Editor’s Note: CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world. Hong Kong CNN  —  A “life and death race” has begun to unfold in the world’s largest market for electric vehicles (EV). Chinese EV makers showing off their newest models at Auto China, which kicks off in Beijing on Thursday, have enjoyed generous support from the government for years, with some growing rapidly to become global players. BYD, for example, is now vying with Tesla for leadership of the battery electric vehicle market. But all of the country’s more than 200 EV manufacturers are now grappling with huge oversupply, and experts predict many smaller companies will not survive the fiercely-competitive environment. From a brutal price war to slowing sales in a weakening economy, the challenges unfolding in China have also forced some global automakers to retreat. And, it doesn’t help that the enthusiasm for EVs is waning in other markets around the world. “China’s EV industry is only going to go from strength to strength as a whole, but not every player today will see the finish line,” said Mark Rainford, an automotive industry commentator based in Shanghai who hosts the YouTube channel “Inside China Auto.” Even Chinese officials have said that carmakers will need a cast iron stomach to pull through the next few months. “Competition in the new energy vehicle (NEV) industry will be extremely fierce in 2024,” the National Development and Reform Commission (NDRC), the country’s top economic planner, said on Monday. More than a dozen passenger carmakers disappeared from the market last year, according to statistics from the China Passenger Car Association. These include once-popular EV brands, such as WM Motor, Byton, Aiways, and Levdeo. Some global automakers have also had to restructure their businesses or shut down operations. In October, Mitsubishi Motors announced it would end production of its cars at its joint venture in China. Honda (HMC), Hyundai and Ford (F) have also taken steps, including layoffs and factory sales, to cut costs, according to stock exchange filings and state media reports. By 2030, China could have fewer than five major EV players, Richard Yu, CEO of Huawei’s consumer business division, predicted last June. Huawei has formed partnerships with several automakers to produce EVs. So what makes the industry so difficult for both local and foreign players, and what’s ahead for EV makers in the world’s second largest economy? A bruising price war Aggressive price cuts are a major headache. The price war kicked off in October 2022, when Tesla (TSLA) slashed prices for its Model 3 and Model Y cars in China by as much as 9%. Three months later, it discounted its cars again, triggering a wave of price cuts that engulfed the country’s auto industry in 2023, including gasoline car producers. The pressure just became even more intense. Just this week, Tesla once again cut the starting prices of four models sold in mainland China, its largest overseas market, by 14,000 yuan ($1,932). Xpeng and Li Auto, China’s fastest growing car brands, immediately followed suit, offering steep discounts or tens of millions of dollars in subsidies to attract buyers. “The price war is likely to rage on further into this year, though it’s hard to imagine prices can come down much further than they already have,” said Rainford. The deals available to Chinese car buyers are now very attractive, but some brands will not be able to sustain these discounts forever, he said. “They’re going to need deep pockets and smart marketing to take enough business,” he added. The price cuts have squeezed profitability. In 2023, the average profit margin for China’s auto industry slid to 5%, the lowest level in at least a decade, according to data from the China Association of Auto Manufacturers (CAAM). Too many players Overcrowding is another major issue plaguing China’s EV industry. The NDRC expects more than 110 new NEV models to be launched this year, adding to a flood of EVs hitting the market. For 2024, BYD, Huawei’s Aito and Li Auto alone are planning to increase deliveries by 2.3 million vehicles, the NDRC said. But the total market demand is forecast to increase by only 2.1 million cars. “The market will be in a state of oversupply for a long time,” it added. And now, more companies are joining the overcrowded field. Last month, Xiaomi, a Chinese smartphone brand, launched its electric car, the SU7 sedan. CEO Lei Jun said he wants to take on Tesla and Porsche with the new premium car that comes with a starting price of just 215,900 yuan ($29,794). FILE PHOTO: Visitors film around Xiaomi's first electric vehicle, the SU7, displayed at an event in Beijing, China December 28, 2023. REUTERS/Florence Lo/File Photo Florence Lo/Reuters Related article China’s Xiaomi joins the crowded EV race with ‘dream car’ to take on Tesla Last November, Meizu, another smartphone maker, announced it would partner with Geely Auto and launch its first EV, Meizu DreamCar MX, in 2024. The same month, Huawei launched its first electric sedan, the Luxeed S7, co-developed with Chery Auto with a view to taking on Tesla’s Model S. The CAAM has forecast the country’s total passenger cars sales will be around 26.8 million vehicles for 2024. But the combined sales targets by major manufacturers have so far reached nearly 30 million units. That oversupply means companies need to speed up sales, including by boosting exports — at the risk of raising tensions with key trading partners. Failure to do so may cause cash flow problems and plunge the manufacturers into crisis. And the battle may get harder for foreign players. Tesla was briefly dethroned by BYD as the world’s bestselling EV brand in the fourth quarter of last year. BYD’s entry-level model sells in China for the equivalent of just below $10,000. In contrast, Tesla’s Model 3, its cheapest model, currently costs at least 231,900 yuan ($32,002) after the latest price cut. “The quality of the products now, combined with the unparalleled levels of automation and innovation going into Chinese cars, means it’s the traditional foreign players who will be feeling the pressure rising as more Chinese brands display their wares in international markets,” Rainford said. The knockout round As competition becomes more intense, many carmakers will perish in the coming months, according to China’s EV company CEOs. “Entering 2024, the knockout round of China’s auto industry will begin in an all-round way, and the industry will enter a period of consolidation, with a complete reshuffle,” said Gan Jiayue, chief executive officer of Geely Auto, at the company’s earnings conference in March. Wang Chuanfu, chairman of BYD, also predicted in March that a “brutal elimination round” is coming. “China’s EV industry has entered a stage of cyclical adjustment after two decades of growth,” he said at a forum in Beijing. “Companies must form economies of scale and brand advantages as soon as possible.” Further consolidation of the industry means more small-to-medium-sized companies could be wiped out, industry insiders predict. According to Yin Tongyue, chairman of Chery Auto, EV makers are entering a “life and death race.” He added last month that his company would roll out 39 new pure electric and hybrid models in 2024 and 2025 to gain a top position in the EV market. But for those that survive, the future isn’t entirely bleak. In 2024, the market share of electric cars could reach up to 45% in China, underpinned by competition among manufacturers, falling battery and car prices and ongoing policy support, according to the International Energy Agency.