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China’s top maker of electric vehicles (EV) wants to pay a lot less for car parts in the new year, a demand that signals there is no end in sight to a vicious price war nor economic gloom marked by lower wages and uncertain prospects.
BYD, Tesla’s main rival, asked a supplier to cut its prices by 10% next year, in widely circulated screenshots of a letter dated Tuesday and signed by He Zhiqi, an executive vice president at the Shenzhen-based company.
“In 2025, while there will be great opportunities in the EV market, market competition will also become more intense, entering a decisive battle and knockout rounds,” he wrote. “In order to enhance the competitiveness of BYD passenger cars, we need the entire supply chain to work together and continue to reduce costs.”
CNN has reached out to BYD for comment and has been unable to independently verify the authenticity of the letter.
However, on Wednesday, Li Yunfei, general manager of branding and public relations at BYD, appeared to acknowledge the letter with a post on his verified account on social media platform Weibo.
“Annual price negotiations with suppliers are a common practice in the car industry,” he wrote. “We set price reduction targets for suppliers. It is not mandatory, and everyone can negotiate.”
For 15 years, China’s car market has been the world’s biggest. But starting two years ago, when Tesla kicked off a price war by slashing prices for its Model 3 and Model Y cars in the country by as much as 9%, it has also become the world’s most competitive, with observers calling it a “life and death race.”
China’s more than 200 EV manufacturers are now grappling with huge oversupply, and experts predict many smaller companies will not survive the fierce competition. It’s not looking more optimistic for makers of vehicles with internal combustion engines either.
A letter from Maxus, a carmaker under state-owned SAIC Motor, circulating online earlier this week also asked for a price cut of 10%, citing a need to “improve survival” amid a “complex situation.” CNN has reached out to the company for comment.
“Market leaders (are) willing to sacrifice margins in order to gain share in the race to an electric future,” said Bill Russo, founder of Shanghai-based consultancy Automobility. “BYD has been most aggressive as they seek to leverage their vertically integrated supply chain and cost advantage to lock in their dominance in the market. Others will try to keep pace.”
Even the mightiest
The ongoing competition, imposition of additional tariffs by the European Union and uncertainty over the incoming Trump administration potentially igniting a global trade war means China’s EV makers may have little choice but to cut costs where they can, according to Tu Le, managing director at Sino Auto Insights, a consulting firm.
“This means the price war … is really stressing the system,” he said. “And that even the mightiest of OEMs is feeling vulnerable.”
OEM refers to original equipment manufacturers, an industry term that describes car makers such as Ford and General Motors. BYD is China’s top carmaker, commanding 16.2% of the overall vehicle market in the first 10 months of the year, according to the China Passenger Car Association. It had 36.1% of the market for EVs over the same period.
A major concern was that price cuts would “stretch suppliers too thin,” Le added, since they are “normally a fraction of the size of OEMs and don’t have access to capital like the OEMs do.”
Concern about the impact of the price cuts on people’s livelihoods during an economic slump made BYD one of the top trending topics on Weibo on Thursday, with a total of 19 million views. Commentators speculated that numerous suppliers in the car industry would inevitably have to slash salaries in an already grim job market in the new year.
“Exploiting the supply chain is their best skill, not treating grassroots employees as humans,” said a post with more than 1,000 likes.
Shares in Chongqing Sulian Plastic, a BYD supplier that sells fuel pipelines and other automotive parts, fell by more than 3% over two trading sessions this week since the emergence of the letter. Another supplier, Alnera Aluminium, which makes aluminum alloy parts for EV battery systems, has seen its stock drop by 4% over the same period.
