A fierce price war has broken out in the world’s largest auto market.
Within a week of March, Volkswagen’s Chinese joint venture slashed the prices of its ID.3 electric cars by 18 percent. Changan Automobile, a state-owned automaker in China, offered $3,000 cash rebates, free shipping credits, and Other incentives for its electric cars. BYD, the country’s largest electric vehicle maker, has unveiled a second round of sales in one month for some of its older models.
Amid declining car sales, car brands are going to extremes to stay competitive, offering dealership gifts and deep discounts. more 40 discount car manufacturers Electric and gas cars in China this year. Discounts run into several hundred dollars for cheaper models, and tens of thousands of dollars for high-end offerings.
“The intensity of this cycle of price cuts is something I’ve never seen before,” said Tu Li, managing director of Chinese consulting firm Sino Auto Insights in Beijing, who has worked in the auto industry in China and the United States for 25 years. .
Price competition has destabilized what had been a pillar of strength in the past few years, even as tough pandemic measures shook China’s economy and undermined the ruling Chinese Communist Party’s efforts to instill confidence.
Auto sales in China fell 13 percent in the first three months of 2023. Sales of conventional cars have slumped, while growth in electric vehicles has slowed, according to the China Passenger Car Association.
China’s electric vehicle market has grown rapidly since 2020 – sales volumes doubled last year – fueled in part by government subsidies. When that program ended in December after 13 years, competition to attract buyers in an already crowded market segment intensified.
The rise of electric vehicles
At the same time, traditional automakers are scrambling to offload inventory of older vehicles before tougher national emissions standards starting in July make it harder to sell diesel and gas-powered vehicles.
An already jittery market started to pick up in January when Tesla, the US maker of electric cars based in Shanghai, cut prices in China for the second time in three months. Other manufacturers felt pressure to do the same.
This month, Wang Quanfu, chairman and chief executive of BYD, suggested that the government extend tax breaks, which reduce the cost of buying electric cars, into 2025 rather than letting them expire this year. The China Chamber of Commerce for Automotive Dealers published an article last month calling for a six-month delay in the new emissions standards.
The price cuts aren’t limited to China. Tesla has also cut prices in the US and Europe, and its competitors have followed suit. But the intensity of competition reflects the fact that China is not only the largest market for electric vehicles, but also the most competitive.
Bolstered by Beijing’s policies that encourage the growth of so-called new energy vehicles, domestic automakers and start-ups have flooded the sector, lured by a once-in-a-generation opportunity to tip the balance of power in the auto industry. By one measure, there is About 300 domestic electric vehicle manufacturers across China.
Didi, China’s leading car booking service, has developed an electric car with BYD exclusively for its drivers. Xiaomi, the smartphone maker, said it plans to For the first time, an electric car Next year. Even Evergrande, the embattled real estate developer, has been making electric cars These plans may be in jeopardy due to her debt problems.
China is the leading market for electric vehicles, and more were sold there last year than in the rest of the world. Foreign automakers see an urgent need to gain a foothold in China and to develop the know-how and scale of manufacturing necessary to compete globally.
Cui Dongxu, secretary-general of the China Passenger Car Association, said the price war “will definitely continue” because of the importance of mass-producing electric vehicles.
“In the end, companies with small sales or bad technology will be easily eliminated,” Mr. Cui said.
Car companies and dealerships are now pulling out all customer stops. Some dealers offer free holidays or perfume bottles In exchange for test drives, while some sales teams are keen on it stalking charging stations hoping to lure drivers away from the competition.
Last month, a promotional poster from a Toyota dealer in the southern city of Shenzhen Sharing was born on the Internet. It announced a free gas-powered sedan with the purchase of the bZ4X, the company’s electric SUV. A woman who answered the phone at the agency said there was no such deal at the moment.
Kevin Yang, 29, said he visited a Volkswagen dealership in Chengdu last month to take a look at its electric cars. A sense of desperation struck him among the salespeople.
The salesman stayed past the end of his workday to beg for a test drive. After Mr. Yang agreed to take the car for a spin, he began receiving daily phone calls from the seller with lower offers if he was willing to return to the dealership.
“The rat race is really on now,” Mr. Yang said.
There are parallels between China’s frothy electric car market and the early days of the smartphone boom, when a new tech product attracted scores of newbies to compete with established foreign brands.
In 2015, there were more than 100 Chinese smartphone manufacturers – a number that has been drastically reduced to four major domestic brands and Apple. Many non-Chinese brands, such as Samsung Electronics, once a leading mobile phone manufacturer in China, are barely registering.
Zhu Jiangming, chairman and CEO of Chinese electric car maker Leapmotor, said he saw another similarity. He expects electric vehicle prices to fall faster than conventional cars because, like smartphone makers, electric vehicle manufacturers will benefit as component prices fall and features improve.
Mr. Zhu said that a mid-to-high-end electric car could be sold in China for about $7,000 in 10 years. the Average price of an electric car In China it is already much less than in the rest of the world, about $35,000 compared to $60,000 in Europe and $70,000 in the United States.
William Lee, CEO of Nio, one of the largest Chinese electric vehicle companies, said he plans to wean Nio out of the price war, which he called “unhealthy and unsustainable.” For traditional gas-powered automakers, “cutting prices is a last resort in trying to secure market share,” he said in a statement.
Some executives worry that consumers will become used to waiting for price cuts. the China Auto Dealers Association He said last month that foot traffic to dealerships had picked up after the writedowns, but that orders were down.
Leapmotor and Li Auto have sought to reassure potential buyers by offering a guarantee to make up the difference if the company lowers prices or offers cash discounts in the next 90 days.
Yang, a car shopper in Chengdu, said he expects prices to drop even further.
He said, “I heard there will be more discounts soon.” “I’ll wait a bit.”
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