The price of the price warfare that the electric car industry in China has sent stock prices and has pushed an unusual level of intervention from Beijing. Shakeout may only start.
For all the efforts of the Chinese government to prevent prices from lowering by the market leader Byd Co. From turning into a vicious vortex, analysts say a mixture of weakest demand and extreme excessive energy will turn into profits in the strongest brands and competitors. Even after the number of EV makers began to shrink for the first time last year, the industry still uses less than half of its productive capacity.
The Chinese authorities are trying to reduce the minimum repercussions, and to promote the sector from the “mice race” Calling the heads of the main brands To Beijing last week. However, previous attempts to intervene have not succeeded. At least in the short term, investors are betting on a few car manufacturers who will enter safely: BYD, the largest winner of the unification of the industry, lost 21.5 billion dollars in the market value since its peak in late May.
“What you see in China is annoying, because there is a shortage of demand and severe prices,” he said, “He said,”John MurphyA large car analyst in Bank of America Murphy said Corp at the end would be “huge unification” to accommodate the extra capacity.
For automotive companies, the uncompromising discount leads to the erosion of profit margins, and undermines the brand value and power even large -head companies to non -sustainable financial jobs. Daily products, a outlet dominated by the Communist Party, said that low -priced and low -quality products can be seriously damaged on the international reputation of “China” cars, which is a port controlled by the Communist Party. This strike will come like models from BYD to Geely, Zekr and Xpeng, starting to collect prizes on the world stage.
For consumers, price declines may seem useful but they risk deeper risks. The unexpected pricing cannot be encouraged in the long-term confidence-actually people complain of social media in China, and they ask why they should buy a car now when they are cheaper next week-while there are parking boxes, because they reduce the costs of staying on his feet, may reduce investment in quality, safety and post-sales service.
The CEOs of cars were informed last week that they should “organize self” and should not sell cars without cost or provide unreasonable price cuts, according to the people familiar with the matter. issue Zero Cars have also appeared-where vehicles that are not sold on their rash measuring devices are sold by traders on the used market, which are widely seen as a means of auto manufacturers to amplify sales and artificially clear stock.
Chinese auto manufacturers have deduced a much larger deduction than their foreign counterparts.
Murphy said that the American auto companies should come out. “Timing Perhaps there should be to compete with those companies and understand what is going on, but there are a lot of risks to them. “
Others leave no doubt that the BYD, the 1st car brand in China is the perpetrator.
“It is clear to everyone that the biggest player is to do this,” said Yoshin Sepert, JSC Automotive. “They want a monopoly as everyone surrenders.” He said that the aggressive BYD tactics raises concerns about the potential delivery of cars, agent management issues and “pressure on suppliers.”
Pricing disorders are also revealed against the background of great excessive ability. The average use rate of the automotive production in China was only 49.5 % in 2024, and data collected by the Gasgoo Automotive Research Institute, headquartered in Shanghai.
Meanwhile, the Alixpartners Report highlights the intense competition that has begun to appear among new energy cars, or companies that produce pure and hybrid battery cars. In 2024, the market witnessed its first unification ever between the NEV brands, with 16 exit and 13 at all.
“The Chinese car market, despite its large scope, is growing at a slower speed. Auto companies must now make a top priority for seizing more of their share in the market,” Ron ChengA partner at Global Consultance Roland Berger GmbH said.
JIYue Auto explains how quickly things change things. A little more than a year later, the auto industry company jointly supports great names Zhejiang Jelly Holding Group Baidu Inc. The giant Co. Technology reducing production and searching for new money.
It is a dilemma for all car makers, but it is especially smaller. “If you do not follow her example, as soon as a leading company moves prices, you may lose the opportunity to stay on the table,” Alixpartners’ advisor.Zhang YichoHe said. He added that the rate of use of low capacity in China, which “mainly nourishes” competition is now under pressure greater than uncertainty in export.
Although the batch to find an excess production port prevents more Chinese brands for export, international markets can only provide some comfort.
“The US market is completely closed and Japan and Korea will close if they see a conquest of Chinese car makers,” Sepert said. “Russia, which was the largest export market last year, has become very difficult. I also don’t see Southeast Asia as a chance anymore.”
The pressure cutting pressure also led analysts to express their concern aboutThe risks of financing the supply chain.
She attracted price demand by BYD to one of its suppliers late last year scrutiny on how to use the auto giant who may use the supply chain financing to hide its enlarged debt. A report from the accusative consulting research GMT developedThe real clear byd debtThe nearest to 323 billion yuan ($ 45 billion), compared to 27.7 billion yuan officially in its books from the end of June 2024.
Pain also bleeds in the rotation network in China. Corps groups in two provincesI went out of workSince April, they both sell BYD cars.
Beijing’s meeting with car manufacturers last week was not the first attempt to a ceasefire. Two years ago, in mid -2023, 16 major auto manufacturers, including Tesla Inc. And byd and GeelyAn agreement signedThe China Automobile Manufacturers Association, to avoid “abnormal pricing”.
Within a few days, CAAM deleted one of the four obligations, saying that the indication of pricing in the pledge was inappropriate and in violating a principle dedicated into the anti -monopoly laws in the country.
The opponent continued unabated.
This story was originally shown on Fortune.com
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