BYD Price War Sparks Crisis in China's Electric Vehicle Industry

Price War Unleashes Turmoil in China’s EV Market as BYD’s Deep Discounts Threaten Industry Stability

Three Key Facts

• BYD has slashed prices by up to 34% on various models since late May, with the BYD Seagull now costing approximately $7,700, down from $10,000
• China’s EV industry profitability has plummeted from 7.3% in 2018 to 3.9% in the first quarter of 2025, despite receiving over $230 billion in state subsidies from 2009 to 2023
• The market now hosts 115 EV brands, with over half holding less than 0.1% market share, creating severe oversaturation

Introduction

China’s electric vehicle industry faces an unprecedented crisis as market leader BYD triggers a devastating price war that threatens the financial foundation of the entire sector. Industry executives warn of systemic risks comparable to the Evergrande property collapse, while government officials and trade associations sound alarms about unsustainable competition practices.

The price war has created ripple effects throughout China’s automotive ecosystem, from dealerships to steel suppliers. High-profile executives describe the current market dynamics as fundamentally “unhealthy,” with concerns mounting about long-term industry stability.

Key Developments

BYD’s aggressive pricing strategy has forced competitors into defensive positions across the market. The company reduced prices on 22 different models, creating immediate pressure on rivals to match these cuts or risk losing market share.

The China Association of Automobile Manufacturers responded by urging automakers to avoid selling vehicles below production costs. The association directly criticized BYD for initiating what it termed “panic-induced price competition.”

Great Wall Motor’s Chairman Wei Jianjun drew stark comparisons to China’s property sector troubles. “An ‘Evergrande-like’ crisis already exists in the automotive industry. It just hasn’t erupted yet,” Wei stated, highlighting potential systemic risks.

Market Impact

The price war has fundamentally altered consumer behavior and market dynamics. According to CNBC, Beijing car salesman Ma Hui noted the universal impact on dealers: “All of us were losing money last year.”

A concerning trend has emerged in the used car market through “zero mileage used cars.” Dealers pre-register and plate vehicles to inflate sales figures, even when cars remain undriven, distorting actual market performance.

Consumer purchasing patterns show significant disruption. Ma Hui observes that buyers increasingly delay purchases, expecting further price drops. “With the price dropping like this, a lot of buyers might wait,” he explains.

Strategic Insights

The competitive pressure extends beyond automakers to their supply chains. Chinese EV manufacturers have demanded price cuts exceeding 10% from suppliers since last year while extending payment delays.

Three major automakers—Dongfeng Motor Group, Guangzhou Automobile Group, and China FAW Group—recently committed to standardizing supplier payment periods to 60 days. This move addresses growing concerns from Chinese authorities about supply chain financing stability.

Steel suppliers face particular strain from the automotive price war. The China Iron and Steel Association warns that fierce price competition seriously affects plant operations, compounding challenges from the real estate crisis and trade war impacts.

Expert Opinions and Data

The People’s Daily, the Communist Party’s official newspaper, published commentary criticizing the price war as potentially threatening worker incomes. The publication labeled current competitive practices an unsustainable “race to the bottom.”

Industry data reveals the scale of market saturation challenges. Despite producing over 30 million vehicles in recent years, the sector struggles with overcapacity across 115 competing EV brands.

The China Iron and Steel Association documented specific impacts on raw material suppliers. “Automobile companies are competing fiercely in terms of prices, putting considerable pressure on raw material suppliers,” CISA stated, noting serious operational disruptions.

Export data shows Chinese companies seeking relief through international markets. Steel exports increased 9.9% in May 2025 compared to the previous year, reaching 10.58 million tons, as domestic margins face pressure.

Summary

China’s EV price war represents a critical inflection point for the world’s largest electric vehicle market. The competition has created systemic pressures affecting manufacturers, suppliers, dealers, and consumers across the automotive ecosystem.

Industry associations call for enhanced cooperation and self-discipline to restore market stability. The China Association of Automobile Manufacturers emphasizes the need for enterprises to maintain fair and orderly competition while avoiding destructive pricing practices.

The current crisis highlights fundamental challenges in China’s EV sector, from overcapacity and excessive subsidization to supply chain financing pressures, shaping both domestic market dynamics and global automotive competition.