BYD Co. (BYDDY, 1211.HK), China’s largest electric vehicle (EV) manufacturer, is signaling its readiness for an intensifying price war in the world’s largest car market. In a move to bolster its market position, BYD has requested its suppliers to accept price reductions for 2024, further underscoring its strategy to lead in a fiercely competitive landscape.
An email reportedly circulating on social media this week reveals that BYD is seeking a 10% price cut from a supplier starting in January. In response, BYD’s public relations and branding director, Li Yunfei, clarified that while price reductions are part of the company’s annual negotiations with suppliers, these are not mandatory but part of a broader negotiation strategy.
“Annual bargaining with suppliers is a common practice in the automotive industry,” Li said in a Weibo post on Wednesday. “We propose price reduction targets to suppliers, but these are open to negotiation.”
The move is seen as a proactive step by BYD to manage the increasingly aggressive pricing strategies sweeping across China’s automotive sector. Over the past two years, a price war has ravaged the market, forcing smaller EV makers to the brink of bankruptcy while accelerating consolidation within the industry. This has driven both domestic and international manufacturers, including Volkswagen AG and Stellantis, to join forces with Chinese companies like Xpeng Inc. and Leapmotor Technology to compete.
However, BYD has weathered the storm better than most, having not only maintained its market leadership but also strengthened its position in the process. The company’s bold price-cutting tactics earlier this year allowed it to capture a larger share of the EV market, squeezing weaker competitors and driving its growth.
The Chinese automaker’s financial performance remains robust. In its most recent quarterly earnings, BYD’s revenue surpassed that of Tesla Inc. for the first time, and its gross margin surged to 21.9%, its highest level in a year. BYD’s success is also evident in its sales figures, having sold a record 3.2 million electric and plug-in hybrid vehicles this year. The company is poised to exceed 4 million vehicles sold by the end of 2024.
The intensifying price competition in China’s EV market has already led to significant changes in the industry landscape. Premium EV brands such as HiPhi and WM Motor are facing bankruptcy proceedings, while newer entrants struggle to keep up. Meanwhile, BYD’s continued expansion of its product offerings and aggressive pricing strategy has allowed it to thrive in this challenging environment.
As the EV price war shows no sign of abating, BYD’s ability to negotiate with suppliers and adapt to market conditions will be critical as it looks to sustain its momentum and further solidify its leadership in China’s electric vehicle market.
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