Request for 10% Price Reduction Quote by Mid-Next Month
"Next Year's Electric Vehicle Market, Knockout Tournament"
Tesla's electric vehicle rival BYD has reportedly demanded a 10% price reduction from its parts suppliers, according to major foreign media on the 27th (local time). The price war in the electric vehicle market is expected to intensify further.
According to reports, Hu Zhiqi, Vice President of BYD Group, in an email leaked on Chinese social media (SNS) on the same day, requested suppliers to submit quotes reflecting a 10% price reduction on parts by December 15 and to officially lower prices starting next year.
Vice President Hu Zhiqi emphasized, "The electric vehicle market in 2025 will enter a knockout tournament and grand final," adding, "To strengthen BYD Auto's competitiveness, suppliers must take this seriously and effectively utilize space to reduce costs."
This is interpreted as BYD's intention to take the lead in the ongoing low-price offensive and cutthroat competition in the electric vehicle market. However, foreign media reported that "this move has already drawn complaints from suppliers struggling with the industry's extremely low margins and BYD's delayed payments."
One BYD parts supplier reportedly responded, "The revival of China's automobile industry cannot come at the expense of the livelihoods of domestic workers and suppliers," adding, "We cannot accept your request and do not want to participate in this type of cooperation that violates corporate ethics and human nature." The average time BYD took to settle unpaid amounts owed to suppliers in the first nine months of this year was 144 days, about 16% longer than the previous year (124 days).
Seemingly aware of public opinion, Li Yunfei, BYD's Branding and Public Relations Manager, explained on social media (SNS), "Annual price negotiations with suppliers are a common industry practice," and "The discount we proposed to suppliers is not mandatory but a negotiable target."
Experts view this issue as a preview of the intensified price competition expected in the electric vehicle market next year. Paul Gong, an automotive analyst at UBS, stated, "Price competition in the Chinese automobile market will be inevitable in early 2025," explaining, "Major automakers cannot afford to leave expanded production facilities idle as they try to meet the recently surged demand for electric vehicles."
Tesla, competing with BYD for the title of the world's largest electric vehicle manufacturer, recently announced a 10,000 yuan (approximately 1.9 million KRW) discount on the 'Model Y,' the best-selling SUV in China, setting the starting price at about 239,900 yuan, a roughly 4% reduction. Citing a report from China Securities Journal (CSJ), foreign media also reported that Maxus, a subsidiary of Shanghai Automotive Industry Corporation (SAIC), recently requested suppliers to reduce costs by 10% in preparation for the price war and oversupply.
Concerns about the electric vehicle 'price war' are not few. An executive from a Chinese auto parts manufacturer, who requested anonymity, said, "Even if market demand for electric vehicles is strong, continuous oversupply will still cause unbearable pain for everyone in the industry," and predicted, "Chinese electric vehicles may have the opportunity to sweep the world following the success story of Japanese brands, but many competitors will be eliminated in the process."
Meanwhile, China's electric vehicle leader BYD recorded sales revenue of 201 billion yuan (approximately 39 trillion KRW) in the third quarter, a 24% increase compared to the same period last year, surpassing Tesla (about 35 trillion KRW). Although BYD has previously outsold Tesla in quarterly sales volume, this is the first time it has surpassed Tesla in quarterly revenue.
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