BYD, China’s top electric vehicle exporter, has asked a supplier for a 10% price cut next year, reflecting a fierce price war in the electric vehicle market in the world’s second-largest economy .
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| Over the past 15 years, China has been the world's largest auto market. (Source: China Daily) |
CNN quoted the letter signed by Mr. He Zhiqi, Executive Vice President of BYD in Shenzhen, stating: "In 2025, there will be great opportunities in the electric vehicle market and competition will also become more fierce. To enhance BYD's competitiveness, we need the entire supply chain to 'get involved' and continue to reduce costs."
Meanwhile, Mr. Li Yunfei, General Manager of Brand and Public Relations at BYD, posted an article on social media platform Weibo saying: "It is a common practice in the auto industry to negotiate prices with suppliers every year. We set a target to reduce costs, and this is not mandatory, everyone can negotiate."
"The Race to the Death"
For the past 15 years, China has been the world's largest auto market.
Since 2022, when Tesla started a price war by cutting the price of its Model 3 and Model Y in China by 9%, the country has become the most competitive market in the world. Many in the industry call it a "race to the death".
China's more than 200 electric vehicle manufacturers are currently struggling with a huge oversupply and experts predict that many smaller companies will not survive this fierce competition.
The situation is not very optimistic for manufacturers of vehicles with internal combustion engines either.
Recently, a letter from Maxus - an automaker under SAIC Motor - also asked suppliers to reduce prices by 10%, citing the need to improve survival in the complex situation.
“When electric vehicles ‘land’ on the market, the ‘giants’ are willing to sacrifice profit margins to gain market share in this race,” said Bill Russo, founder of Shanghai-based consulting firm Automobility.
Among them, BYD has been the most aggressive in seeking to leverage its integrated supply chain and cost advantages to maintain its dominant position in the market. Other companies are also trying to catch up.
Will a price war begin?
Back to the BYD issue. According to CNN , BYD's request for a 10% discount from a supplier became one of the top trending topics on Weibo, with a total of 19 million views.
Commentators speculate that many suppliers in the auto industry will inevitably have to cut wages in an already bleak job market.
Shares of Chongqing Sulian Plastic — a supplier that sells fuel pipes and other auto parts to BYD — have fallen more than 3% in two trading sessions this week.
Another supplier — Alnera Aluminum — which makes aluminum alloy parts for EV battery systems, saw its shares fall 4% this week.
Regarding the future of the market, Mr. Tu Le, CEO at Sino Auto Insights Consulting Company, noted that the imposition of additional tariffs by the European Union (EU) and the uncertainty about the upcoming Trump administration are likely to cause a global trade war.
"That means Chinese EV makers may have no choice but to cut costs where they can. And from there, a price war will really put stress on the market. In this situation, the strongest players - like original equipment manufacturers (OEMs) - also feel vulnerable," Tu Le predicted.
OEM is an industry term used to describe automobile manufacturers such as Ford and General Motors.
BYD is the country's leading automaker, accounting for 16.2% of the overall vehicle market in the first 10 months of 2024, according to the China Passenger Car Association. It accounted for 36.1% of the electric vehicle market in the same period.
A big concern, Mr. Tu Le added, is that price cuts from suppliers will put them under stress. Typically, suppliers are only a fraction of the size of OEMs and do not have the same access to capital as OEMs.
Source: https://baoquocte.vn/cuoc-dua-sinh-tu-tren-thi-truong-xe-dien-trung-quoc-den-ga-khong-lo-cung-lung-lay-295449.html
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