Chinese electric vehicle champion BYD’s major offensive in the country’s EV price war is forcing competitors to follow suit and could drive further consolidation in the sector, analysts say.
Since the beginning of this year, BYD has repeatedly launched limited-time “fixed price” or subsidy campaigns, effectively reducing prices through means such as manufacturer subsidies and cash discounts. On May 23, the automaker made its biggest such move yet, announcing that until the end of June, buyers will get discounts of up to 34% on 22 of its battery-powered and plug-in hybrid models.
Thanks to the campaign, drivers will be able to get a BYD for as little as around USD 7,700.
But the low prices have renewed concerns over a race to the bottom in the industry, sending the stock prices of BYD and other Chinese EV makers plunging. BYD shares dropped over 8% on May 26, and continued to decline the day after, sliding as much as 4.2% in morning trading.
Wei Jianjun, chairman of Great Wall Motor, told Chinese media recently that “the Evergrande of the automotive industry already exists; it just hasn’t collapsed yet,” referring to the Chinese property developer that imploded under heavy debt. He did not name any carmaker, but social media users speculated that Wei was talking about BYD, whose asset-liability ratio stood at about 70.7% at the end of March.
In an apparent, cryptic response without naming names, Li Yunfei, general manager of BYD’s brand and public relations division, posted on social media on May 25: “A dog can bite a person! But a person cannot bite a dog!” Many interpreted this as him likening the rival to a dog—a common putdown in China—while BYD is a more sophisticated human that need not fuss with animals.
After the EV stock rout, shares in some other manufacturers dropped over 5% on May 26 and were down again the following day. Morningstar senior equity analyst Vincent Sun observed that investors “may have concerns about a prolonged price war.”
“I believe sales targets are the main driver behind this,” Sun said.
BYD aims to sell 5.5 million vehicles in 2025, for a 30% year-on-year increase. The company is targeting sales of 800,000 units overseas, which would be twice the figure from the previous year, after it failed to double foreign sales in 2024.
BYD’s discount promotion means its lowest-priced model, the Seagull with assisted driving features, starts at RMB 55,800 (USD 7,812). The biggest price cut applies to the Seal 07 DM-i intelligent driving version, with a fixed price of RMB 102,800 (USD 14,392), RMB 53,000 (USD 7,420) off the original price.
Oscar Wang, an analyst at Haitong International Securities, suggested that BYD has little choice but to intensify the price war despite its lead in the domestic market. He said that while rivals such as Geely, Leapmotor, and Xpeng are making strides in technology and products, BYD is gradually losing its advantage, particularly in the RMB 70,000–150,000 (USD 9,800–21,000) price range. And after an accident involving an EV made by rival Xiaomi brought closer scrutiny of the safety of smart- or self-driving features, Wang said consumers have become “unwilling to pay a premium” for BYD’s “God’s Eye” system.
“While long-term reliance on price wars may erode brand premium value, it can help capture market share in the short term,” Wang said.
Morningstar’s Sun said he expects other automakers to slash prices to keep up. Already, shortly after BYD’s announcement, Geely’s Galaxy brand announced a limited-time offer for multiple popular models, with reductions on some of them nearing RMB 20,000 (USD 2,800). State-owned Chang’an Automobile and Stellantis-backed Leapmotor also introduced price cuts over the weekend.
Swelling inventories help explain the increasingly vicious competition in the Chinese industry.
China’s automobile inventory reached 3.5 million units in April, equivalent to 57 days of supply, the highest level since December 2023, according to Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA).
Cui told Nikkei Asia that inventory pressure at BYD has reached the upper boundary of the acceptable range.
BYD itself reported RMB 154.37 billion (USD 21.6 billion) worth of inventory at the end of March, up 33% on the quarter. The company explained that the increase was primarily due to growing market orders and greater preparation.
The pressure is only growing as rivals roll out compelling new models at all price points. Even traditional automotive joint ventures involving legacy players like Japan’s Toyota, Nissan, and Mazda have unveiled EVs in China that look competitive in terms of both cost and features.
“We think BYD is looking to both sustain its position in the local EV market while also forcing competitors to match them on prices, which may accelerate future consolidation in the market,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital.
“I think in the near term, my feeling about consolidation of the market is it’s really going to be more around the legacy traditional players eventually merging together,” he added.
In late March, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) said it wanted to restructure central government-owned auto companies. And in April, state-owned Chang’an confirmed that its integration with Dongfeng Group had been largely finalized.
In May, Geely announced it will take its New York-listed EV brand Zeekr private, in an effort to boost cost competitiveness by eliminating overlapping investments among its companies.
Many analysts believe something has to give soon.
Haitong’s Wang warned that “if industry associations or regulators do not intervene” to curb the relentless price battle, “the second half of the year will see competition focused on cost-cutting capabilities, potentially accelerating the market exit of lower- to mid-tier automakers with weaker cost control.”
S&P Global said in a note that the sector is only at the start of a “sweeping consolidation.”
“We believe capacity cuts are necessary to restore profits, with many entities on an unsustainable path,” S&P warned. “For many firms, a merger or some form of partnership will be necessary for survival.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.