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Price War Over Electric Cars Erupts in China

2023-08-28

A cutthroat price war has erupted in the world’s largest automobile market.

Within a week in March, Volkswagen’s Chinese joint venture slashed prices on its ID.3 electric cars by 18 percent. Changan Automobile, one of China’s state-owned car manufacturers, offered $3,000 cash rebates, free charging credits and other incentives for its electric vehicles. BYD, the country’s biggest E.V. maker, unveiled a second round of markdowns in a month for some of its older models.

Amid slumping auto sales, car brands are going to extremes to stay competitive, offering dealership giveaways and deep discounts. Over 40 carmakers have discounted electric and gas-powered vehicles in China this year. The discounts have amounted to several hundred dollars for cheaper models, and tens of thousands of dollars for higher-end offerings.

“The severity of this cycle of price cuts is something that I’ve never seen,” said Tu Le, a managing director at the Beijing consultancy Sino Auto Insights, who has worked in the automotive industry in China and the United States for 25 years.
The price competition has unsettled what was a pillar of strength in the last few years, even as strict pandemic measures shook China’s economy and undermined efforts by the ruling Chinese Communist Party to instill confidence.

This month, Wang Chuanfu, chairman and chief executive of BYD, proposed that the government extend tax exemptions, which reduce the cost of buying electric vehicles, to 2025 instead of allowing them to expire this year. And China’s Auto Dealers Chamber of Commerce published an article last month calling for a six-month delay in the new emissions standards.
The price cuts are not limited to China. Tesla has also lowered prices in the United States and Europe, and its competitors have followed suit. But the intensity of competition reflects the reality that China is not only the biggest market for electric vehicles but also the most competitive.

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