The Price War for Chinese Vehicles

By: C. Oliveira

Chinese car makers now account for half of all Global EV sales, benefitting from access to minerals and a cost-effective supply chain built over years. The industry, however, is now entering a transitional phase from traditional ICE energy to new energy. 
Car makers are now aiming at making inroads at smaller towns and rural areas. Albeit pricing plays a large role to do so. 
Sales of battery-powered EVs in China slowed to 18.2% in the first two months of the year from 20.8% for all of 2023, according to the China Passenger Car Association. 
2 years ago, Tesla started a price war by slashing their prices and BYD, Xpeng, Leapmotor and Geely have followed their incentive. The initiation of price drops serves to entice buyers. Leapmotor has reportedly cut prices of its new EV version of its C10 SUV by nearly 20%, while BYD has been lowering prices of various EV models and even launched a new version of its best-selling car on Monday at a lower price. Xpeng extended its 20,000-yuan discount on its popular G6 SUV until the month’s end. This, on the other hand, raises questions about sustainability for the manufacturers especially when lacking government funding and when experiencing a slowing domestic market. 
Competition in the industry has intensified within China and also international giants like Tesla. Tesla launched discounts in car insurance products, and preferential financing plans for a limited time, yet still lost market share in China in January. Last year, it cut the average Tesla price by about 25% in a bid to drive up sales. 
Industry experts predict that most carmakers will turn to offering discounts and engaging in price wars to retain market share in 2024 and further escalation of the price war is foreseen to occur, with more manufacturers likely to join in to safeguard their market shares as failing to do so could lead to a risk of losing market share.