The Financial Times said that the electric car market in China is preparing for more intense competition in 2025, as BYD, Tesla’s biggest competitor in China, pushed its suppliers to reduce their prices by 10%.
This measure comes within the framework of BYD’s efforts to enhance its competitiveness in the largest automobile market in the world.
In an email sent by He Qiqi, the company’s executive vice president, BYD asked its suppliers to submit discounted price offers by December 15 and start implementing the new prices early next year.
Cheki described the year 2025 as “the great final battle” in the electric car market, calling on suppliers to seriously search for ways to reduce costs, according to the newspaper.
However, this step was met with great rejection and dissatisfaction by spare parts suppliers, who already suffer from slim profit margins and long payment cycles, according to the Financial Times. The newspaper quoted one of the suppliers as saying, “We cannot accept your request and do not wish to participate in cooperation that violates business ethics and humanity.”
For his part, Li Yunifei, who is responsible for public relations and brand promotion at BYD, said, “Annual negotiations with suppliers are a common practice in the automobile industry. We place targeted price reductions in front of suppliers in advance. These are non-binding requests for them. We can negotiate it together,” Bloomberg reported.
Impact of price war on industry
This step represents a new chapter in the price war that began in late 2022, led by Tesla, which put severe pressure on the profits of automobile companies and led to a wave of industrial mergers.
In the first nine months of 2024, BYD took an average of 144 days to settle its invoices, up from 124 days the previous year, according to the company’s financial filings.
Market forecast for 2025
Reports expected that a new round of price cuts would begin in the first quarter of 2025. Tesla announced this week a discount of 10,000 Chinese yuan (about 1,379 dollars) on its “Model Y” car, bringing its initial price to about 239,900 yuan (33 thousand dollars), a decrease of 4%.
Analysts reported that price competition in the Chinese market is inevitable, especially with excess production capacity that is difficult to reduce.
One of the executives of a Chinese spare parts company said that this situation will eliminate many players in the market, but it may pave the way for Chinese electric cars to dominate global markets, similar to what Japanese brands have achieved in the past.
Spark of price war
The price war has raged in China’s electric car market over the past two years, leading to a wave of mergers and bringing smaller companies in the sector closer to the brink.
Western car companies, such as the German Volkswagen and the multinational Stellantis, have allied with the Chinese companies Xiping and Xijiang Limotor Technology to benefit from their expertise in the field of electric cars, while the luxury electric car manufacturers “Hi-Fi” and “WM Motor” in Shanghai have begun to take bankruptcy procedures. According to what Bloomberg reported.
On the other hand, BYD has not been harmed, if not benefited, by the current chaos in the electric car market. Earlier this year, the company launched a new wave of price cuts in various market sectors, increasing its market share and reducing the shares of competitors.
The Chinese company recently succeeded in displacing its American competitor Tesla from the top of the global car market in terms of sales, and raised its profit margin to 21.9%, which is the highest in a year.
