Chinese Automobile Price Wars
There are 115 Chinese EV brands. Only a few, including BYD, make any money and are expected to survive in the long run. Brutal price wars are a common affliction across Chinese industries.
On May 23rd China's biggest EV manufacturer, BYD, caused shockwaves when it slashed the cost of 22 electric and hybrid models.
Now the starting price of its cheapest model, the Seagull, has fallen to a mere 55,800 yuan ($7,700).
BYD's shares fell after the price cuts and the official pronouncements, amid concerns that the price war will be unsustainable.
But to cling to market share, other carmakers cut their own prices.
On May 31st China's Industry Ministry told Xinhua, the state-run news agency, that "there are no winners in the price war, let alone a future." The ministry vowed to curb cut-throat competition, which it said harmed investment in R&D, and could cause safety problems.
On June 1st People's Daily, the Communist Party mouthpiece, argued that low-priced, low-quality products could harm the reputation of "Made-in-China" goods.
Wei Jianjun, Chairman of Great Wall Motors, one of the largest, called the industry unhealthy and invoked the collapse of the property market as a cautionary tale. "Now, the Evergrande of the automobile industry already exists, but it just hasn't exploded yet," he told Sina Finance, a news outlet, referring to the world's most-indebted developer.
Ajay Bagga