March 26, 2023: In recent events, the world's largest Automobile market has clearly changed due to the price war that Tesla Inc. started. The company has announced steep cuts, threatening to put several automakers out of business. How? Read on.
This started in October when Tesla, Elon Musk's electric car manufacturing company and a major competitor in the automobile market of China, cut costs for models produced in a giant factory outside Shanghai. In January, the models being manufactured locally were up to 14% cheaper year-on-year and in some cases nearly 50% cheaper than in the US and Europe. Tom Zhu, Tesla's production head added that the company's price cuts "created enormous demand".
This action and stark change in prices came to the notice of the competitors. As a result of the changes, local startups such as Xpeng Inc. and Nio Inc. and global giants such as Volkswagen AG and Mercedes-Benz Group AG, started giving discounts of up to RMB 70,000 (INR 8,23,474).
According to Bloomberg New Energy Finance, sales of electric vehicles could grasp 8.1 million in China this year, compared with an estimated 3.2 million in Europe and 1.9 million in the United States.
A minimum of 30 other automakers have cut prices, according to Bloomberg News and local media calculations. Ford Motor Company's Mach-E electric sport utility automobile has been chased to a basic price of 209,900 Yuan, about a third lower than in the US.
On Wednesday, the China Association of Automobile Manufacturers said that it was not a long-term solution to the monetary issues and demanded an end to the price conflict. It was said that returning to normal operations is important to ensure healthy growth.
State media, earlier this week, commented that it was inappropriate for local governments to sponsor locally produced vehicles. As an example, Hubei Province and State-owned Dongfeng Motor Group have slashed the price of a Citroen C6 model by 90,000 Yuan, or nearly 40%, from his.
The cuts have come during a difficult period for China's auto sector. The spending habits of consumers because of Covid restrictions, sales and supply chain across the world have also been hit by the end of government subsidies for electric vehicle purchases at the end of last year.
Despite these challenges and a commercial decline, retail sales of new energy vehicles, including all-electric and plug-in hybrids, nearly doubled to 5.67 million units last year. His BYD Co. accounts for about 30% of this. Tesla shipped more than 100,000 electric cars every month from Shanghai in November.
According to a recent interview with Bloomberg Television, Nio Chief Financial Officer, Steven Feng exclaimed that the Chinese Automobile market is going through a "very serious restructuring" as electric vehicles become more popular. He said that they expect the industry to experience a solid correction in fundamentals after this price war. He also commented regarding the rise of Automobile manufacturing companies in China, making it a stiff market.
According to Sanford C. Bernstein & Co., there are a few signs that competition is easing. This year alone, 155 new all-electric and plug-in hybrid models will be launched in China.