The electric car market in China is experiencing a fierce competition that is not only impacting the domestic economy but also the global auto market. Industry giant BYD recently announced significant discounts on several of its lower-end battery-only and hybrid models, with some discounts reaching nearly 30% or more. This move has sent shockwaves through the industry, making smaller automakers nervous about their ability to compete.
The Chinese government has been providing subsidies for new energy vehicles, including battery-only and hybrid-powered cars, as part of efforts to spur consumption in a slowing economy. However, the latest price cuts by BYD and other major Chinese automakers highlight the ongoing supply-demand imbalance in the market, fueling deflation.
China’s electric car market has been in a price war for the past two years, partly driven by Tesla’s presence in the market. Traditional automakers, including state-owned companies, are now feeling the heat as new energy vehicles account for about half of new passenger cars sold in China. Great Wall Motors Chairman Wei Jianjun recently warned of a potential crisis in the auto industry similar to what happened with China’s real estate giant, Evergrande.
In response to reports of financial pressure on its dealers, BYD refuted the claims and emphasized its commitment to maintaining a stable business environment. The Chinese government’s efforts to support the electric vehicle industry have led to the emergence of several startups, but only a few have survived, highlighting the challenges in the market.
According to a recent report, the average car retail price in China has dropped by around 19% over the past two years, with steeper cuts for hybrid and battery-only vehicles. In contrast, the average price of a new car in the U.S. has increased over the same period, with electric cars commanding an even higher price tag. BYD’s latest price cuts did not include its higher-end models, signaling a strategy to capture market share with a range of cars at various price points.
Looking ahead, industry experts expect the price war in China’s electric car market to continue as automakers vie for market share. Companies may resort to offering more features for free to attract consumers, rather than raising prices. Geely-backed Zeekr and Tesla have already taken steps in this direction, highlighting the evolving dynamics of the industry. BYD made headlines a month ago when it announced plans to introduce driver-assist capabilities to over 20 of its car models. This move was seen as a significant step towards enhancing safety and convenience for drivers using BYD vehicles.
In recent months, Chinese leaders have been emphasizing the need to address non-productive business competition, referred to as “involution.” This term has been highlighted in various official reports and meetings, signaling a push towards more efficient and sustainable business practices in China.
The push for lower-cost electric cars in China has raised concerns about the potential impact on international auto industries. The European Union and the United States have both taken measures to protect their markets from an influx of Chinese-made electric vehicles. The EU imposed tariffs on imports of China-made electric cars, while the US imposed 100% duties on these vehicles.
Despite these challenges, BYD has managed to make significant strides in the European market. In April, BYD surpassed Tesla in terms of sales in Europe for the first time, according to JATO Dynamics. This achievement comes at a time when Tesla’s sales in Europe have seen a significant decline, showcasing BYD’s growing presence in the region.
Overall, BYD’s expansion into driver-assist technology and its success in the European market demonstrate the company’s commitment to innovation and growth. As the global auto industry continues to evolve, BYD’s advancements in electric vehicles and driver-assist capabilities position it as a key player in the future of mobility.
— CNBC’s Bernice Ooi contributed to this report
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