China wants to end the price war between electric car manufacturers

2023-07-10 20:07:00

Response to tough competition Tesla agrees to “core socialist values” – China wants to end the price war between electric car manufacturers

Tesla started the price war in China last year (icon image)

© CFOTO / Picture Alliance

The price war in China has been putting pressure on the electric car industry for months. Now more than a dozen manufacturers, including Tesla, BYD and Nio, have signed an agreement required by the government. This should put an end to the price war in the People’s Republic.

The competition in China is big. There are numerous manufacturers who are bringing electric cars onto the market and are vying for the most important automobile market in the world. After the US electric car manufacturer Tesla reduced the prices of its vehicles last year, others followed suit. The price war has now lasted for months. But an agreement between electric car manufacturers promoted by the Chinese government should now end this.

At an auto industry conference in Shanghai last Thursday, executives from 16 manufacturers signed the letter, committing them to fair competition. It envisages strengthening “basic socialist values” and avoiding “abnormal prices”. In addition to Tesla and market leader BYD, the signatories also include Nio, Xpeng and Geely.

The government in Beijing had previously asked automakers to end the month-long price war in China. The agreement was eventually drafted by order of the Ministry of Industry and Information Technology.

China is the most important electric car market

Tesla is the only foreign manufacturer that agreed to end the price war in China by signing the agreement. The US company, headed by CEO Elon Musk, lowered prices for the Model 3 and Model Y for the first time last October in response to weak demand in the country. As a result, other major automakers felt compelled to follow suit. High price discounts followed, with Tesla and BYD implementing the largest price cuts. In the USA and Europe, too, there were price reductions of several thousand dollars or euros.

As the world’s largest automotive market, China is now the most important for manufacturers. Tesla runs its most profitable plant in Shanghai and posts almost a third of its annual sales in the People’s Republic. Just last month, the US e-car manufacturer again increased the number of vehicles it delivered. According to preliminary figures from the industry association PCA (China Passenger Car Association) last week, the number of deliveries in June was 93,680 cars – an increase of around a fifth compared to May.

Other foreign countries, such as the well-known German car manufacturers, have so far not had any significant sales of electric cars in China. Aside from Tesla, Chinese manufacturers have the upper hand in their home market. Things were going particularly well for BYD recently. The Chinese electric car giant earned five times as much in the first quarter of 2023 as in the same period last year thanks to the large increase in sales. The profit increase was over 400 percent. With around 440,000 cars sold in China, BYD took over the market leadership from VW.

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A competitive struggle is part of the business, but in the future there should be no more price wars in China for electric cars. Meanwhile, industry expert Ferdinand Dudenhöffer told the German Press Agency that he expects “a fierce price war for electric cars in Europe”.

Sources: Financial Times, Bloombergwith material from the dpa