Latest news with #pricewar
Yahoo
2 days ago
- Automotive
- Yahoo
China's electric car revolution is eating itself
In the world's biggest market for electric cars, a sales miracle is turning into a 'Darwinian battle' for survival. The number of electric vehicles (EVs) sold in China rocketed to 6.4m last year, accounting for more than half of all cars sold. Despite this roaring success, growth is now slowing and the market has become oversaturated with companies fighting to win over drivers. It has prompted a vicious price war that has caused alarm in Beijing. Last week, the government issued a stern warning to 16 brands including BYD, Nio, Leapmotor and SAIC Motor, which are among the country's biggest domestic brands, urging them not to destroy each other by merciless undercutting on price. Analysts believe competition is only set to become more intense, with a potentially significant impact on export markets such as the UK and Europe. It will also have consequences for Western brands such as Tesla, which are also fighting for sales in China. 'There's been a Darwinian battle, where the larger manufacturers in China are heavily discounting, and really pushing prices downwards in a brutal fashion,' says Matthias Schmidt, an independent automotive analyst. 'They're looking to destroy their domestic peers and also Western manufacturers, trying to get them to exit the Chinese market.' While the clash may be good for Chinese drivers, who benefit from cheaper cars, it is bad news for Britain. Chinese brands are charging higher prices abroad, using international sales to bank-roll price cuts at home. The battle royal is the culmination of a years-long EV boom in the country, kicked off under Beijing's 'Made in China' strategy. Recognising the fact that Chinese manufacturers were unlikely to overtake Western rivals that made traditional internal combustion engine (ICE) cars, Beijing prioritised support for future hybrid and electric models – known collectively as 'new energy vehicles'. Since then, hundreds of EV brands have emerged off the back of surging consumer demand and massive state support, including subsidies, state-backed loans, investments from local governments and huge spending on charging infrastructure. Growth has been explosive, helping China become the world's largest manufacturer of EVs by far and more recently the largest exporter of cars globally. In 2015, about 100,000 EVs were sold in the country. By 2020 the figure had jumped to about 900,000, rising to 2.7m, 4.4m, 5.4m and 6.4m in the following four years. But the rapid annual growth has slowed from 63pc to just 19pc in the past two years. That has put intense pressure on companies, many of which had built business models contingent on strong sales growth. 'There are far more EV companies in China than can possibly survive in a competitive market,' the International Energy Agency (IEA) has warned. It highlighted that one company alone, Nio, recorded net losses of $3bn (£2.2bn) in 2023. Consultants at AlixPartners have estimated that the number of EV brands will plummet from more than 130 last year to just 19 profitable companies by the end of this decade. The market is already experiencing what analysts have euphemistically called 'consolidation', with the losers forced to declare bankruptcy or pursue mergers with their rivals. To keep the sales coming in, many are resorting to aggressive discounting. But that has prompted concerns in Beijing, as companies have tended to fund this by squeezing their suppliers, paying them later and later. That threatens to have knock-on effects if those companies can't then pay their own workers and bills. Some companies are taking more than 200 days – 28 weeks – to pay suppliers, including XPeng and Dongfeng Motor, according to the Financial Times. Beijing has sought to counter this by imposing new rules that require brands to pay up in 60 days, but there are doubts about whether these rules will be followed and concerns that it may plunge some car companies into deeper trouble. 'We are entering the consolidation phase, and the way producers in China are trying to survive is by price war,' says Endeavour Tian, an automotive analyst at Rhodium Group. The discounting is often led by BYD, the biggest-selling EV brand in China. That is partly because it has more on the line. BYD owns much of its supply chain, a model that requires huge amounts of capital. This means the company is relying on high sales volumes to keep the wheels turning. 'If their revenue is not that high, then there will be problems,' says Tian. The fierce competition in China has dragged on for longer than expected as several brands are backed by local governments reluctant to let them collapse. 