In the hugely competitive Chinese economy, consumers are unwilling to part with their money and have come to expect rock-bottom prices.
The Chinese Government has raised concerns over the price wars that are currently on in its domestic EV industry. Officials are worried that the ongoing EV price war could threaten the nation’s economic growth and are demanding automakers take action. And if they don’t, the government has plans to do it for them.
Chinese President Xi Jinping gave a couple of speeches recently in which he warned of the dangers of “involution,” where businesses invest ever larger sums of money and get less back. The car industry was one of his biggest targets.
Some Chinese EV makers have cut prices to insane levels in recent times. The BYD Seagull EV costs as little as 55,800 yuan (7,800 USD) in China, but the same car sold in Europe, where it’s called the Dolphin Surf, costs the equivalent of 26,000 USD. Even after the tariffs on Chinese cars being imported to Europe, there’s a huge difference. In March, it cut prices across the Seagull range by 3,000 yuan. Great Wall Motors, one of BYD’s competitors, released a new version of its Ora 3 car in June for about 20 percent less than the September retail price.
Hutong Research, an independent advisory firm based in Beijing and Shanghai, said, “Government agencies across China have moved swiftly in response to Xi’s recent remarks, pledging to implement supply-side reductions.
“These developments highlight not only the elevated political attention to excess capacity but also the breadth of the problem across China’s economy.”
In the hugely competitive Chinese economy, consumers are unwilling to part with their money and have come to expect rock-bottom prices. Companies across industries often cut prices to near or below cost levels in a play to dominate the market.
In January, He Xiaopeng, the chief executive of XPeng Motors, reportedly told employees that “the market will see fiercer competition in 2025” and that some carmakers would not survive the looming price war.
While China revealed a new draft amendment to its law on pricing last month, analysts say responses may not go far enough.
However, one option to prevent oversupply in the Chinese market is to export even more overseas, which is already happening. In June this year, Chinese companies grabbed a 10 percent share of Europe’s EV market. This is despite the EU imposing tariffs of up to 45 percent on Chinese-built battery EVs.
That said, the flood of Chinese EVs to the European Union has alarmed EU officials who worry that their carmakers will not be able to compete.
Source: The Guardian
