The tension is rising in the world’s biggest car market as profit margins get squeezed. A recent exchange between two major Chinese electric vehicle manufacturers highlighted the pressures they are facing as a price war in the industry intensifies. Huawei’s smart car unit chairman implied that rival EV maker BYD is ahead due to low prices rather than the quality of its cars. BYD, which overtook Tesla as the biggest seller of electric vehicles at the end of last year, is facing competition based on value, intelligence, luxury, comfort, safety, and high quality.
In the hyper-competitive EV industry in China, a price war has escalated in recent months as manufacturers battle for consumer attention with deep discounts and newer, cheaper models. The industry suffered a blow when US President Joe Biden quadrupled tariffs on electric vehicles from China to 100%, effectively closing off one of the world’s biggest passenger car markets. The industry also faces potential extra import duties from the European Union. The comments made by Yu Chengdong about BYD have gone viral on Chinese social media and provoked a sharp response from the EV giant.
BYD’s general manager of branding and public relations, Li Yunfei, responded to the criticisms by pointing out that Huawei is also competing with low prices, despite claiming to focus on value, intelligence, luxury, and quality. He welcomed other brands to compete with BYD on the same stage and emphasized BYD’s core strength lies in technology and innovation. The company plans to invest 100 billion yuan in developing smart EVs focusing on artificial intelligence and large model technologies. BYD was also among a group of automakers approved for public trials of advanced auto driving by the Chinese government.
Competition in the world’s largest EV market has become cutthroat, with over 200 EV manufacturers grappling with oversupply and slowing consumer demand. A brutal price war began last year, with even market leaders like BYD and Tesla rushing to cut prices to retain or expand their market positions. While price cuts and government subsidies have boosted sales volume, overall profitability has decreased. BYD’s founder and chairman, Wang Chuanfu, warned earlier this year of a “brutal elimination round” coming for the industry and urged companies to form economies of scale and brand advantages quickly.
The EV industry in China is facing challenges on multiple fronts, with pressure to compete on price, quality, technology, and innovation. The industry is in a state of flux with ongoing changes in regulations, tariffs, and consumer preferences driving manufacturers to adapt quickly. As the market becomes increasingly saturated with players, the need for differentiation and competitive advantages has never been more critical. It remains to be seen how the industry will evolve in the face of these challenges and what strategies companies will employ to survive and thrive in this dynamic market.