'The government either invests in them or provides subsidies to them or provides low interest credit, so that even when some of the producers are really at the brink of bankruptcy they're still saved - and the price war goes on,' Tian says. For example, in 2020 Nio was rescued from collapse through a $1bn (£750m) bailout by state-owned investors. Elsewhere, Dongfeng Motor and Changan Auto – both owned by the central government – are in talks to merge amid the huge market pressures. Among the chaos, Chinese drivers are ostensibly benefitting from cheaper cars. But the price wars are not necessarily good for consumers abroad. In fact, for the UK and Europe, the pressure in China could mean higher prices for longer. Already, the sticker prices of Chinese-made cars tend to be far higher when exported. For example, BYD's best-selling Seagull hatchback starts at 56,800 yuan, or about £5,900, for local buyers. But in the UK, where the car launched this year, the model (renamed the Dolphin Surf) sells for £18,650. Similarly, research by Rhodium last year found that BYD's Seal U sold in Europe for a premium of about £11,000 compared to China. 'Those sales in Europe are essentially subsidising the price war taking place in the China market,' Schmidt says. This is particularly the case in Britain, which has not copied EU tariffs on Chinese EVs. In May, Chinese brands accounted for almost one in 10 cars sold in the UK according to the Society for Motor Manufacturers and Traders. 'The UK is essentially a cash cow market for Chinese manufacturers, it's extremely profitable,' says Schmidt. 'That's the reason we're seeing the UK soak up the highest amount of Chinese cars.' The largest European destinations for Chinese EVs are the UK, Spain and Italy, which make up more than 60pc of sales combined, according to Schmidt. The price war at home means that – at least for now – fears of cheap Chinese cars flooding into Europe may be overdone. Instead, brands may want to protect their margins, says Rhodium's Tian. At the same time, while European manufacturers are finding it hard to compete in China, in Europe they are starting to catch up. Greater adoption of lower-cost lithium iron phosphate (LFP) batteries, which have long been used by Chinese brands, have allowed Western manufacturers to bring prices down on a spate of newer models, says Schmidt. The share of EVs sold with LFP batteries in Europe has increased from 3pc to 10pc in just two years, according to the International Energy Agency. Yet Western rivals shouldn't take too much comfort from this. Ultimately, Chinese brands such as BYD are more focused on growth than profits – and they still have plenty of room to cut prices. And once the Darwinian battle at home is over, the newly-crowned winners may decide to bring the price wars to Europe next. 'If they want to play out the same scenario in overseas markets, that's also doable,' Tian says. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
3 days ago
- Automotive
- Telegraph
China's electric car revolution is eating itself
In the world's biggest market for electric cars, a sales miracle is turning into a 'Darwinian battle' for survival. The number of electric vehicles (EVs) sold in China rocketed to 6.4m last year, accounting for more than half of all cars sold. Despite this roaring success, growth is now slowing and the market has become oversaturated with companies fighting to win over drivers. It has prompted a vicious price war that has caused alarm in Beijing. Last week, the government issued a stern warning to 16 brands including BYD, Nio, Leapmotor and SAIC Motor, which are among the country's biggest domestic brands, urging them not to destroy each other by merciless undercutting on price. Analysts believe competition is only set to become more intense, with a potentially significant impact on export markets such as the UK and Europe. It will also have consequences for Western brands such as Tesla, which are also fighting for sales in China. 'There's been a Darwinian battle, where the larger manufacturers in China are heavily discounting, and really pushing prices downwards in a brutal fashion,' says Matthias Schmidt, an independent automotive analyst. 'They're looking to destroy their domestic peers and also Western manufacturers, trying to get them to exit the Chinese market.' 'Made in China' While the clash may be good for Chinese drivers, who benefit from cheaper cars, it is bad news for Britain. Chinese brands are charging higher prices abroad, using international sales to bank-roll price cuts at home. The battle royale is the culmination of a years-long EV boom in the country, kicked off under Beijing's 'Made in China' strategy. Recognising the fact that Chinese manufacturers were unlikely to overtake Western rivals that made traditional internal combustion engine (ICE) cars, Beijing prioritised support for future hybrid and electric models – known collectively as 'new energy vehicles'. Since then, hundreds of EV brands have emerged off the back of surging consumer demand and massive state support, including subsidies, state-backed loans, investments from local governments and huge spending on charging infrastructure. Growth has been explosive, helping China become the world's largest manufacturer of EVs by far and more recently the largest exporter of cars globally.
