BYD Sparks Fierce EV Price War, Undercutting Toyota and Volkswagen in China

In a bold move to dominate the electric vehicle market, BYD has slashed EV and hybrid model prices, challenging industry giants Toyota and Volkswagen in China's intense price war.

BYD's Strategic Price Cuts: A Bold Move to Expand EV Adoption and Challenge Global Auto Giants

In a recent report by SCMP, the Shenzhen-based automaker is discounting almost every electric and hybrid vehicle model it sells as part of a marketing campaign claiming that "electricity is cheaper than oil."

According to data from the Chinese car portal 16888.com, as analyzed by Bloomberg News, BYD has reduced prices on more than 100 existing model versions since December and relaunched 70 additional model trims at lower prices. The only unaffected models are those from its newly launched Yangwang brand, including the freshly unveiled supercar, which costs 1.68 million yuan (US$233,000).

Notably, BYD's most affordable EV has gotten even cheaper. According to The Straits Times, the Seagull hatchback has been discounted by 5% to 69,800 yuan (less than $10,000, more than $50,000 less than the average price of an American EV). BYD's best-selling Qin Plus sedan has been discounted by 20%, starting at 79,800 yuan.

While Chinese EV manufacturers have generally marketed their models to first-time car buyers in wealthy cities such as Shanghai and Shenzhen, BYD's massive price cuts are aimed at persuading drivers to ditch their gasoline cars and go electric, as well as gaining customers in smaller cities and rural areas who could not previously afford an EV.

The strategy threatens Toyota, Volkswagen, and Nissan Motor, which all need to transition to EVs faster, and they have seen their China sales suffer.

"This is round two of the price war," said Bill Russo, founder and CEO of Shanghai-based consultancy Automobility. "BYD is using its margin advantage to attack the market. If I've got more chips in my stack on the poker table, then I'm going to try and bully that person off the table."

Unprecedented Price Cuts Propel BYD to Top Sales, Shaking Up the Auto Industry Landscape

Even long-time observers familiar with China's hyper-competitive auto market were taken aback by the magnitude of the most recent price cuts. Cui Dongshu, secretary general of the China Passenger Car Association, wrote on his blog last week that discounting has become "ultra-intense" and has reached "an astonishing level."

The significant discounts are boosting sales; the Qin Plus and Seagull were among the top five selling sedans or hatchbacks in the first two months of 2024. A year ago, Nissan's gasoline-powered Sylphy was the best-selling vehicle, followed by VW's Lavida. In a February 19 report, Morgan Stanley analysts identified the Sylphy and Toyota Corolla as the most vulnerable to BYD's discounts.

"New energy vehicle [makers] are severely cutting prices," the CPCA's Cui wrote in his blog, adding that some ICE manufacturers had reached a limit with their current discounts. According to Bloomberg Intelligence, new-energy vehicles such as pure battery EVs and plug-in hybrids accounted for 35.8 percent of new car sales in February.

BYD's Financial Health in Focus: Price War Impacts and the Push for EV Market Consolidation

BYD will report its 2023 results on March 26. While the company has announced an annual profit of 29 billion to 31 billion yuan, analysts and investors will look for signs that the price war is affecting margins.

"With more companies trimming EV prices, those with higher margins could cushion more aggressive price cuts," BloombergNEF wrote in a March 21 report. "But an extended price war will squeeze revenues as most firms are yet to turn a profit on producing EVs."

The latest escalation in the price war may hasten a shakeout of China's EV sector, forcing weaker manufacturers to merge or go out of business.

Last week, Yuqian Ding, HSBC Qianhai's head of China car research, told Bloomberg Television that China has "too many brands, too many models on the market" and that the industry is due for consolidation.

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