A top industry group last week gave a stern rebuke to automakers fueling a “price war,” a week after Chinese electric vehicle (EV) giant BYD Co (比亞迪) announced sweeping trade-in discounts, with multiple competitors following suit.
“Since May 23, a certain automaker has taken the lead in launching a substantial price drop campaign … triggering a new round of ‘price war’ panic,” the China Association of Automobile Manufacturers (CAAM) said in a statement posted to its WeChat account.
Such “disorderly” competition would “exacerbate harmful rivalry” and harm profit, the group said.
Photo: AFP
The statement, dated on Friday, did not single out any company by name, but on May 23, BYD announced it was offering big trade-in discounts on nearly two dozen makes, offering discounts of up to 34 percent.
Its cheapest model, the Seagull, now goes for a starting price of 55,800 yuan (US$7,745), down from 69,800 yuan, with a trade-in.
Days later, Stellantis NV-backed Chinese EV start-up Leapmotor Technology Ltd (零跑汽車) announced similar discounts on two “entry-level” models through Sunday.
Geely Automobile Holdings Ltd (吉利汽車) on Friday announced limited-time trade-in subsidies for 10 models, with its X3 Pro going for the lowest starting price of 44,900 yuan.
However, domestic criticism was growing against what the automakers association called “involution” — a popular tag used to describe the race to outcompete that ends up nowhere.
Wei Jianjun (魏建軍), CEO of China’s Great Wall Motor Co (長城汽車), whose annual revenue was about one-quarter of BYD’s, compared it to the start of China’s years-long housing slump triggered by the 2021 default of property giant Evergrande Group (恆大集團).
“Evergrande in the auto industry already exists,” Wei said in an interview with Chinese news outlet Sina Finance last month. “I hope that … all these years of hard work will not go to waste.”
Beijing has poured vast state funds into the EV sector, supporting the development and production of less polluting battery-powered vehicles.
However, China’s automakers association warned its goliaths to play fair.
“Leading companies must not monopolize the market,” the CAAM statement said.
It added that “with the exception of lawful discounting, companies must not sell products below cost nor engage in misleading advertising.”
Such behavior disrupted the market and harmed consumers and the industry, it said.
BYD Co’s sales last month were its best this year after heavy discounts offered during the final days of the month lured customers into showrooms.
The company sold 382,476 vehicles last month, according to a statement yesterday. Of those, passenger cars were 376,930. Notably, BYD’s battery passenger EV sales of 204,369 topped its plug-in hybrid sales of 172,561, only the second time pure EV sales have been in front since early last year.
Analysts at Citi Research estimated that after BYD’s discounts, traffic to its dealerships may have surged between 30 percent and 40 percent week-on-week.
Year-to-date, BYD has sold 1.76 million units. Its target for the full year is 5.5 million.
Additional reporting by Bloomberg
