China shows signs of tackling the price wars that are taking a toll on its EV industry
China's industrial policy has engineered a remarkable transformation to electric vehicles in what is the world's largest auto market. In so doing, it has spawned far more makers than can possibly survive. Now, long-simmering concerns about oversupply and debilitating price wars are coming to the fore, even as the headline sales numbers soar to new heights.
Market-leader BYD announced this week that its sales grew 31% in the first six months of the year to 2.1 million cars. Nearly half of those were pure electric vehicles and the rest were plug-in hybrids, it said in a Hong Kong Stock Exchange filing. The company phased out internal combustion engine cars in 2022.
BYD came under thinly veiled criticism in late May when it launched a new round of price cuts, and several competitors followed suit. The chairman of Great Wall Motors warned the industry could come under threat if it continues on the same trajectory.
'When volumes get bigger, it's just much harder to manage and you become the bullseye,' said Lei Xing, an independent analyst who follows the industry.
The government is trying to rein in what is called 'involution' — a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere.
BYD has come under criticism for using its dominant position in ways that some consider unfair, sparking price wars that have caused losses across the industry, said Murthy Grandhi, an India-based financial risk analyst at GlobalData.
With the price war in its fourth year, Chinese automakers are looking abroad for profits. BYD's overseas sales more than doubled to 464,000 units in the first half of this year. Worried governments in the U.S. and EU have imposed tariffs on made-in-China electric vehicles, saying that subsidies have given them an unfair advantage.
Market leader BYD comes under attack
The latest bout of handwringing started when BYD cut the price of more than 20 models on May 23.
The same day, the chairman of Great Wall Motors, Wei Jianjun, said he was pessimistic about what he called the 'healthy development' of the EV market. He drew a comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover.
'The Evergrande in the automobile industry already exists, but it is just yet to explode,' he said in a video message posted on social media.
Two days later, a BYD executive rejected any comparison to Evergrande and posted data-filled charts to buttress his case.
'To be honest, I am confused and angry and it's ridiculous!' Li Yunfei, BYD's general manager of brand and public relations, wrote on social media. 'All these come from the shocking remarks made by Chairman Wei of Great Wall Motors.'
Next, the government and an industry association weighed in. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic.
On the same day, the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a treat to the healthy and sustainable development of the sector.
'That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show,' Lei said.
A promise to pay suppliers within 60 days signals possible shift
The following month, 17 automakers including BYD made a pledge: They would pay their suppliers within 60 days.
One way China's automakers have been surviving the bruising price wars is by delaying the payments for months. The agreement, if adhered to, would reduce financial pressure on suppliers and could rein in some of the fierce competition.
'The introduction of the 60-day payment pledge is the call of the government to oppose involution-style competition,' said Cui Dongshu, the secretary-general of the China Passenger Car Association.
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It also reduces the risk of an Evergrande-like scenario.
Many automakers had stretched out payments by paying suppliers with short-term debt — promises to repay them in a certain period of time — instead of cash. Real estate developers used the same system. It worked until it didn't. When Evergrande defaulted on its debts, suppliers were left holding worthless promises to pay.
'This practice is seen as a potential cause of a larger crisis, similar to what happened with Evergrande,' Grandhi said.
The vows to speed up payments and the government calls to rein in the price wars, along with a rollback of some financing offers, point to an effort to reverse downward price expectations, said Jing Yang, a director at Fitch Ratings who focuses on the auto industry.
'We may watch how effectively these measures are in reversing the price trend and how would that affect EV demand in the coming quarters,' she said.
