While the prices of electric vehicles are rising globally, in China, the largest automotive market, prices are declining. Concerns have been raised that excessive price competition could disrupt market order, prompting even the government to intervene. However, some analysts believe that after repeated price competitions, the standards for electric vehicle prices will be rerouted, and the corporations that can still profit in this context will emerge as the final winners.
BYD, the world's number one electric vehicle manufacturer, announced on June 1 that its sales in May reached the highest level this year. According to BYD, total sales last month were 382,476 units. Among these, the sales of pure electric vehicles reached 204,369 units, surpassing the sales of plug-in hybrid vehicles (172,561 units). This marks the second time since early 2024 that BYD's pure electric vehicle sales have outpaced those of plug-in hybrid vehicles.
This impressive performance comes as BYD implemented steep discounts of up to 34%. Earlier, BYD offered discounts of up to 34% on 22 of its models at the end of last month. Notably, the price of the budget model 'Seagull' dropped from 69,800 yuan (approximately 13.35 million won) to 55,800 yuan (approximately 10.67 million won).
In response, Geely launched discounts of up to 18% on seven models at the end of last month, and Chery has also offered discounts of up to 47% on 31 model types by that day. The fierce price competition in China's electric vehicle market has intensified since around 2023, when Tesla's aggressive strategy took hold. According to Japan's Nomura Securities, the average price of cars in China has dropped by 19% over the past two years. In the same period, the price of new cars in the United States has risen by about 1%.
Chinese electric vehicle corporations are also indirectly lowering prices by offering additional paid options for free. According to CNBC, Geely's electric vehicle brand Zeekr announced in March that it would provide advanced driver-assistance systems (ADAS) for free. BYD also announced that it would introduce driver assistance features for free on over 20 models.
Foreign media compared the recent electric vehicle market to the smartphone market in the early 2010s. It is predicted that most corporations will be eliminated through fierce competition, ultimately leaving only a few to monopolize the market.
According to the Financial Times (FT), over 50 corporations were competing in the global smartphone market around 2010. However, as smartphones became widespread in 2013, the market was restructured around corporations that could provide long-term high-value services rather than novelty, resulting in brands like LG, Sony, Nokia, Motorola, and Blackberry, which once captured consumer attention, disappearing, with only Apple and Samsung, which achieved economies of scale based on vertical integration, surviving.
FT identified BYD as likely to achieve final victory in competition based on vertical integration. FT noted, "BYD produces its own electric vehicle batteries and designs semiconductor chips," adding, "As a result, BYD has been able to implement several sharp price reductions in recent years while maintaining a consistent increase in gross profit margin since 2021."
It also analyzed that the electric vehicle price discounts led by BYD will contribute not only to short-term consumer incentives but also to lowering electric vehicle prices in the long term. In fact, automakers from Europe such as Volkswagen, Mercedes-Benz, and BMW, which lagged in the price competition, have abandoned part of their sales in China. Tesla's factory shipments in China have decreased for seven consecutive months as of April. FT stated, "As a result, the electric vehicle market is transforming into a 'margin competition' where only a few can succeed," remarking, "BYD's biggest innovation has been to reroute the standards for electric vehicle prices."