Chinese EV Price Wars: Are Negative Profits Looming for BYD and Tesla?

Chinese Electric Vehicle Brands Stick to Cost-Effective Policies Amid Controversy Over Possible Negative Profits

Chinese electric vehicle brands have been capturing the market through affordable electric vehicles. High prices have been one of the biggest obstacles to purchasing electric cars, so this strategy resonates with consumer needs. The reason they could offer such low prices is analyzed to be due to the use of Chinese-made LFP batteries.

However, a surprising analysis has been raised recently, causing controversy. In a report released on the 23rd, Goldman Sachs suggested that if Chinese electric vehicle brand BYD further reduces the vehicle price by 13,000 yuan (approximately $1,800), the overall profitability of Chinese cars could turn negative.

Price Reduction Relay Begins
Tesla and BYD Engage in Bloody Competition

Price competition for electric vehicles is not just an issue for Chinese brands. Tesla also recently reduced the price of its flagship Model Y from $43,990. This price reduction policy is attributed to the decline in the electric vehicle market.

BYD, the number one Chinese electric vehicle brand, also reduced the price of its electric vehicles by as little as 5% to as much as 20% in February this year. The price competition for electric cars, which began earlier this year, continues, with the average price of electric vehicles across 50 brands in China reduced by 10%.

No Choice but to Lower Prices
Electric Vehicle Sales are in Crisis

With BYD and Tesla, the top two players in the electric vehicle industry, lowering their prices, other small and medium-sized brands also feel they have no choice but to reduce their prices. According to data from SNE Research, the electric vehicle market share in 2023 is projected to be 20.5% for BYD in first place, followed by Tesla with 12.9% in second place. Tesla’s market share increased slightly by 0.4% compared to the previous year, while BYD’s increased by 3.2%.

As competition in the electric vehicle market intensifies, there are concerns that Tesla and BYD’s duopoly will become more solidified. Although BYD still heavily relies on domestic demand, it is expected to target the global market based on its success in the Chinese market.

Analysis of Xiaomi’s Electric Vehicle Pricing
Suggests Losses

Chinese electronics manufacturer Xiaomi previously entered the electric vehicle market with its electric sedan SU7. With a somewhat radical price structure of around 40 million won, considering its performance and design, it has attracted the attention of consumers worldwide. An analysis suggested that Xiaomi is losing 6,800 yuan (approximately $1,000) per vehicle due to its pricing strategy, but Xiaomi’s chairman, Lei Jun, refuted this claim.

China’s aggressive pricing strategy is expected to impact the domestic market. This is because BYD, the world’s largest electric vehicle market share holder, is on the brink of entering the Korean market. After obtaining trademark registrations in various fields, the company plans to expand into the passenger car sector. The industry predicts that BYD will complete the relevant certification process in the first half of this year and begin full-scale sales in the second half. As the “chicken game” in China may continue in Korea, attention is being paid to changes in the electric vehicle market.