A price war among Chinese electric vehicle (EV) assemblers is spreading to overseas markets, as more than a dozen players look abroad to boost sales and chase higher profits to offset losses at home.
In Southeast Asia, where battery-powered cars are becoming increasingly popular, Chinese EV makers, from established giants like BYD and Great Wall Motor to startups like Hozon New Energy Automobile, are offering discounts in an effort to compete with Japan’s rivals whose petrol vehicles dominate the market.
“Price competition is intensifying in markets outside China as more companies realize that high profit margins abroad can help them limit losses or improve profits as profits struggle at home due to the discount war,” said Jacky Chen, general manager of the company. manager of Jetour Auto International, a subsidiary of state car manufacturer Chery.
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“This is not a good sign for Chinese auto companies as we accelerate our pace to go global.”
China is the world’s largest auto and EV market, with nearly four in 10 new cars hitting the streets powered by batteries.
But the domestic industry, which is overcrowded with more than a hundred companies, is now mired in overcapacity problems following the collapse of several underperformers such as WM Motor and Human Horizons.
“Increasing sales outside China is a good way to chase profits because prices in markets like Southeast Asia are much higher than in the mainland,” said Qian Kang, an entrepreneur who owns auto parts companies in the East -Chinese province of Zhejiang.
“But when Chinese automakers enter those markets en masse, price competition becomes inevitable, which ultimately harms their own interests.”
In Thailand, Shenzhen-based BYD, the world’s best-selling electric car maker, recently cut prices of updated versions of its flagship Atto3 sport-utility vehicle (SUV) by 18 percent to 899,900 baht (US$24,542). This was followed by similar discounts offered by Chinese rivals Changan Automobile and Hozon.
Hozon’s pure electric car Neta V now has a price tag of 549,000 baht, 30 percent cheaper than BYD’s electric Dolphin Dolphin, while Changan’s Lumin EV costs 480,000 baht.
Their low-price strategies have worked in recent years, as Chinese EV manufacturers now control the lion’s share of the Southeast Asian market. Their share of the pie grew from 47 percent in 2021 to 74 percent last year, according to data collected by Deloitte China.
The consultancy said BYD had a 33 percent share of the EV market in Association of Southeast Asian Nations (Asean) countries, followed by Neta-branded EVs whose sales accounted for 14 percent of the regional total for took his account.
Last year, Japanese automakers had a 64 percent share of the Asean auto market, but rising EV penetration in the region will give Chinese EV companies a big opportunity to challenge market leaders like Toyota, officials said. sector.
In 2023, electric car sales represented just 3 percent of total car sales in the region, but Deloitte predicted the EV adoption rate could rise to 10 percent of a market where more than 3.3 million cars were delivered last year.
“Price wars are not uncommon in both developed and emerging markets,” said David Zhang, director of the WDEF Digital Automotive International Cooperation Research Center in Hangzhou.
“But Chinese EV manufacturers need to reach a consensus that constant price cuts will prove detrimental to all of them as lower prices will lead to heavy losses.”
To date, Chinese EV makers continue to report strong margin per vehicle – the gap between retail price and tangible costs such as raw materials, labor and logistics – in the Asean market, Jetour’s Chen said.
BYD’s Atto3, known on the mainland as Yuan Plus, starts at 119,800 yuan (US$16,542) in the domestic market, a third cheaper than the price paid by Thai consumers.
Early this month, the White House announced a fourfold increase in tariffs on Chinese-made electric cars, part of a series of measures it said would protect American companies from unfair subsidies Beijing hands out to its companies.
Chinese EV assemblers are already bracing for another blow in Europe after the European Commission launched an investigation into Beijing’s subsidies to carmakers last September.
BYD, which counts Warren Buffett’s Berkshire Hathaway among its shareholders, has fired the first salvo in an EV price war on the continent, sending prices of almost all its cars down 5 to 20 percent since mid-February.
Since then, prices of 50 models from a range of brands have fallen by an average of 10 percent, Goldman Sachs said in a report last month.
A new cut of 10,300 yuan per vehicle by BYD, or 7 percent of the company’s average sales price, could push the country’s EV industry to losses, the US bank added.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice covering China and Asia for more than a century. For more SCMP stories, explore the SCMP app or visit the SCMP Facebook page Tweet Pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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