BYD’s Aggressive Pricing Strategy Triggers Price War Among Chinese Electric Vehicle Makers

BYD, China’s largest electric vehicle brand, has reignited the price war by launching an electric vehicle that is cheaper than internal combustion engines. As the Spring Festival holiday, the traditional off-season of the Chinese auto market, ends, companies are expected to secure market share aggressively through price reductions.

On the 21st, China’s Jiemian newspaper reported, “After the Spring Festival holiday, BYD launched a low-priced new car model, showing the ambition for a price war, and at least five brands followed.”

BYD launched the Qin Plus DM-I and Destroyer 05 plug-in hybrid models on the 19th for 79,800 yuan (about $12,400). This is about 20% cheaper than the previous version and comparable internal combustion engine models sold in the Chinese market. When BYD launched the previous version last year, it touted the same price as internal combustion engine vehicles. Still, this time, it promoted the two models with the slogan “Electricity is cheaper than gas.”

Li Yunfei, head of BYD’s brand promotion department, explained, “With the advantages of mass production and our supply chain, BYD’s plug-in hybrid models can be produced cheaper than comparable internal combustion engine vehicles.” He then hinted at a head-on confrontation with internal combustion vehicle brands, asking, “Who will buy internal combustion vehicles in the future?”

With BYD’s declaration of war, other Chinese electric vehicle brands are also lining up to cut prices. The same day, SAIC-GM-Wuling, a joint venture between General Motors, SAIC Motor, and Wuling Motors, also lowered the price of the Wuling Starlight, a comparable plug-in hybrid model, from 105,800 yuan to 99,800 yuan ($15,500 to $14,000). Changan Qiyuan, Neta, and Beijing Hyundai have also declared price cuts one after another.

Chinese electric vehicle brands aim to snatch market share from under $15,500 internal combustion engine brands led by global automakers and joint venture brands of Chinese auto companies through this price-cut competition. This time, the plug-in hybrid models launched by BYD are cheaper than comparable internal combustion engine models such as Toyota’s Corolla, Nissan’s Sylphy, and Volkswagen’s Lavida.

Meanwhile, the Chinese industry predicts that the demand for hybrid vehicles will explode this year. According to the China Passenger Car Association (CPCA), the proportion of pure electric vehicles in China’s new energy vehicle (electric vehicle, hybrid vehicle, hydrogen vehicle) sales in January was 59%, a significant drop from 70% in the same month last year. On the other hand, the proportion of hybrids increased by about 4% to 28%.

Cui Dongshu, Secretary-General of the CPCA, said, “Hybrid models can primarily expand their market share mainly due to their prominence in the low-price (model) segment,” and “With the maturity of independent hybrid technology, it is already taking on a large share in the mid-low price market.”