Foxconn Chairman Warns of 'Brutal' Shakeout in China's EV Market
Comments from the head of the world's largest electronics manufacturer signal looming consolidation as intense price wars erode profitability for scores of automakers.
The chairman of Foxconn, the world’s largest electronics manufacturer, has issued a stark warning about the future of China's electric vehicle market, forecasting a significant “shakeout” that will cull the growing number of unprofitable players in a “brutal” competitive landscape.
Young Liu, who heads the key manufacturing partner for Apple and Nvidia, cautioned that the intense price wars and overcrowding in the world's biggest auto market are unsustainable. "A shakeout is inevitable," Liu stated during a recent visit to Tokyo, noting that many Chinese EV makers are "not making money." His comments carry significant weight, coming from a company with deep visibility into global technology supply chains and its own ambitions in vehicle manufacturing.
Underscoring this bleak outlook, Foxconn itself is reportedly delaying its goal of capturing 5% of the global EV market and is pausing further major investments in the sector. In a strategic pivot, the Taiwanese manufacturing giant plans to redirect its capital, committing to invest between $2 billion and $3 billion annually in AI infrastructure, a move that highlights where seasoned industrial leaders see future profitability.
The warning from Foxconn's leadership echoes growing concerns from Beijing to Wall Street. China’s EV sector, once a symbol of rapid technological advancement, is now buckling under the pressure of its own success. The market is saturated with over 120 brands, all vying for consumer attention through aggressive price cuts that have decimated profitability. According to one analysis, profit margins in the industry have plummeted from 8% to just 4.3% in recent years.
Even the Chinese government has voiced alarm over the “vicious ‘involution’ competition,” a term describing a zero-sum internal struggle that harms the entire sector. Officials have cautioned against “blindly overinvesting” and are reportedly tightening export and manufacturing standards to foster healthier development.
The market turmoil is evident in the mixed fortunes of its leading companies. BYD, the domestic market leader, recently posted its first year-over-year monthly sales decline in September, a sign that even the strongest players are not immune to the downturn. While rivals like Nio have celebrated record delivery numbers, they have yet to achieve sustained profitability. XPeng, another prominent name, delivered a weak revenue forecast for the fourth quarter, citing the unrelenting price war.
The impending consolidation is expected to be severe. Projections suggest that by 2030, only about 15 of the current 129 new-energy vehicle brands in China may remain financially viable. For investors and smaller EV startups, Liu’s forecast serves as a critical signal: the era of unchecked growth in China's EV market is over, and a period of painful but necessary consolidation has begun.