China’s EV Price War Intensifies #

China’s leading electric vehicle manufacturer is pushing for significant reductions on car parts prices in the coming year, signaling relentless price competition and economic challenges characterized by declining wages and uncertain futures.

The company has requested a 10% price cut from its suppliers for next year. An executive highlighted intense market competition expected in the EV sector, dubbing it a “decisive battle and knockout rounds.” To enhance competitiveness, the company emphasizes collaboration across its supply chain to reduce costs.

Officials from the company mentioned that annual price negotiations with suppliers are routine in the car industry, setting price reduction targets while maintaining room for negotiation.

For 15 years, China has held the title for the largest car market globally. However, since a major player initiated a price war by slashing prices roughly two years ago, it has become fiercely competitive, likened to a “life and death race.” Over 200 EV manufacturers are now grappling with surplus supply, and many smaller companies may not withstand the fierce competition. This situation is also daunting for manufacturers of vehicles with internal combustion engines.

A similar price cut request was made by another carmaker to its suppliers, citing a need to improve survival amidst challenging circumstances. Market leaders are willing to sacrifice margins to gain a share in the electric market, attempting to leverage vertically integrated supply chains for market dominance.

Ongoing competition, tariffs, and global trade uncertainties force China’s EV makers to seek cost reductions. Such measures are causing systemic stress, making even the largest original equipment manufacturers feel vulnerable. Currently, the leading EV maker controls 16.2% of China’s vehicle market and holds 36.1% of the EV market share.

Concerns arise that price cuts might overstretch suppliers, typically smaller than OEMs and less capital-rich. The economic slump and pressure on suppliers have made this a trending topic on social media, with speculations about inevitable salary reductions in the industry. One popular post criticized the exploitation of the supply chain at the expense of grassroots employees.

In response to the price cut request, shares in some supplier companies have fallen, reflecting the market’s immediate reaction to these developments.