In recent times, the fierce competition in China’s electric vehicle market has intensified as the new year’s price war began ahead of schedule. Companies such as BYD and SAIC Motor Demand have demanded a 10% price reduction from suppliers, sparking market attention.
According to reports from mainland Chinese media on November 26th, an email titled “BYD Passenger Cars Cost Reduction Request for 2025” was circulated online. The email, signed by He Zhiqi, Executive Vice President of BYD Group and Chief Operating Officer of Passenger Cars, requested that relevant suppliers reduce the prices of supplied products by 10% starting from January 1, 2025.
The email mentioned that the market competition in 2025 would become even more intense, entering a “final battle” and “elimination round.” In order to enhance the competitiveness of BYD passenger cars, the entire supply chain needs to work together to continuously reduce costs. Therefore, “relevant suppliers are required to effectively explore cost reduction space, actively promote the requirements, and submit post-reduction prices to us (BYD) through the SRM system by December 15th.”
On the same day, another response email from a supplier was circulated online, expressing strong dissatisfaction and stern protest against BYD’s request. The email urged BYD, as an industry leader, to focus on long-term global development, stop using bottomless exploitation methods to gain short-term benefits, and instead promote the healthy development of the supply chain to create a fair and sustainable cooperative environment.
Following BYD’s request for suppliers to reduce prices by 10%, on November 27th, the stock prices of suppliers such as Suyun Corporation and New Aluminum Era dropped by over 3%.
According to reports from “Yicai,” among these companies, “New Aluminum Era” is highly dependent on BYD, with over 80% of its revenue coming from sales to BYD.
When contacted by “Yicai” for a response, some suppliers stated that they needed to confirm the details with management before responding. Automotive industry insiders also pointed out that annual renegotiation of automotive parts prices is an industry norm. Furthermore, if they deeply cooperate with BYD and agree to reduce prices, considering the low gross profit margins, profits would likely face significant erosion.
On November 27th, Li Yunfei, General Manager of BYD Brand and Public Relations Department, responded by saying, “Annual negotiations with suppliers are a common practice in the automotive industry. Based on large-scale procurement, we set price reduction targets for suppliers, which are not mandatory but can be negotiated by all parties.”
Additionally, according to a report from “China Securities Journal,” on November 27th, information obtained exclusively from industry sources revealed that SAIC Maxus Automotive Co., Ltd. (referred to as SAIC Maxus) had also sent letters to its suppliers on the 25th. The letter mentioned the prevailing issue of oversupply in the current automotive market, stating that with a large number of new cars entering the market, the imbalance in supply and demand is expected to persist in the short term, making it difficult to alleviate the price war. “Cost control” will be the main theme of the automotive industry in 2025.
SAIC Maxus invited supplier partners to participate in a major cost control initiative, stating that “through close collaboration, we can jointly develop more cost-effective solutions and achieve a win-win situation. Further strengthening management, improving quality, service, efficiency, and reducing costs to enhance survival capabilities under complex conditions, aiming for a 10% cost reduction.”
Reports indicate that the new year’s automotive price war will kick off early, with car manufacturers passing on cost pressures to upstream suppliers. Industry insiders have expressed concerns that the rights of automotive consumers may be compromised in the process.