BYD is pushing in China's price war for e-cars to its suppliers

BYD is pushing in China's price war for e-cars to its suppliers

China's leading manufacturer of electric vehicles (EV), BYD, will be striving for considerable cost reductions in the next year. This requirement indicates that the merciless price war in the industry continues to continue and that the economic prospects of falling wages and uncertainties are clouded.

BYD demands price reductions from suppliers

byd, the main competitor of Tesla, has asked a supplier to reduce prices by 10 % next year. This request becomes clear in a widespread screenshot of a letter, dated Tuesday and signed by He Zhiqi, a vice president of the company based in Shenzhen. "In 2025, while there will be great opportunities in the EV market, the market competition will also become more intensive and pass into crucial fights," he continued. "In order to increase the competitiveness of the BYD cars, we have to make sure that the entire supply chain works together and continuously lowers the costs."

confirmation and reactions to the price request

CNN has asked BYD to comment, but has so far not received independent confirmation of the authenticity of the letter. On Wednesday, however, Li Yunfei, the Director General for Branding and Public Relations at BYD, seemed to confirm the letter in a post on his verified Weibo account.
"Annual price negotiations with suppliers are a common practice in the automotive industry," said Li. "We set price reduction goals for suppliers. These are not binding, and everyone can negotiate."

The challenges of the Chinese car market

China's automotive market has been the largest in the world for 15 years. But two years ago, when Tesla lowered the prices for his models 3 and Y in China by up to 9 %, he also became the most competitive. Observers refer to this as a "race for life and death". More than 200 EV manufacturers in China are faced with massive overproduction, and experts predict that many smaller companies will not survive in hard competition.

Other price inquiries from the industry

A letter from Maxus, a car manufacturer under the state -operated SAIC motor, which circulated online at the beginning of this week, also called for a price reduction of 10 % and referred to the need to be able to "survive" in a "complex situation". CNN asked the company to comment. "Market leaders are ready to sacrifice margins to win market shares in the race for an electrical future," said Bill Russo, founder of the Automobility consulting company in Shanghai. "BYD is most aggressive because you try to use your vertically integrated supply chain and cost advantages to secure your dominance on the market."

price wars and their effects

The continuing competitive conditions, additional tariffs of the European Union and the uncertainty regarding future trade relationships-for example by a possible return of the Trump administration-China's EV manufacturers could leave little choice than the costs, wherever possible, to lower, so Tu Le, Managing Director of Sino Auto Inights.
"This means that the price war is heavily loading the system," said Le. "Even the most powerful OEMs feel vulnerable." OEM describes original equipment manufacturers, a term that includes manufacturers such as Ford and General Motors. According to the China Passenger Car Association, BYD held 16.2 % of the total market for vehicles and 36.1 % of the EV market in the first ten months of the year.

effects on the suppliers

A big concern is that price reductions could overload the suppliers, since they usually only make up a fraction of the size of the OEMs and do not have capital as the OEMs do. The concerns about the effects of price reductions on the livelihood of people during an economic downturn BYD on Thursday on one of the most discussed topics on Weibo with a total of 19 million. Commentators speculated that numerous suppliers in the automotive industry would probably be forced to shorten salaries in an already dark labor market in the new year.
"The exploitation of the supply chain is their best ability not to treat the basic employees than humans," was a comment with more than 1,000 likes.

market developments and share prices

The shares of Chongqing Sulian Plastic, a BYD supplier who sells fuel pipes and other automotive parts, fell over two trading sessions by more than 3 % since the letter appeared. Another supplier, Alnera aluminum, which produces aluminum alloy parts for EV battery systems, experienced a decline in the share price by 4 %in the same period