BYD Co has asked its suppliers to accept price cuts for the coming year, indicating that the Chinese electric vehicle maker is preparing for a heightened intensity in price rivalry within the world’s largest automotive market.
A purported email from the Shenzhen-based company surfaced on social media on Wednesday, requesting a 10% price reduction from a supplier that has not been named, starting in January.
“Annual negotiations with suppliers are a common practice in the automotive industry,” remarked Li Yunfei, BYD’s director of public relations and branding, in a Weibo post about the email on Wednesday. “We set price reduction goals for suppliers. These are not mandatory requests. We welcome negotiations.”
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The email indicates that the EV manufacturer is bracing for further discounts in the upcoming year. The ongoing price competition in China’s automotive sector, which has persisted for at least two years, has prompted a wave of consolidation and has placed smaller firms in jeopardy.
Western automakers such as Volkswagen AG and Stellantis NV have partnered with Chinese companies like Xpeng Inc. and Zhejiang Leapmotor Technology Co to leverage their electric vehicle expertise, while luxury EV brands like HiPhi and Shanghai-based WM Motor are currently facing bankruptcy issues.
BYD has effectively weathered the turmoil, if not emerged even stronger. Earlier this year, it led a new phase of industry-wide price reductions, successfully capturing market share and exerting pressure on weaker rivals.
The company continues to achieve record levels of revenue and profit. In the most recent quarter, its revenue surpassed that of Tesla Inc. for the first time, and its gross margin reached 21.9%, the highest it has been in a year.
BYD has become China’s top automotive brand, with around 3.2 million plug-in hybrid and electric vehicles sold this year, including a record of half a million units in October. It is on track to sell at least 4 million vehicles by year-end.
© 2024 Bloomberg
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