Policy Drive and Market Competition: A Comparative Study on Financial Risks of New Energy Vehicle Companies

Abstract

As China’s new energy vehicle (NEV) industry shifts from policy-driven to market-oriented development, the financial sustainability of enterprises is undergoing new challenges. Existing research—largely centered on static financial indicators and the direct effects of subsidies—offers limited insight into firms’ financial resilience in the post-subsidy era. This study adopts comparative analysis and cash flow evaluation to examine three leading firms—BYD, NIO, and XPeng—and uncovers notable differences in their financial performance. The results show that BYD benefits from economies of scale and efficient channel management, enabling strong operating cash flow and reduced reliance on external financing. In contrast, NIO and XPeng experience substantial cash burn, negative operating cash flow, and heavy dependence on financing activities, exposing vulnerabilities in their path toward sustainable profitability. Major risks identified include intensifying market competition, rapid technological iteration, and persistent policy uncertainty. The study concludes that improving internal operational efficiency and strengthening strategic financial management are essential for firms to thrive in an increasingly market-driven environment. It offers actionable recommendations for managers seeking to enhance financial stability and for investors assessing risk, thereby contributing to the sustainable development of the NEV industry.