BYD has asked suppliers to accept price cuts next year in a signal the Chinese electric vehicle (EV) maker is preparing for the brutal price war in the world’s biggest auto market to intensify.
A screen shot of an e-mail purportedly from the Shenzhen-based auto giant was circulating on social media on Wednesday (Nov 27), demanding 10 per cent price cuts from an unnamed supplier from January.
“Annual bargaining with suppliers is a common practice in the automotive industry,” Li Yunfei, BYD’s public relations and branding director, said on Wednesday. “We put forward price reduction targets to suppliers. They are not mandatory requirements. We can negotiate.”
The e-mail indicates the EV maker is positioning itself to weather further discounts in the coming year. The price war in China’s auto market, which has raged for at least two years, has driven a wave of consolidation and pushed smaller players to the brink.
Western automakers such as Volkswagen and Stellantis have teamed up with Chinese brands such as Xpeng and Zhejiang Leapmotor Technology to try to leverage their EV expertise, while premium EV-brand HiPhi and Shanghai-based WM Motor are mired in bankruptcy proceedings.
BYD has so far come through the turmoil largely unscathed, if not strengthened. Earlier this year it led a new round of industry-wide price cuts, successfully gaining market share and squeezing weaker rivals.
It continues to deliver record levels of revenue and income. In the most recent quarter, its revenue overtook Tesla’s for the first time and its gross margin rose to 21.9 per cent, its highest level in a year.
The EV maker has grown to become China’s best-selling car brand, having sold around 3.2 million plug-in hybrid and EVs this year, including a record half a million cars in October. It is on track to sell at least four million units by the end of the year. BLOOMBERG
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