Price Wars Intensify in China’s Automotive Industry
Recent reports from Radio Taiwan International and South China Morning Post indicate that price wars in China’s automotive sector are escalating due to intense competition and overcapacity.
The Chinese government’s subsidy of RMB 20,000 for car replacements is set to expire at the end of December 2024, prompting major automakers to slash prices ahead of schedule. Leading electric vehicle manufacturer BYD announced a significant 10% price cut for its hybrid SUV Sealion 05 DM-i, with the promotion lasting until January 26, aiming to attract more customers before the Chinese New Year holiday.
Following suit, Tesla also reduced the price of its Model Y SUV in China by RMB 10,000 between November 25 and December 31, offering a 4% discount to consumers.
In early 2024, BYD initiated a round of price cuts ranging from 5% to 20% on almost all its models, sparking a wave of discounts across various brands. Over the next two months, at least 50 car models saw price reductions of 10% or more.
According to data from the China Passenger Car Association (CPCA), 195 car models, including gasoline-powered, all-electric, and hybrid vehicles, underwent price cuts between January and November 2024, surpassing the 150 models that received discounts in the previous year.
Despite the increase in sales volumes driven by price reductions, profitability remains a challenge for automakers in China. Only a few major EV companies, including BYD, Li Auto, and Aito backed by Huawei Technologies, have managed to stay profitable amidst the ongoing price wars, as reported by South China Morning Post.
Further insights from TechNews, referencing CPCA data from BNN Bloomberg, indicate that the average profit margin for China’s car manufacturing industry was 4.4% from January to November 2024, lower than the 5% recorded in the previous year.
