China’s carmakers don’t see the country’s fierce price war ending anytime soon as they press suppliers for discounts
Carmakers like BYD and SAIC Motor aren’t holding out hope for a ceasefire in the price war raging in China’s oversaturated EV sector.
The U.S. carmaker Tesla first initiated China’s EV price cuts in late 2022, which in turn spurred its domestic competitors like BYD to follow suit with their own discounts. There’s been sporadic truces in the fighting, but EV makers in China still turn to price cuts when they want to increase market share.
Now, EV suppliers are getting caught in the cross-fire.
Maxus, owned by the state-owned SAIC Motor, is asking suppliers for a 10% discount, reports the China Securities Journal citing unnamed industry sources. A letter to suppliers, sent Monday, reportedly asks for help in reducing costs as SAIC predicts EV oversupply persisting into next year.
SAIC Motor did not immediately respond to a request for comment.
It’s the second report of a Chinese automaker asking for a discount this week. BYD—the market leader in China’s EV sector—also asked suppliers for a 10% discount, according to an email from the carmaker’s executive vice president He Zhiqi that circulated on Chinese social media and was picked up by local media outlets. The email asked for price cuts to start Jan. 1.
Fortune was unable to independently verify the accuracy of the letter but a BYD public relations executive posted on his Weibo account claiming that annual price negotiations are common, and that discounts were not mandatory.
China has encouraged the rapid development of the EV sector since the early 2010s, leading to a large number of new EV startups, as well as several traditional automakers transitioning to electric cars.
That’s helped to create an extremely competitive market for EVs—and in turn encouraged price cuts as a way to gain market share. That’s eaten into margins, which is a problem for EV startups like Nio and XPeng which have yet to turn an annual profit. The reported pressure on suppliers to cut prices indicates that automakers don’t see the fierce competition letting up anytime soon.
Fierce competition at home is pushing Chinese automakers to go overseas in search of new markets, but new tariffs in the U.S., Canada and Europe could be closing doors in some of the world’s wealthiest economies.
Instead, Chinese automakers are targeting “smaller but still meaningful” markets for growth, like Thailand, Mexico and Brazil, which sometimes have a less fractious geopolitical relationship with Beijing.
