Chinese new energy vehicle (NEV) companies are joining a wave of price cuts that began with fuel vehicles earlier this year. Nearly ten companies, including BYD Seal, Changan Deep Blue, SAIC-GM-Wuling, and Chery New Energy, have announced price cuts in April. Despite calls from the China Association of Automobile Manufacturers for the price war to end, competition remains fierce, and no company wants to fall behind. The increased price war comes as NEV manufacturers face production crises, such as work suspensions, and the industry knockout race accelerates.
The wave of fuel vehicle price cuts started in March, led by Dongfeng Citroen C6, which cut the price of its products by up to CNY 90,000 (USD 14,032). Although other car companies followed, some have been accused of false advertising when it comes to price cuts. The cuts are said to be carried out with local governments, and the discounts are limited to local users, or only apply to maintenance and other items under comprehensive discounts, giving the illusion of a price cut when officially there are none.
Despite the doubts surrounding fuel vehicles, NEV companies are eager to cut costs and remain competitive. BYD Seal launched a purchase event on April 7, offering a comprehensive discount of up to CNY 31,000 (USD 4,816), while Changan Shenlan announced an anniversary celebration event, offering cash subsidies of CNY 12,000 (USD 1,864), financial subsidies of CNY 6,000 (USD 932), and insurance cash subsidies of CNY 4,000 (USD 621). Meanwhile, Tesla cut prices for its Model 3 and Model Y, as did other NEV companies, such as SAIC-GM-Wuling, Chery New Energy, Dongfeng Nano, Geely’s Ruilan Automobile, and Geometry Auto.
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The price cuts are not only related to the fuel vehicle price war, but also the cost of battery raw materials. Recently, the price of battery-grade lithium carbonate has fallen below CNY 200,000 (USD 31,057) per ton, reducing the battery cost of NEV companies, creating room for further price cuts. However, there is also polarization in the market, with some companies such as Wei Xiaoli avoiding the price war.
The situation raises the likelihood of major industry consolidation, fulfilling the prophecy of Huawei‘s Yu Chengdong, who warned that many auto companies might undergo mergers and major adjustments, with some inevitable failures along the way.