(Yicai) July 13 -- Most Chinese electric vehicle startups failed to meet their midyear sales targets despite new energy vehicles accounting for more than 60 percent of new car sales in China for three consecutive months in the first half as rising costs and a sluggish auto market undermined their ambitious growth plans.

Zeekr was a notable exception, with sales almost doubling in the first six months year on year to 178,370 autos, according to Yicai research. The Geely Automobile Holding’s unit achieved 59.5 percent of its full-year target of 300,000 units.

Other companies, though, did not fare so well. Nio only met 41.9 percent of its annual sales target even though shipments surged 67.4 percent in the first half from a year earlier to 191,123 vehicles. The Shanghai-based firm had set a goal of maintaining annual sales growth of between 40 percent and 50 percent for the year.

Leapmotor Technology posted a 60.8 percent jump in first-half deliveries from the year before to 356,487 units, but it achieved only 35.6 percent of its ambitious full-year target of one million vehicles. Other companies, such as Li Auto, Xiaomi Auto, Xpeng, Deepal, Aito and IM Motors, only managed to meet between 30 percent and 40 percent of their annual sales goals.

Avatr, backed by Changan Automobile, logged the weakest performance with sales plunging 53.5 percent over the period to just 27,619 autos, achieving only 15.9 percent of the firm’s full-year target.

The disappointing progress largely reflects broader weakness in China’s auto market, analysts said. Passenger vehicle retail sales slumped 20.2 percent in the first half from a year earlier to 8.7 million units, according to the China Passenger Car Association. The shrinking market has made it difficult for EV startups to achieve the aggressive sales target that they set at the beginning of the year.

The rising cost of key materials has also reduced automakers’ ability to spur demand through price cuts. Memory chip prices have almost quintupled to nearly CNY100 (USD14.70) per unit, Zhang Xinghai, chairman of Seres Group, said at an industry forum. And the price of lithium carbonate has soared 125 percent to CNY180,000 (USD26,539) per ton. As a result, the average production cost of each Aito vehicle has gone up by between CNY15,000 (USD2,200) and CNY20,000.

Nio founder William Li Bin said higher raw material prices have increased the production cost of the ES8 by approximately CNY20,000 (USD2,950) per vehicle. To maintain its gross profit margin, the company would need to hike the model’s selling price by about CNY30,000. Instead, Nio has chosen to absorb the extra costs rather than passing them on to consumers.

Leapmotor has adopted a platform-based vehicle design and increased the in-house production of key components to offset rising procurement costs. Leading automakers including Harmony lntelligent Mobility Alliance, Tesla and Li Auto have also diversified their battery supplier base to improve vehicle cost control.

China will end several vehicle and vessel tax incentives from Jan. 1 next year, including the 50 percent tax reduction for energy-efficient vehicles and tax exemptions for pure electric commercial vehicles, plug-in hybrid vehicles, including extended-range models, and fuel-cell commercial vehicles. Analysts said the policy changes could further increase the share of pure electric vehicle sales in the market.

Editor: Kim Taylor