In a report of December 29, 2024, the Chinese electric vehicle market is currently facing intense competition and overcapacity. To survive, the entire industry is engaged in a fierce price war, with leading manufacturers lowering prices one month earlier than the previous round of discounts. Data shows that in the first 11 months of this year, 195 car models have seen price reductions, leading to a year-on-year decline in profits in the automotive industry.
Analysts indicate that with government subsidies set to expire at the end of this year, electric vehicle sales are expected to decrease, putting financial pressure on small electric car manufacturers. The existing 20,000 RMB subsidy for electric car buyers provided by the Beijing authorities will expire on December 31.
According to a report from South China Morning Post on December 28, Eric Han, senior manager at Shanghai consulting firm Suolei, stated, “Every car brand understands that maintaining market share in 2025 is crucial due to intensified price competition. Most companies will have to offer discounts to survive in the price war.”
On December 25, an article from the Shanghai-based website cnevpost reported that BYD will lower the price of its Sea Lion 05 plug-in hybrid SUV by 11.5% to 99,800 RMB in order to attract more customers before the Chinese New Year holiday. BYD’s promotion will run until January 26.
In addition to BYD, companies like Tesla are also continuing to implement price reduction measures. From November 25 to December 31, Tesla’s Model Y rear-wheel drive and long-range all-wheel drive models saw a final price reduction of 10,000 RMB, starting at 239,900 RMB. Customers can also choose a 5-year interest-free financial plan.
Reporting in South China Morning Post, Tian Maowei, sales manager at Shanghai Yiyou Auto Services, remarked, “The low-price strategies introduced by leading manufacturers in the industry will be imitated by smaller competitors, as they will lose customers if they maintain unchanged prices.”
“Now, middle-income consumers are more price-sensitive because they are concerned about economic slowdown leading to wage decreases,” he said.
UBS analyst Paul Gong stated last month, “As subsidies are gradually phased out, the upcoming discount war will be more intense than the one at the beginning of this year.” He predicted that a new round of price reductions would occur in January.
The previous round of discounts began in February of this year when BYD lowered prices of nearly all its cars by 5% to 20%. Over the following two months, at least 50 models from various brands saw an average price reduction of 10%.
Data from the China Association of Automobile Manufacturers on Friday, December 27, showed that from January to November this year, a total of 195 car models (including gasoline-powered, pure electric, and hybrid vehicles) experienced price reductions, surpassing the 150 models in 2023 and significantly exceeding the 95 models in 2022. Pure electric vehicles saw an average price reduction of 10%, or 20,000 RMB, while hybrid vehicles saw a 4.3% price reduction, or 10,500 RMB.
The price war has squeezed profit margins. Data released by the China Association of Automobile Manufacturers showed that the average profit margin for the entire Chinese automotive industry from January to November this year was 4.4%. In 2023, the profit margin averaged 5%. In November of this year, the automotive industry generated revenue of 1.1241 trillion RMB, up 9% year-on-year; costs amounted to 983.7 billion RMB, up 11% year-on-year; profits reached 37.4 billion RMB, a 35% year-on-year decrease; and the profit margin for the automotive industry stood at 3.3%.
During a second-quarter earnings conference call for General Motors (GM) in July, CEO Mary Barra described the electric vehicle market in China as a “Race to the bottom,” warning that it would erode the residual value of products, and that the unsustainable amount of losses there cannot continue indefinitely.
On October 29, Barra once again cautioned that the Chinese electric vehicle market is oversaturated. She noted that there is a “huge transformation” happening in the Chinese electric vehicle business, and the competition is leading to “increasingly lower” prices that will be difficult to sustain.