Typhoon and domestic slump hit China's EV market; BYD sales fall 20%

CATL, the world's largest battery maker, has its headquarters and factories in Fujian, raising concerns about the impact. EV batteries are highly vulnerable to moisture, so typhoon-related humidity damage could force manufacturers to scrap finished batteries and raw materials, a serious situation.

As a result, its market share fell 5 percentage points, a sign of serious weakness. This is seen as a clear indicator of the downturn across China's EV market as a whole.

Economic commentator Yoon Seok-cheon analyzed that the domestic market has shrunk sharply, directly affecting EV sales. After a period of rapid growth, China's EV market has slowed, and major companies are struggling.

Since the Evergrande crisis, instability in the property market has persisted, creating a negative wealth effect that dampens consumer sentiment and slows overall economic activity. Serious youth unemployment and local governments running out of fiscal room are also cited as factors deepening the slump.

BYD's overseas export business is also facing a tough environment. The European market is gradually raising regulatory barriers to Chinese-made EVs and plug-in hybrids. At the same time, emerging markets such as Indonesia, Thailand, and Malaysia are restricting imports of Chinese-made vehicles and demanding local production, making the export outlook uncertain for BYD and other Chinese EV makers.

This strategy gives it the ability to supply products that match diverse consumer demand rather than relying on a single powertrain, and it continues to grow by maintaining local production bases in each market.

Economic commentator Yoon Seok-cheon argued that BYD's market share may peak this year. Hyundai, by contrast, has built a foundation for steadily expanding its global share through a broad lineup and local production strategy. He views this as the result of anticipating market shifts and responding proactively.

This flexible approach allows it to respond effectively to demand changes, and it is delivering results, with Hyundai's hybrid sales growing 62% in July. This is helping raise factory utilization and secure profitability.

In the US market, Hyundai holds a competitive edge thanks to its hybrid production capacity. The Detroit Three automakers, GM, Ford, and Stellantis, remain weak in hybrids and focus mainly on combustion vehicles. Pure EV companies such as Tesla and Rivian do not produce hybrids. Against this backdrop, Hyundai's hybrid-inclusive production strategy gives it a unique position in the US market.

As hybrids gain clear momentum in the US market, Japanese automakers are coping well and performing strongly. However, Japanese cars lack a sufficient EV lineup. By contrast, Hyundai offers combustion, hybrid, and EV lines, giving it a well-balanced position in the US market. This gives Hyundai a foundation to respond flexibly and keep growing even during the EV slowdown.

Typhoon Dupi is expected to cause heavy damage to China's core manufacturing facilities. In particular, Fujian Province, where CATL's headquarters and factories are located, has suffered large-scale displacement and damage. BYD also has factories in Shanghai, which was also badly hit, so the situation is far from safe. The Chinese government has not yet disclosed the official damage figures, but concern is growing over the typhoon's impact on China's manufacturing sector as a whole.

As the typhoon made landfall in this area, serious concern has grown over its impact on the battery industry as a whole.

If humidity rises during a typhoon, raw chemicals and semi-finished products can absorb moisture and may have to be scrapped. If power is cut, for example by toppled transmission towers from strong winds, semi-finished products and chemicals on the production line may also need to be discarded, causing production disruption and large economic losses. This shows how disaster-prone battery production facilities are.

Large companies such as BYD and CATL have some disaster-preparedness infrastructure, but second- and third-tier vendors located in Jiangsu, Zhejiang, Fujian and elsewhere are in a different position. These small and mid-sized suppliers provide battery components, materials, and EV-specific parts, and their lack of disaster infrastructure leaves them even more exposed to typhoon damage. Damage to these vendors' plants is expected to create bottlenecks across the supply chain and cause knock-on losses for final manufacturers such as CATL and BYD.

Market research firms expect only about 15 companies to survive through 2030, but Yoon Seok-cheon considers even that number too high. He predicts Chinese EV makers will follow the path of solar companies, which grew on subsidies and then struggled with losses. Although Chinese solar firms came to dominate the global market, all top eight of them recorded losses.

Chinese solar companies grew on the back of massive government subsidies. While subsidies lasted, they could break even despite overcapacity and selling below cost, but once the subsidies disappeared, losses widened sharply. Data from 2024 through the end of September 2025 show that the top eight Chinese solar makers recorded losses of about 13 trillion won. This clearly illustrates the limits of subsidy-driven growth and suggests similar risks lurk for China's EV industry.

Chinese EV companies also grew on the back of heavy government subsidies. Until 2022, Beijing paid subsidies directly, but it then shifted to an indirect model. EV producers were given 'credits' that they could sell to combustion-vehicle makers such as Toyota, Honda, and Volkswagen. In effect, this channels funds from combustion-car makers to EV makers, and it can be read as a policy that shifts the burden onto foreign companies.

As Beijing shifts its support focus to physical AI and artificial intelligence, EV subsidies have effectively ended. Local governments, burdened by excessive borrowing, no longer have the fiscal capacity to support the EV industry. Yoon Seok-cheon noted that growing on subsidies means lacking competitiveness, and that once subsidies stop, Chinese EVs could wither quickly, like a delicate greenhouse flower. The recall of Mercedes EQA and EQB models using CATL-made batteries in 57 countries after battery fires illustrates the quality and competitiveness problems facing Chinese EVs.