and logistics, known as the vehicle margin, dropped to 10%. This is down from approximately 20% just four years ago. Analysts believe that most of China’s smaller EV manufacturers will be forced out of the market or will be acquired by larger rivals over the next couple of years.

“Nearly all of them were the victims of price competition,” said Phate Zhang from CnEVPost. “But if any of them chooses to exit the price war, their sales will decline and make it more difficult to post a net income.”

Looking Beyond China’s Borders

One potential lifeline is exports. Chinese carmakers have begun shipping more EVs abroad, where they can command better margins. According to JPMorgan’s Nick Lai, international sales are proving to be more profitable and could provide the breathing room these companies need.

“Price competition has turned fiercer this year. Unfortunately, we have not seen a jump in [EV] demand so far,” Lai noted. The domestic market, while massive, isn’t growing fast enough to offset the steep discounts.

Still, exports are trending upward. In the first four months of 2025, EVs made up roughly 33% of China’s total vehicle exports, up from about 25% over the past two years. It’s not a total solution, but it’s a glimmer of hope for brands looking to survive the increasingly brutal home turf battle.