Yahoo
3 days ago
- Automotive
- Yahoo
China's electric car revolution is eating itself
In the world's biggest market for electric cars, a sales miracle is turning into a 'Darwinian battle' for survival. The number of electric vehicles (EVs) sold in China rocketed to 6.4m last year, accounting for more than half of all cars sold. Despite this roaring past success, growth is now slowing and the market has become hugely over-saturated with companies fighting to win over drivers. It has prompted a vicious price war that has caused alarm in Beijing. Last week, the government issued a stern warning to 16 brands including BYD, Nio, Leapmotor and SAIC Motor, which are among the country's biggest domestic brands, urging them not to destroy each other by merciless undercutting on price. Analysts believe competition is only set to become more intense, with a potentially significant impact on export markets such as the UK and Europe. It will also have consequences for Western brands such as Tesla, which are also fighting for sales in China. 'There's been a Darwinian battle, where the larger manufacturers in China are heavily discounting, and really pushing prices downwards in a brutal fashion,' says Matthias Schmidt, an independent automotive analyst. 'They're looking to destroy their domestic peers and also Western manufacturers, trying to get them to exit the Chinese market.' While the clash may be good for Chinese drivers, who benefit from cheaper cars, it is bad news for Britain. Chinese brands are charging higher prices abroad, using international sales to bank-roll price cuts at home. The battle royale is the culmination of a years-long EV boom in the country, kicked off under Beijing's 'Made in China' strategy. Recognising the fact that Chinese manufacturers were unlikely to overtake Western rivals that made traditional internal combustion engine (ICE) cars, Beijing prioritised support for future hybrid and electric models – known collectively as 'new energy vehicles'. Since then, hundreds of EV brands have emerged off the back of surging consumer demand and massive state support, including subsidies, state-backed loans, investments from local governments and huge spending on charging infrastructure. Growth has been explosive, helping China become the world's largest manufacturer of EVs by far and more recently the largest exporter of cars globally. In 2015, about 100,000 EVs were sold in the country. By 2020 the figure had jumped to about 900,000, rising to 2.7m, 4.4m, 5.4m and 6.4m in the following four years. But the rapid annual growth has slowed from 63pc to just 19pc in the past two years. That has put intense pressure on companies, many of which had built business models contingent on strong sales growth. 'There are far more EV companies in China than can possibly survive in a competitive market,' the International Energy Agency (IEA) has warned. It highlighted that one company alone, Nio, recorded net losses of $3bn (£2.2bn) in 2023. Consultants at AlixPartners have estimated that the number of EV brands will plummet from more than 130 last year to just 19 profitable companies by the end of this decade. The market is already experiencing what analysts have euphemistically called 'consolidation', with the losers forced to declare bankruptcy or pursue mergers with their rivals. To keep the sales coming in, many are resorting to aggressive discounting. But that has prompted concerns in Beijing, as companies have tended to fund this by squeezing their suppliers, paying them later and later. That threatens to have knock-on effects if those companies can't then pay their own workers and bills. Some companies are taking more than 200 days – 28 weeks – to pay suppliers, including XPeng and Dongfeng Motor, according to the Financial Times. Beijing has sought to counter this by imposing new rules that require brands to pay up in 60 days, but there are doubts about whether these rules will be followed and concerns that it may plunge some car companies into deeper trouble. 'We are entering the consolidation phase, and the way producers in China are trying to survive is by price war,' says Endeavour Tian, an automotive analyst at Rhodium Group. The discounting is often led by BYD, the biggest-selling EV brand in China. That is partly because it has more on the line. BYD owns much of its supply chain, a model that requires huge amounts of capital. This means the company is relying on high sales volumes to keep the wheels turning. 'If their revenue is not that high, then there will be problems,' says Tian. The fierce competition in China has dragged on for longer than expected as several brands are backed by local governments reluctant to let them collapse. 'The government either invests in them or provides subsidies to them or provides low interest credit, so that even when some of the producers are really at the brink of bankruptcy they're still saved - and the price war goes on,' Tian says. For example, in 2020 Nio was rescued from collapse through a $1bn (£750m) bailout by state-owned investors. Elsewhere, Dongfeng Motor and Changan Auto – both owned by the central government – are in talks to merge amid the huge market pressures. Among the chaos, Chinese drivers are ostensibly benefitting from cheaper cars. But the price wars are not necessarily good for consumers abroad. In fact, for the UK and Europe, the pressure in China could mean higher prices for longer. Already, the sticker prices of Chinese-made cars tend to be far higher when exported. For example, BYD's best-selling Seagull hatchback starts at 56,800 yuan, or about £5,900, for local buyers. But in the UK, where the car launched this year, the model (renamed the Dolphin Surf) sells for £18,650. Similarly, research by Rhodium last year found that BYD's Seal U sold in Europe for a premium of about £11,000 compared to China. 'Those sales in Europe are essentially subsidising the price war taking place in the China market,' Schmidt says. This is particularly the case in Britain, which has not copied EU tariffs on Chinese EVs. In May, Chinese brands accounted for almost one in 10 cars sold in the UK according to the Society for Motor Manufacturers and Traders. 'The UK is essentially a cash cow market for Chinese manufacturers, it's extremely profitable,' says Schmidt. 'That's the reason we're seeing the UK soak up the highest amount of Chinese cars.' The largest European destinations for Chinese EVs are the UK, Spain and Italy, which make up more than 60pc of sales combined, according to Schmidt. The price war at home means that – at least for now – fears of cheap Chinese cars flooding into Europe may be overdone. Instead, brands may want to protect their margins, says Rhodium's Tian. At the same time, while European manufacturers are finding it hard to compete in China, in Europe they are starting to catch up. Greater adoption of lower-cost lithium iron phosphate (LFP) batteries, which have long been used by Chinese brands, have allowed Western manufacturers to bring prices down on a spate of newer models, says Schmidt. The share of EVs sold with LFP batteries in Europe has increased from 3pc to 10pc in just two years, according to the International Energy Agency. Yet Western rivals shouldn't take too much comfort from this. Ultimately, Chinese brands such as BYD are more focused on growth than profits – and they still have plenty of room to cut prices. And once the Darwinian battle at home is over, the newly-crowned winners may decide to bring the price wars to Europe next. 'If they want to play out the same scenario in overseas markets, that's also doable,' Tian says.
