(Yicai) Nov. 25 -- The Chinese automotive industry will see quite a fierce rivalry over the next several years, which will not end until the mass elimination of new brands, according to the chief executive of Deepal Automobile Technology, the electric vehicle unit of Changan Automobile.

The gross profit margin of a carmaker must be at least 15 percent for it to survive, Deng Chenghao said to Yicai in a recent interview. Firms will lose money with each sale and likely shut eventually if the figure remains below that level, Deng added.

Sales of Chongqing-based Deepal surged 80 percent to 27,862 vehicles last month from a year earlier, with its deliveries soaring 75 percent to 179,371 units in the ten months ended Oct. 31 from a year ago.

New energy vehicles in China enjoyed large policy allowances this year, leading to excessive buying that may cause weaker demand in the first half of next year, Deng noted, adding that whether such subsidies can persist next year is uncertain.

Lower demand and more new factories becoming operational in the first half of next year may lead to an intensified price war in the Chinese auto sector, forcing some firms with weaker competitiveness to exit, Deng pointed out.

Rivalry from hybrid and extended-range vehicles and the lure of small all-electric cars priced between CNY100,000 and CNY150,000 (USD13,800 and USD20,705) for consumers are likely to take a significant market share from traditional fuel autos, according to Deng.

There have been several notable changes in China's NEV market recently, Deng said. Despite latecomers, NEV brands of established carmakers have surpassed startups in sales and growth rates, Deng noted, adding that this is partly because their subsidiaries, such as Deepal, can concentrate existing resources on smart and electric businesses.

Established in 2018, Deepal utilizes the manufacturing platforms of Changan Auto. This means it only needs to pay market-oriented manufacturing fees to its parent firm, making its fixed-asset investment near zero.

Deepal and Changan Auto can also share product quality management, sales channels, overseas markets, and overseas factory resources, which are advantages NEV startup rivals do not have, Deng noted.

Deepal will likely make a profit this month and keep its goal of becoming profitable next year, according to Deng. The company has the chance to be the first state-owned backed NEV brand to turn a profit, he said. 

Editors: Tang Shihua, Martin Kadiev