• China's EV companies are turning to hybrids, which are becoming increasingly popular with drivers.
• Tesla rivals such as Zeekr plan to launch their first hybrid models.
• Hybrids could help them avoid European tariffs on Chinese EVs.

China's Tesla rivals have a new trick up their sleeve: hybrids.

China is the world's largest electric vehicle market in terms of sales. But many of its battery-powered pioneers are now turning to hybrids and extended-range vehicles as they vie for a slice of a highly competitive market and expand overseas.

Xpeng, which rivals Tesla in EVs and humanoid robots, recently unveiled its Kunpeng Super Electric System, a new powertrain system that Xpeng says will allow future vehicles to travel 1,400 kilometers (870 miles) without stopping to charge or refuel. It's unclear when it will launch new models with this technology, though its first hybrid model could arrive early next year.

Rival Zeekr also plans to release its first hybrid, an SUV, in the second half of 2025.

There's a reason these companies are abandoning their all-electric strategy: hybrids and extended-range vehicles are becoming increasingly popular in China — and could make it easier for Chinese EV makers to dodge tariffs overseas.

Hybrids are having a moment

BYD, China's largest EV maker, has reported booming growth in recent months, largely due to its hybrid lineup.

Its hybrid sales jumped were almost 70% higher in November compared with the same month last year. BYD says its latest hybrids can go up to 1,250 miles without stopping for gas or charging.

Tu Le, managing director of consultancy Sino Auto Insights, told Business Insider that China was now "well past the first movers" when it comes to battery electric vehicles.

That has led EV companies to increasingly target customers with limited access to charging infrastructure who may be more skeptical of pure battery-powered vehicles. "There's a huge market for those people," Le said.

He added that diversifying into hybrids made financial sense for EV startups still searching for profits, as hybrids and extended-range vehicles are generally cheaper to produce than battery electric equivalents due to their smaller batteries.

Despite delivering record numbers of cars in recent months, Xpeng, Zeekr, and Nio continue to rack up heavy losses amid a bruising price war in China's cut-throat EV market.

Above all, Le said the likes of Xpeng and Zeekr did not want to miss out on the booming popularity of hybrids.

"They've seen the success BYD has had. BYD basically gives you a full menu — they have offerings at $10,000, $15,000, $30,000 on battery electric or hybrid. That's a compelling reason to buy a BYD," he said.

Overseas ambitions

There are other advantages to selling hybrids, especially for Chinese manufacturers with one eye on overseas expansion.

BYD, Xpeng, Nio, and Zeekr are all seeking to grow beyond the pressure cooker of China's brutally competitive EV market by selling new models and setting up factories in foreign markets.

This expansion push has increasingly encountered hurdles as Western nations have imposed trade protections to protect their auto industries from a wave of cheap Chinese EVs.

The European Union followed in the footsteps of the US by finalizing steep tariffs on imported Chinese electric vehicles in October, with some manufacturers facing a maximum tariff of 35.3% on top of an existing 10% levy.

The new EU tariffs, however, do not apply to hybrids, giving China's EV upstarts a crucial opening.

BYD is already looking to take advantage, with president Stella Li telling Autocar the company was planning to launch three hybrid models in Europe next year alongside three battery EVs.

Fellow EV maker Nio, meanwhile, is reportedly developing its first hybrid model exclusively for the overseas market.

Auto experts have said that European tariffs could ultimately boost imports of plug-in hybrids. S&P Global Mobility analyst Ian Fletcher recently wrote that Chinese automakers are likely to replace some pure EVs in Europe with more hybrids and petrol vehicles.

"I think BYD is going to go to town on the lack of a higher tariff on plug-in hybrids in Europe," said Le. "And the Europeans are going to eat up plug-in hybrids, full stop."

BYD, Zeekr, and Nio did not respond to requests for comment from Business Insider.

• BYD just smashed its annual delivery target a month ahead of schedule.
• The automaker has thrown down a gauntlet for Tesla, which faces a battle to beat 2023's record sales.
• Tesla and its Chinese rival are locked in a battle to become the world's largest EV company.

BYD and Tesla are locked in a fierce battle to become the world's biggest EV company — and the Chinese automaker has just landed a major blow.

BYD has surpassed its annual sales target a month ahead of schedule, throwing down a gauntlet for Tesla as Elon Musk's company scrambles to meet its own annual goal.

The Chinese EV giant delivered 504,000 passenger vehicles in November, according to figures released on Sunday.

BYD has now sold over 3.7 million cars this year, meaning it has smashed its annual target of 3.6 million sales with a month to go.

Its sales have taken off in recent months, with the automaker selling half a million cars in October and November.

The company has benefited from the booming popularity of its hybrid vehicles.

Sales of plug-in hybrids have risen nearly 70% this year from 2023, with BYD releasing new technology over the summer that it says allows its latest hybrids to go up to 1,250 miles without stopping for gas or charging.

BYD's success has heaped the pressure on Tesla, which has been fighting the Chinese company for the title of the world's largest EV producer.

CEO Elon Musk has said he expects Tesla to sell more than the record 1.8 million vehicles it sold last year in 2024.

However, the US carmaker will need a record quarter in Q4 to do that. Tesla has sold 1.29 million cars so far this year.

Tesla is fighting hard to meet that lofty goal, offering a string of end-of-year deals, including free Supercharging and Full Self-Driving trials to US customers.

Tesla's sales in China have struggled in recent months, however. The company is facing brutal competition not just from BYD but also from EV startups such as Zeekr and Nio, which both registered record deliveries in Q3.

While Tesla, which doesn't sell hybrids, has no chance of matching BYD's total vehicle sales, the race to sell the most EVs is still on. BYD has sold 1.56 million battery-electric vehicles this year so far.