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Globe and Mail
6 hours ago
- Globe and Mail
China shows signs of tackling the price wars that are taking a toll on its EV industry
BEIJING (AP) — The Chinese government is signaling enough is enough when it comes to the fierce competition in the country's electric car market. China's industrial policy has engineered a remarkable transformation to electric vehicles in what is the world's largest auto market. In so doing, it has spawned far more makers than can possibly survive. Now, long-simmering concerns about oversupply and debilitating price wars are coming to the fore, even as the headline sales numbers soar to new heights. Market-leader BYD announced this week that its sales grew 31% in the first six months of the year to 2.1 million cars. Nearly half of those were pure electric vehicles and the rest were plug-in hybrids, it said in a Hong Kong Stock Exchange filing. The company phased out internal combustion engine cars in 2022. BYD came under thinly veiled criticism in late May when it launched a new round of price cuts, and several competitors followed suit. The chairman of Great Wall Motors warned the industry could come under threat if it continues on the same trajectory. 'When volumes get bigger, it's just much harder to manage and you become the bullseye,' said Lei Xing, an independent analyst who follows the industry. The government is trying to rein in what is called 'involution' — a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere. BYD has come under criticism for using its dominant position in ways that some consider unfair, sparking price wars that have caused losses across the industry, said Murthy Grandhi, an India-based financial risk analyst at GlobalData. With the price war in its fourth year, Chinese automakers are looking abroad for profits. BYD's overseas sales more than doubled to 464,000 units in the first half of this year. Worried governments in the U.S. and EU have imposed tariffs on made-in-China electric vehicles, saying that subsidies have given them an unfair advantage. Market leader BYD comes under attack The latest bout of handwringing started when BYD cut the price of more than 20 models on May 23. The same day, the chairman of Great Wall Motors, Wei Jianjun, said he was pessimistic about what he called the "healthy development' of the EV market. He drew a comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover. "The Evergrande in the automobile industry already exists, but it is just yet to explode,' he said in a video message posted on social media. Two days later, a BYD executive rejected any comparison to Evergrande and posted data-filled charts to buttress his case. 'To be honest, I am confused and angry and it's ridiculous!' Li Yunfei, BYD's general manager of brand and public relations, wrote on social media. 'All these come from the shocking remarks made by Chairman Wei of Great Wall Motors.' Next, the government and an industry association weighed in. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic. On the same day, the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a treat to the healthy and sustainable development of the sector. 'That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show,' Lei said. A promise to pay suppliers within 60 days signals possible shift The following month, 17 automakers including BYD made a pledge: They would pay their suppliers within 60 days. One way China's automakers have been surviving the bruising price wars is by delaying the payments for months. The agreement, if adhered to, would reduce financial pressure on suppliers and could rein in some of the fierce competition. 'The introduction of the 60-day payment pledge is the call of the government to oppose involution-style competition," said Cui Dongshu, the secretary-general of the China Passenger Car Association. It also reduces the risk of an Evergrande-like scenario. Many automakers had stretched out payments by paying suppliers with short-term debt — promises to repay them in a certain period of time — instead of cash. Real estate developers used the same system. It worked until it didn't. When Evergrande defaulted on its debts, suppliers were left holding worthless promises to pay. 'This practice is seen as a potential cause of a larger crisis, similar to what happened with Evergrande,' Grandhi said. The vows to speed up payments and the government calls to rein in the price wars, along with a rollback of some financing offers, point to an effort to reverse downward price expectations, said Jing Yang, a director at Fitch Ratings who focuses on the auto industry. 'We may watch how effectively these measures are in reversing the price trend and how would that affect EV demand in the coming quarters,' she said.
Global News
6 hours ago
- Global News
‘It can't just be a competition on price': Why Seaspan didn't bid on BC Ferries contract
British Columbia's biggest shipyard says building the next wave of ferries in the province is absolutely a possibility, but will require political will on the part of decision makers. It comes as BC Ferries faces public pressure over its recent decision to award a multi-billion-dollar contract to build four new major vessels to a Chinese shipyard. No Canadian company bid on the contract, and while the decision will save the company $1.2 billion over going with a European yard, it has hit the choppy waters of growing nationalism and a global trade war. B.C. shipyard Seaspan did not bid on the deal. 2:15 BC Ferries criticized over decision to award contract to Chinese-owned shipyard Senior vice-president of strategy, business development and communications Dave Hargreaves told Global News that's in part because while it has the capability, it doesn't currently have the capacity. Story continues below advertisement The company is essentially fully booked through the end of the decade, building Coast Guard and Canadian Navy ships. But the company said the BC Ferries procurement process — which was heavily tilted towards price — would have essentially ruled it out anyway. 'The fact of the matter is that their labour costs in their shipyards is probably seven to eight times cheaper than ours, so not like 10 per cent cheaper,' Hargreaves said. Get breaking National news For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen. Sign up for breaking National newsletter Sign Up By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy 'That labour cost differential is big. And so it's hard to see that we would ever get to cost-competitive with China, or for that matter like Korea, or some Eastern European countries, or places like that.' Hargreaves compared the BC Ferries contract to its deals for major vessels with the federal government, which he said have a 100 per cent overall Canadian content requirement. It's a political calculation, he said, that acknowledges a higher up-front cost, but comes with downstream benefits. 2:15 BC Ferries new vessel federal funding controversy Those high-paying jobs return income taxes to the provincial and federal government and have indirect economic effects through consumer spending, he said. Story continues below advertisement Expanding the shipbuilding sector drives innovation, grows the skilled workforce and expands the wider marine ecosystem, he added. 'Some of our subcontractors are already exporting things,' he said. 'You don't get any of that if you go and build the ferries in China.' And there is the strategic benefit of domestic control of shipbuilding capacity. 'Having a sovereign capability to do shipbuilding in Canada, I mean, we still are one of the world's longest coastline countries with huge maritime areas,' he said. 'So the ability to build ships kind of seems important.' While Premier David Eby has said he wants to see vessels built in B.C., the province won't force BC Ferries to drop the China contract — citing the urgent need to get the vessels into service, and the desire to keep ferry fares down. On Thursday, Deputy Premier Niki Sharma toured the Seaspan shipyard. 2:10 BC Building Trades expresses disappointment in BC Ferries decision 'This multi-billion-dollar success story is possible thanks to the key role Ottawa plays in supporting the national shipbuilding strategy,' she said of the Navy and Coast Guard work underway. Story continues below advertisement 'We are determined to continue this work with the federal government to support Seaspan to do the same for civilian ships. Expanding B.C.'s capacity and getting B.C. shipyards ready to successfully bid on more Canadian ship contracts will create more good jobs in this community and the communities that supply them.' That's the kind of talk Hargreaves said will be necessary if future ferries are to be built in B.C., adding the provincial government will need to be fully on board. 'That does have to include some much stronger preferences for B.C./Canadian content. It can't just be a competition on price, it has to take into account all the other benefits that accrue from building here … has to be seen as an investment for B.C.,' he said. 'BC Ferries doesn't really have that flexibility to make that decision by themselves, right? It has to be the province that comes to the table there.'
