BYD Pressures Suppliers for 10% Price Drop to Stay Ahead in China's Tough NEV Market

China's NEV giant BYD is urging suppliers to slash prices by 10% starting January 2025 to sustain its edge in an increasingly competitive market. The move underscores a growing trend of cost reductions as the company targets record-breaking annual sales.

BYD Pushes for 10% Supplier Price Cuts in 2025

Some of BYD's suppliers have been asked to reduce their product quotations beginning next year, suggesting that price competition in China's new energy vehicle (NEV) sector may persist, CnEVPost reports.

According to a source from Sina Tech, a local media site, citing an internal email, BYD has requested that its suppliers reduce pricing for passenger car products by 10% starting from January 1, 2025.

According to the report, which cites the email, BYD anticipates more intense competition in the NEV market in 2025. To make its passenger cars more competitive, the entire supply chain must collaborate and keep costs down.

Competitive Pressure Drives BYD's Cost-Cutting Strategy

The corporation has asked its suppliers to find ways to save money and submit their proposals by December 15th, the report added.

When Sina Tech asked BYD to confirm the email's legitimacy, the company said it is currently verifying it.

Automakers often engage in yearly price haggling with their suppliers, according to Li Yunfei, GM of branding and public relations at BYD, who subsequently stated on Weibo.

"We proposed a price cut to our suppliers based on our plans for massive bulk purchases. We can negotiate to continue forward, and this is not required," Li wrote.

Whether or not BYD requested a 10% price decrease from suppliers was one of the details he omitted.

BYD Leverages Sales Growth to Strengthen Supply Chain Position

Chinese social media have been abuzz with screenshots of an email purporting to show that BYD sold over 3.25 million units in the first ten months of the year and expects to sell over 4.2 million units for the entire year.

The email states that technology innovation, scale advantages, and a low-cost supply chain are the reasons behind BYD's continuous sales breakthroughs.

The negotiating strength of BYD over its supply chain increases as sales increase beginning in 2023, according to an industry source cited by Tencent News.

Suppliers Navigate Risks Amid BYD's Price Demands

The firm frequently asks its suppliers for price cuts, usually between 10% and 20% annually, according to the source.

The source said that BYD is forced to comply due to the size of its purchases unless the supplier is in a strong position and the carmaker can locate a suitable substitute.

This is a typical occurrence in the automobile business, thus suppliers in that sector have one option: increase their customer base to share the risk.

In a separate development, the China Securities Journal also stated—based on documents retrieved from sources within the automotive supply chain—that on November 25, SAIC Maxus, a subsidiary of SAIC Motor, also wrote to its suppliers, aiming to cut parts costs by 10%.

BYD Achieves Record Sales Milestones in 2023

In October, BYD sold 502,657 NEVs, which was a new monthly record and the fifth month in a row of record highs, according to figures released on November 1.

The 3,250,532 NEVs sold by BYD from January to October represented a year-on-year increase of 36.49 percent.

Annual sales for BYD are projected to reach over 4.3 million vehicles, which is a 42% increase from 3.02 million in 2023, assuming sales in November and December remain close to October’s levels.

Expanding Production Capacity Amid Rising Demand

He Zhiqi, BYD's executive vice president, announced on November 2 on Weibo that the company's production capacity increased by over 200,000 units from August to October.

His statement was vague, but the increase of approximately 200,000 units would constitute monthly capacity. From 370,000 units sold in August to 500,000 units sold in October, BYD's monthly sales increased significantly.

The current move by BYD suggests that next year, China's NEV market would witness intense pricing rivalry.