| To compete to survive, Chinese electric car companies are racing to reduce prices (Photo: Getty). |
The price war of the “giants”
New energy vehicle companies that mainly sell in the Chinese market often suffer losses from 10,000 yuan (35 million VND) to 30,000 yuan (105 million VND) for each unit sold.
This is information given by Mr. Wu Songquan, an expert at the China Automobile Industry Center under the Committee for Management and Supervision of Publicly Owned Assets under the State Council.
Mr. Tu Dai Toan (Xu Daquan), President of Bosch China branch, also said that the phenomenon of selling electric cars at a loss is unhealthy and will cause many car manufacturers to go bankrupt.
According to Chinese media, after BYD launched a comprehensive price reduction war in February 2024, experiencing price cuts, price increases and disguised discounts, Tesla was forced to follow suit.
On April 21, less than a month after announcing a price increase, Tesla had to announce a price reduction of 14,000 yuan (49 million VND) for all car models. Among them, the new price of the refreshed Model 3 version is 231,900 yuan (812 million VND), a decrease of 5.7%.
Meanwhile, Xpeng Motors has launched a car purchase subsidy worth 500 million yuan for a limited time, applicable to models including Xpeng G9, G6, P7i and Xpeng P5 2024 versions.
Experts predict that with the race to sell at a loss, many electric car companies will go bankrupt (Photo: Orientaldaily)
Li Auto was also caught up in the price reduction war. On April 22, this company announced that it would reduce prices on its entire product line, except for the L6 model just launched on April 18. Among them, the price of the pure electric MPV MEGA model has been reduced by 30,000 yuan (105 million VND) and the prices of all L series 7, 8 and 9 models have been reduced by 18,000 to 20,000 yuan/vehicle.
Along with the price reduction, buyers also get additional benefits such as choosing the car color and getting free charging. Li Auto also said that owners who previously purchased these models will receive a cash rebate.
Mr. Ngo Tung Tuyen wrote an article pointing out that the Chinese auto market is in a transition period from fuel-powered vehicles to new energy vehicles, and corporate profits are changing.
He said that from 2017 to 2023, China’s auto industry revenue increased from 8.8 trillion to 10.1 trillion yuan, but the profit margin decreased from 7.8% to 5%, low. 0.8 percentage points higher than the average of industrial enterprises.
After Li Auto announced a price cut, the three new energy auto companies that had achieved profits including Tesla, BYD and Li Auto all had to implement the “price for quantity” strategy, and the overall industry profit had may continue to worsen.
In the first 4 months of 2024, there were 89 new energy vehicle models and 91 fuel vehicle models that had to reduce their selling prices, more than in the whole of 2023 (Photo: Chejahao).
What’s even worse is that in the first 2 months of 2024, the profit margin of the Chinese auto industry continued to decline to only 4.3%.
Many car companies are at risk of going out of business
Bosch, the international parts giant, recently pointed out that selling electric vehicles at a loss is unhealthy.
Mr. Tu Daiquan, President of Bosch China, said that the average car price in China will decrease by 15% by 2023 and with the new price reduction war having started in February 2024, the prices of some car models will continues to decrease by more than 20%.
He emphasized that the phenomenon of selling electric cars at a loss of capital could lead to the collapse of a large number of automobile companies. Until the competitive environment achieves stability, downward pressure on prices will continue to exist and “firms will continue to be caught in it.”
According to incomplete statistics from Evening Finance, in April alone, at least 43 automobile companies had to reduce prices on 128 car models, making the number of price reductions by car model from the beginning of the year until now more than in the whole of 2023. .
Car manufacturers reduce prices in many different ways, including direct discounts. GAC’s Aion V Plus model has a direct discount of 10,000 yuan, and the Zhijie S7 has a direct discount of 20,000 yuan.
Some car models have “increased equipment and reduced prices” such as Denza N7 and Avita 12, with reductions from 10,000 yuan (35 million VND) to 60,000 yuan (210 million VND). Some companies offer promotions by offering new preferential financial policies, giving gifts when buying a car…
The Volkswagen ID.3 electric car model had to be sold at a loss of 140 million VND per car.
Many auto companies admit that they are “making losses”. CEO of SAIC Volkswagen once said, “Volkswagen ID.3 model lost 27,000 yuan (94.5 million VND) per car before the price reduction and the loss reached more than 40,000 yuan (140 million VND) after the price reduction” .
Mr. Yu Chengdong, Director of Huawei’s smart car solutions, also said: “Car models priced under 300,000 yuan are all being sold at a loss.”
According to statistics from the China Association of Automobile Manufacturers, from January to February this year, the automobile manufacturing industry had revenue of 1,371.45 billion yuan (192 billion USD), total profit of 58.69 billion CNY (8.22 billion USD) and the industry profit margin is only 4.3%.
But as long as the market continues to expand and there is still room for cash flow, the price war will not stop easily.
According to Orientaldaily, Chejiahao
Tags: Chinese electric cars sold lose money car manufacturers risk business Viettimes
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