• China's brutal EV battle shows no signs of letting up.
• BYD is asking suppliers to cut prices and Tesla is rolling out more discounts.
• The price war is putting some smaller Chinese players under financial pressure.

BYD and Tesla have been playing a game of how-low-can-you-go on EV prices in China for the past year, and they don't seem to be slowing down anytime soon.

The rivals are asking suppliers to cut prices and rolling out discounts as they prepare for another round in an ongoing EV battle.

After Bloomberg reported on a leaked email that appeared to be asking an unnamed supplier to cut prices by 10% from January, a BYD executive said it was asking suppliers about price reductions.

"Annual price negotiations with suppliers are a common practice in the automotive industry," wrote BYD public relations and branding general manager Li Yunfei in a post on Chinese social media site Weibo.

"Based on large-scale purchases, we set price reduction targets for suppliers. This is not a mandatory requirement and we can negotiate and move forward."

The move is the latest sign that China's price war, which has seen the price of new vehicles plummet as local and foreign automakers vie for a bigger slice of the country's EV and hybrid markets, is set to enter a new phase.

Tesla, which is battling BYD for the crown of the world's largest EV producer, cut the price of its bestselling Model Y EV in China by 10,000 yuan ($1,400) on Monday.

Elon Musk's automaker kicked off China's EV price war last April, and is attempting to boost sales as it seeks to deliver a record number of cars this year.

Tesla's sales in China have suffered recently, with shipments from the company's Shanghai factory falling 23% in October from September.

Tesla is coming under pressure from smaller rivals such as Zeekr and Xpeng, which have both launched rivals for the Model 3 and Y this year, as well as its lack of hybrids that have proven increasingly popular in China.

BYD reported record monthly deliveries for October and recently announced quarterly earnings that outstripped Tesla for the first time.

Analysts previously told Business Insider BYD was cashing in on its strong hybrids lineup, with hybrid sales rising by 62% year-on-year.

The race to the bottom on price, which has seen some Chinese automakers offer EVs for as little as $10,000, has strained the finances of some smaller EV startups.

Xpeng, Nio, and Zeekr all reported sizeable net losses in their most recent quarterly earnings despite booming sales, with Nio attributing a decline in revenue from vehicle sales to lower sticker prices.

BYD and Tesla did not immediately respond to requests for comment from Business Insider.

• China's Tesla rivals are booming, with BYD, Nio, and Zeekr all breaking sales records.
• Despite their success, many Chinese automakers continue to lose money.
• Nio reported a widening net loss in its latest earnings, as the CEO of Xpeng warns many EV firms face a fight to survive.

China's Tesla rivals might be booming, but they're still losing money.

Nio, Zeekr, Xiaomi, and Xpeng have all broken personal sales records in recent months. Xpeng delivered 24,000 vehicles last month, and Xiaomi sold over 100,000 of its SU7 EV this year alone.

However, the booming sales come as many Chinese EV makers continue to report heavy losses, as they grapple with a brutal price war and intense pressure to quickly launch new affordable models amid a crowded field of battery-electric vehicles.

EV startup Nio, known for its battery-swapping stations and run by CEO William Li, sometimes dubbed "the Elon Musk of China," reported widening losses in its Q3 earnings on Wednesday.

The company reported a net loss of 5.06 billion yuan ($700 million), up 11% from the third quarter of 2023.

Shares plunged nearly 7% in the hours after the announcement, despite Nio delivering 61,800 vehicles in the past three months, a new quarterly record for the company.

The company has been hit hard by the price war that has gripped the Chinese market for much of the past year. Nio said vehicle sales had fallen despite record deliveries due to lower average selling prices.

Nio's rivals reported a similar blend of booming deliveries and painfully high losses.

Zeekr delivered a record 55,000 vehicles in the third quarter, up over 50% from last year, while fellow EV startup Xpeng recorded record sales of its electric vehicles in October.

Both companies narrowed their net losses year-over-year, but they remained sizable at 1.81 billion yuan ($250 million) for Xpeng and 1.14 billion yuan ($157 million) for Zeekr, respectively.

Xpeng's shares fell amid concern that the company's upcoming affordable models may dilute selling prices and margins.

Smartphone maker Xiaomi, which has pivoted into EVs and received acclaim from Ford CEO Jim Farley, announced it was upping its sales target for its high-tech SU7 electric vehicle after selling over 100,000 this year.

Despite this, the tech giant continues to lose money on its EV venture.

A fight to survive

Xpeng CEO He Xiaopeng told Singaporean newspaper The Straits Times that the competitive pressure means most Chinese carmakers will not survive the next decade.

"From 300 start-ups, only 100 of them survived. Today, there are fewer than 50 companies that still exist, and only 40 of them are actually selling cars every year," he said.

"I personally think that there will only be seven major car companies that will exist in the coming 10 years," Xiaopeng added.

One company that is not having the same problems is Tesla's nemesis BYD.

The automaker posted bumper revenues in its Q3 earnings last month, outstripping Elon Musk's company in quarterly sales for the first time, and recorded a profit.

BYD's net profit rose 11.5% from the previous quarter to 11.6 billion yuan ($1.6 billion), and it also sold a record number of vehicles in the third quarter. It's its success comes as Tesla's sales in China slip, with the company's October deliveries down 5.3% from the same month last year.

Analysts previously told Business Insider that BYD was reaping the benefits of its strong hybrid lineup and that its manufacturing approach of making almost every component in-house enabled the company to keep costs low.

"BYD's high degree of vertical integration — making rather than buying many key strategic components — means it can control production of batteries and chips and can do so at very low cost," David Bailey, a professor of business economics at the University of Birmingham, told BI.