To revive the dwindling sales figures in China’s electric vehicle (EV) sector, leading manufacturers BYD and Xpeng have ignited a fierce price war. February saw both companies grappling with substantial sales slumps, with BYD’s sales plummeting nearly 40% month-on-month and Xpeng experiencing a decline of almost 45%.

BYD, headquartered in Shenzhen and backed by Warren Buffett’s Berkshire Hathaway, took an aggressive stance by slashing the price of its refreshed Yuan Plus SUV to 119,800 yuan, marking an 11.8% reduction compared to its predecessor. This move follows a series of price cuts implemented by BYD over the past weeks, indicating a determined effort to stimulate sales amidst a challenging market landscape.

Meanwhile, Xpeng, based in Guangzhou, extended its 20,000-yuan discount on its popular G6 SUV until the month’s end. The entry-level G6, now priced at 189,900 yuan, witnessed a significant reduction from its earlier tag of 209,900 yuan. This extension comes in response to persisting low deliveries and aims to entice hesitant buyers into the market.

Observers and industry analysts foresee an escalation in the ongoing price war, with more manufacturers likely to join in to safeguard their market shares. Experts have emphasized on the risk of losing market share for competitors who fail to adjust their pricing strategies in line with the prevailing market dynamics. Several factors contribute to the faltering demand for EVs in China, including a lack of confidence in the economic outlook, ongoing issues in the property sector, and the cessation of subsidies totaling about 12,000 yuan on EV purchases.

In response to its significant sales slump in February, BYD initiated a wave of price reductions across its Dolphin, Han, Tang, Song, and Seal series to maintain competitiveness. The most notable reduction was in the revamped Qin Plus DM-i plug-in hybrid, priced 20% below its previous iteration at 79,800 yuan.

The repercussions of BYD’s pricing strategy reverberated across the industry, with three other carmakers, including a General Motors joint venture, following suit by pricing their bestselling battery-powered cars below the 100,000-yuan threshold, thus intensifying the price war.

Xpeng also felt the sting of declining deliveries in February, experiencing a 44.9% drop month-on-month to 4,545 units, the lowest since March 2021. In response to the market dynamics, Tesla, a dominant player in China’s premium EV segment, announced a subsidy of 8,000 yuan for buyers purchasing car insurance from its partners, valid until the end of March.

Moreover, other manufacturers, such as Hangzhou-based Leapmotor, adjusted pricing for their vehicles lower than initially planned. Leapmotor’s new SUV C10 now starts at 128,800 yuan, reflecting a 17.3% reduction from its presale price in January.

Industry experts predict that most carmakers will resort to offering discounts and engaging in price wars to retain market share in 2024. Despite the slowdown in EV sales growth forecasted by Fitch Ratings, government stimulus measures and favorable policies from manufacturers like Tesla are expected to fuel rapid growth in the car trade-in sector in the coming months.

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