Customers are watching BYD electric vehicles at the car show held in Yantai, Shandong Province, eastern China on April 10, 2025.
Stringer | AFP | Getty Images
Beijing – Competition in China’s electric car market has become fierce and fierce, affecting the domestic economy and even the global auto market.
Last week, industry giant BYD announced numerous discounts with nearly 30% or more across several low-end battery-only hybrid models. The budget-friendly Seagull compact car has dropped its price to 55,800 yuan ($7,750).
Other major Chinese automakers began following the lawsuit.
“BYD’s actions this time have really strained the industry,” said Zhong Shi, an analyst with the Chinese Automotive Dealers Association, translated by CNBC, in Mandarin.
“There’s an industry [a state of] It’s a relatively big shock,” he said.
The industry has been a rare, bright place in an economy where growth is slowing and consumer demand is declining. Some of the latest attempts to promote consumption in Beijing included subsidies for new energy vehicles, a category that includes battery-only cars and hybrid-powered cars.
“The latest car price competition highlights how the supply demand imbalance continues to burn deflation,” Morgan Stanley chief China economist Robin Singh said in a report Wednesday.
“Rhetoric is growing regarding the need for rebalancing. [to more consumption]however, recent developments suggest that older supply-driven models remain intact.
China’s electric vehicle market is partly fueled by Tesla and has already been in a price war for the past two years.
However, this time, traditional automakers, including state-owned automakers, have now considered about half of the new passenger cars sold in China, making state-owned automakers a significant heat.
Last week, Wall Motors Chairman Wei Jianjun warned of the “Evergrande” of China’s automotive industry, which has not yet exploded, comparing the burgeoning EV industry with the country’s bloated real estate sector. The outspoken private sector automotive executive spoke to Chinese media outlet Sina in an interview posted on May 23.
The Chinese real estate giant once defaulted on its obligations in late 2021 as the real estate market halted after Beijing cracked down on the company’s high debt levels. Additionally, stricter government regulations led to lower demand for housing, and developers struggled to finance the rest of the construction of the remaining units of sale.
On Wednesday, BYD rebutted reports that it had put excessive pressure on one of its cash flow dealers as Chinese media scrutiny about the carmaker’s financial situation rose. The dealer, Zinang Qingsheng from the eastern Shandong province, did not immediately respond to CNBC’s request for comment. BYD introduced CNBC in a statement to the Chinese media.
Early in China’s national support efforts to become a global leader in the emerging electric and vehicle industry, the Treasury Ministry said it found that at least five companies were cheating the government at 1 billion yuan ($140 million). High-level policies encouraged startup flooding.
Prices will drop by 19% over two years
In China, the average car retail price fell approximately 19% over the past two years to 165,000 yuan ($22,900), according to a Nomura report this week, citing industry data from the Autohome Research Institute.
The report shows that price reductions have skyrocketed by 27% over the past two years for hybrid or range extension vehicles, while battery-only vehicles have dropped by 21%. It was noted that traditional fuel-powered vehicles saw a below average price reduction of 18%.
In contrast, the average price of new cars in the US was $48,699 in April, up almost 1% from two years ago, according to CNBC calculations from COX Automotive data. The average electric car price last month was an additional $59,255.
BYD’s latest round of price cuts did not include high-end models from the company, which cost around 200,000 yuan, including the flagship Han Electric Sedan. Reuters noted that the latest model of HAN, released in February, is about 10% cheaper than the previous version, according to its calculations.
Backed by Warren Buffett in his childhood, the Chinese automotive giant is rapidly gaining Chinese market share with a wide range of cars at various prices. The company reported 14.17 billion yuan last year, from a 49% increase in net profit. Current total liabilities increased by more than 60%, up 571.5 billion yuan. Cash and cash equivalents fell slightly to 100.21 billion yuan.
Price war to continue
Rather than reflecting the expansion of the market, double-digit growth in sales of new energy vehicles in China is simply digging into slices of internal combustion engine pie from Ying Wang, Fitch Managing Director of APAC Corporate Rating. She noted that the country’s automotive market has not grown much since 2018, and expects automobile retail sales to rise by a single digit lower this year.
She said the automaker continues to cut prices to gain market share in China this year. Wang pointed out that rather than asking consumers to pay more as add-ons, businesses can include more features, such as advanced driver assist systems, for free.
Geely Backed Zeekr in March said it was releasing an advanced driver assist system for free, and Tesla tried to charge customers for similar features. A month ago, BYD announced it was deploying driver assist capabilities on more than 20 car models.
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Over the past few months, top Chinese leaders have increasingly sought an effort to deal with the unproductive business competition known as “in conversion.” This period was mentioned at the March Premier annual work report and last week’s meeting of market regulators, calling for a comprehensive “revise the “competitive” competition.”
However, large efforts to produce low-cost electric vehicles in China, and subsequent moves for automakers to expand to other markets, have heightened concerns about the impact on other countries’ automotive industries.
The European Union slapped tariffs on imports of Chinese-made electric vehicles after investigating businesses into the use of government subsidies in manufacturing. The US also places 100% of its duties on Chinese-made electric vehicles, and hopes that vehicles will enter the world’s second largest automotive market.
However, in the EU, tariffs were limited in effect. According to Jato Dynamics, BYD surpassed Tesla for the first time in Europe in April. According to the European Association of Auto Manufacturers, Tesla’s European sales rose 49% that month.
– CNBC’s Bernice OOI contributed to this report
