The EV price war escalates as China's BYD and the US' Tesla cut prices in China
On Friday, Tesla rolled out new incentives in China, the biggest auto market globally.
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The backstory: China has been making big moves in the global automotive industry, especially with electric vehicles (EVs). With strong government support, China is pushing for widespread EV adoption, aiming for at least 20% of new car sales to be new energy vehicles (NEVs) by 2025 and ultimately dominating by 2035.
One big player in this game is BYD, which is going head-to-head with Tesla for the top spot in EVs. BYD surpassed Volkswagen to become China's top-selling car brand in 2023. But Tesla's pricing strategies have been hitting BYD hard. Last year, Tesla started a price war in China, causing BYD's value to drop by a whopping US$18 billion in February. To stay competitive, the carmaker had to slash its prices, too. By the end of 2023, BYD was the world's largest electric car company, outperforming Tesla for the second year in a row.
More recently: In January, Tesla dropped prices on certain models and started offering cash discounts in February to keep up with the market. Meanwhile, BYD is expanding its offerings with new brands like Yangwang and Fangchengbao and introducing a new electric sportscar, the U9.
The development: On Friday, Tesla rolled out new incentives in China, the biggest auto market globally. According to the company's post on Weibo, if you buy certain Model 3 sedans or Model Y SUVs before the end of March, you could save up to 34,600 yuan (US$4,807.76). You can also save 8,000 yuan (US$1,111) on car insurance if you use Tesla's partners. Plus, if you want a different paint color, you'll get another 10,000 yuan (US$1,389) off. And if you need financing, there are plans available that could save you up to 16,600 yuan (US$2,306) on a Model Y.
On the other hand, BYD, Tesla's local rival, also dropped the price of its new Song Pro hybrid SUV by 15.4%. The company also launched new versions of its Han sedans and Tang SUVs at even lower prices than last year. In short, it's a full-blown price war in the Chinese auto market, with Tesla and BYD going all out to win over customers.
Key comments:
"BYD is very, very strong," said Oliver Blume, CEO of Volkswagen, during an event at the Shanghai auto show last April. "In the end, not everything is about volume. We want to have a successful business and it is more important to be the best international group here in China."
"BYD is the dominant player—it has a weapon that Tesla doesn't have and that's the plug-in hybrid," said Bill Russo, a former Chrysler executive who's now CEO of Automobility Ltd., a Shanghai-based consultancy.
"China is now leading in production and increasing its comparative edges, banking on its massive domestic market and the first mover advantage," said analysts from Natixis Asia in a report in November.
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