After overtaking Tesla Inc. as the best-selling electric vehicle manufacturer globally, BYD Co. is now attempting to overtake others like Toyota Motor Corp. and Volkswagen AG by aggressively lowering their products in one of the fiercest pricing wars in China.
As part of a marketing push that claims “electricity is cheaper than oil,” the manufacturer is presently offering discounts on practically every model of electric and hybrid vehicle it offers.
According to data examined by Bloomberg News from the Chinese auto portal 16888.com, BYD has lowered the price of over 100 model versions that are now in production compared to December and has reintroduced an additional 70 model trims at a reduced cost. Almost the only cars that are unaffected are those from its recently introduced Yangwang brand, such as the supe rcar that was just announced and costs 1.68 million yuan ($233,000).
Notably, the most economical EV from BYD is now much less expensive. The Seagull hatchback is now available for 69,800 yuan, a five percent savings (less than $10,000), which is more than $50,000 less than the average cost of an American EV. The best-selling Qin Plus sedan from BYD has seen an even further price cut of 20%, bringing it down to 79,800 yuan.
While most Chinese EV manufacturers have targeted first-time buyers in affluent cities like Shanghai and Shenzhen with their models, BYD is hoping to win over customers in smaller cities and rural areas who previously couldn’t afford an EV by offering steep price reductions in addition to enticing drivers to switch from gasoline to electric vehicles.
Toyota, Volkswagen, and Nissan Motor Co. are at risk from this plan since they have all been sluggish to switch to electric vehicles and have suffered as a result in their sales in China.
According to Bill Russo, the founder and CEO of Shanghai-based consultancy Automobility, “this is round two of the price war.” “BYD is attacking the market by leveraging its margin advantage. I will attempt to intimidate that person off the poker table if I have more chips in my stack.
Even seasoned watchers accustomed to China’s fiercely competitive auto industry have been taken aback by the magnitude of the most recent price reductions. Last week, Cui Dongshu, the secretary general of the China Passenger Car Association, stated on his blog that discounts have reached a “surprising” and “ultra intense” level.
Sales are soaring thanks to the steep reductions; in the first two months of 2024, the Qin Plus and Seagull both broke into the top five sedans and hatchbacks in terms of sales. The best-selling vehicle a year ago was Nissan’s gasoline-powered Sylphy, which was followed by VW’s Lavida. In a report released on February 19, Morgan Stanley analysts identified several vehicles, including Toyota’s Corolla and Sylphy, as being most vulnerable to BYD’s price reductions.
The PCA’s Cui stated in his blog that “new energy vehicles are severely cutting prices,” and that certain ICE manufacturers had reached a ceiling with their existing discounts. New-energy cars, which comprise plug-in hybrids and pure battery electric vehicles, made up 35.8% of new car sales in February, according to Bloomberg Intelligence.
Soon BYD will make their 2023 findings public. Although the company has already reported an annual profit of between 29 and 31 billion yuan, investors and analysts will be watching for indications that margins are being impacted by the pricing war.
In a report published recently, BloombergNEF stated, “Those with higher margins could cushion more aggressive price cuts as more companies trim EV prices.” However, since the majority of businesses are still losing money on EV production, a prolonged pricing war would reduce revenues.
A shakeout of China’s EV industry may also be accelerated by the recent pricing war, as weaker manufacturers may be compelled to consolidate or go out of business.
The head of HSBC Qianhai’s China auto research, Yuqian Ding, told Bloomberg Television last week that there are “too many brands, too many models on the market” in China. “The sector needs to consolidate,”
