BYD Letter Leaks: Price War in China’s EV Market is Heating Up
BYD Co has requested that suppliers accept price reductions for the upcoming year, signaling that the Chinese electric vehicle manufacturer is gearing up for an escalation in the fierce price competition within the world’s largest automotive market.
An image of an email allegedly from the Shenzhen-based company was shared on social media on Wednesday, asking for a 10% price decrease from an unspecified supplier starting in January.
“Annual negotiations with suppliers are standard practice in the automotive sector,” stated Li Yunfei, BYD’s director of public relations and branding, in a Weibo post regarding the email on Wednesday. “We propose price reduction targets to suppliers. These are not obligatory demands. We are open to negotiations.”
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The email suggests that the EV manufacturer is preparing to endure additional discounts in the upcoming year. The price competition in China’s automotive market, which has been ongoing for at least two years, has led to a wave of consolidation and has pushed smaller companies to the edge.
Western automakers like Volkswagen AG and Stellantis NV have formed alliances with Chinese brands like Xpeng Inc. and Zhejiang Leapmotor Technology Co to capitalize on their electric vehicle expertise, while premium EV brands like HiPhi and Shanghai-based WM Motor are currently facing bankruptcy proceedings.
BYD has managed to navigate through the upheaval largely unscathed, if not emerging stronger. Earlier this year, it spearheaded a new round of industry-wide price cuts, effectively capturing market share and putting pressure on weaker competitors.
The company continues to experience record levels of revenue and profit. In the latest quarter, its revenue surpassed that of Tesla Inc. for the first time, and its gross margin rose to 21.9%, the highest it has been in a year.
BYD has become China’s leading car brand, with approximately 3.2 million plug-in hybrid and electric vehicles sold this year, including a record of half a million cars in October. It is on pace to sell at least 4 million units by the end of the year.
© 2024 Bloomberg
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