Bloomberg
5 days ago
- Automotive
- Bloomberg
China Parts Suppliers Are Wary of Carmakers' Bill Payment Pledge
Chinese carmakers' pledge to make timely bill payments — an effort to appease officials' growing scrutiny of a long-running price war — has left many suppliers skeptical about how readily they'll follow through on their promises. After meeting with regulators in early June about the need for better self-regulation, the industry's biggest names including BYD Co. and Zhejiang Geely Holding Group Co. said they'll pay suppliers within 60 days. While that represents a shift toward global industry norms, it's a major change for some carmakers, including BYD, whose payment cycles can stretch to hundreds of days.
Auto Blog
12-06-2025
- Automotive
- Auto Blog
Tesla's Top Rival BYD Ignites EV Pricing War in China
BYD's newest price cuts in China may cause the country's average EV discount to reach a record high for the second month in a row. BYD set to move larger volumes with newest price cuts BYD has reignited China's electric vehicle (EV) price war after lowering the price of 22 all-electric and plug-in hybrid vehicles by up to 34% through the end of June. Subsequently, shares of many Chinese EV makers, including BYD, tumbled. The Seal hybrid sedan saw the most significant price cut in BYD's lineup at 34%, lowering its starting cost to $15,000 or 102,800 yuan. 0:03 / 0:09 Nissan's revolutionary self-driving tech hits Japan's streets Watch More However, BYD's price changes don't impact its luxury inventory, which includes the Denza FangChengBao and Yangwang lines. China's IM Motors, Leapmotor, and Geely's Galaxy have also announced price cuts in response to BYD's move. Other key players, like XPeng, Nio, and Li Auto, haven't yet slashed any price tags. European automakers like Volkswagen, BMW, and Mercedes-Benz will likely see further EV sales declines in China after BYD's bold move, given their reluctance to enter the country's new energy vehicle (NEV) price war. Tesla China registrations have also lagged in Q2. BYD Seal — Source: BYD Why BYD is one of the EV price war's largest players BYD has been considered a leader in China's EV price war with its in-house battery production and ability to get volume discounts from suppliers. The automaker is one of China's three profitable EV makers among the country's 50 or so electric car manufacturers. According to Investor's Business Daily, BYD introduced its latest price cuts in response to rising dealer inventories, causing some to wonder whether China's NEV push is losing steam. Chinese officials have also been investigating the possibility of zero-mileage car sales, where automakers pad their delivery numbers by reporting vehicles as sold that are being distributed to finance companies and used auto dealers, Clean Technica reports. In other words, Chinese automakers might be recording zero-mileage cars as sold when end users haven't purchased them. A slowdown in NEV sales would be a significant concern among Chinese officials regarding the country's economic goals and environmental sustainability. New price cuts from BYD also stem from the automaker's desire to reach 5.5 million sales this year, representing a 1.5 million increase from 2024. BYD's U.S. stocks declined 9.75% on Tuesday after the company's pricing announcement, while XPeng, Nio, and Li Auto's U.S. shares fell 3.8%, 4.1%, and 2.6%, respectively, according to Investor's Business Daily. Close to half of all China's new car sales are all-electric and PHEV, Electrek reports. By comparison, less than 10% of U.S. new vehicle sales are NEVs. Victor Sun, senior equity analyst at Morningstar, said he expects BYD to: 'Offset the impact [of its discounts] via larger sales scale and [its] battery cost staying low,' according to CNBC. Autoblog Newsletter Autoblog brings you car news; expert reviews and exciting pictures and video. Research and compare vehicles, too. Sign up or sign in with Google Facebook Microsoft Apple By signing up I agree to the Terms of Use and acknowledge that I have read the Privacy Policy . You may unsubscribe from email communication at anytime. BYD Seagull — Source: Getty Final thoughts Market reactions to BYD's discounts reflect how investors are nervous about an escalating EV price war in China and increased scrutiny from the country's regulators regarding sales numbers. In April, China's EV discounts reached a record high of 16.8%, and it appears this figure will climb higher in May. BYD, Seres, and Li Auto are the only three Chinese EV makers currently profitable, and an intensifying price war is setting the stage for an industry shakeout where smaller competitors will likely go under or get bought out by competitors. About the Author Cody Carlson View Profile