Winnipeg Free Press
7 hours ago
- Winnipeg Free Press
China shows signs of tackling the price wars that are taking a toll on its EV industry
BEIJING (AP) — The Chinese government is signaling enough is enough when it comes to the fierce competition in the country's electric car market. China's industrial policy has engineered a remarkable transformation to electric vehicles in what is the world's largest auto market. In so doing, it has spawned far more makers than can possibly survive. Now, long-simmering concerns about oversupply and debilitating price wars are coming to the fore, even as the headline sales numbers soar to new heights. Market-leader BYD announced this week that its sales grew 31% in the first six months of the year to 2.1 million cars. Nearly half of those were pure electric vehicles and the rest were plug-in hybrids, it said in a Hong Kong Stock Exchange filing. The company phased out internal combustion engine cars in 2022. BYD came under thinly veiled criticism in late May when it launched a new round of price cuts, and several competitors followed suit. The chairman of Great Wall Motors warned the industry could come under threat if it continues on the same trajectory. 'When volumes get bigger, it's just much harder to manage and you become the bullseye,' said Lei Xing, an independent analyst who follows the industry. The government is trying to rein in what is called 'involution' — a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere. BYD has come under criticism for using its dominant position in ways that some consider unfair, sparking price wars that have caused losses across the industry, said Murthy Grandhi, an India-based financial risk analyst at GlobalData. With the price war in its fourth year, Chinese automakers are looking abroad for profits. BYD's overseas sales more than doubled to 464,000 units in the first half of this year. Worried governments in the U.S. and EU have imposed tariffs on made-in-China electric vehicles, saying that subsidies have given them an unfair advantage. Market leader BYD comes under attack The latest bout of handwringing started when BYD cut the price of more than 20 models on May 23. The same day, the chairman of Great Wall Motors, Wei Jianjun, said he was pessimistic about what he called the 'healthy development' of the EV market. He drew a comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover. 'The Evergrande in the automobile industry already exists, but it is just yet to explode,' he said in a video message posted on social media. Two days later, a BYD executive rejected any comparison to Evergrande and posted data-filled charts to buttress his case. 'To be honest, I am confused and angry and it's ridiculous!' Li Yunfei, BYD's general manager of brand and public relations, wrote on social media. 'All these come from the shocking remarks made by Chairman Wei of Great Wall Motors.' Next, the government and an industry association weighed in. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic. On the same day, the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a treat to the healthy and sustainable development of the sector. 'That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show,' Lei said. A promise to pay suppliers within 60 days signals possible shift The following month, 17 automakers including BYD made a pledge: They would pay their suppliers within 60 days. One way China's automakers have been surviving the bruising price wars is by delaying the payments for months. The agreement, if adhered to, would reduce financial pressure on suppliers and could rein in some of the fierce competition. 'The introduction of the 60-day payment pledge is the call of the government to oppose involution-style competition,' said Cui Dongshu, the secretary-general of the China Passenger Car Association. Monday Mornings The latest local business news and a lookahead to the coming week. It also reduces the risk of an Evergrande-like scenario. Many automakers had stretched out payments by paying suppliers with short-term debt — promises to repay them in a certain period of time — instead of cash. Real estate developers used the same system. It worked until it didn't. When Evergrande defaulted on its debts, suppliers were left holding worthless promises to pay. 'This practice is seen as a potential cause of a larger crisis, similar to what happened with Evergrande,' Grandhi said. The vows to speed up payments and the government calls to rein in the price wars, along with a rollback of some financing offers, point to an effort to reverse downward price expectations, said Jing Yang, a director at Fitch Ratings who focuses on the auto industry. 'We may watch how effectively these measures are in reversing the price trend and how would that affect EV demand in the coming quarters,' she said.
