Several electric vehicle (EV) automakers, including Tesla and NIO, have made a commitment to refrain from engaging in price wars in China, signaling a potential end to the intense competition that has characterized the market, according to a report by Bloomberg.
The pledge was made during a signing ceremony at the China Auto Forum in Shanghai, with executives from 16 companies participating in the event. Domestic automakers such as BYD, Nio, Xpeng, Geely, and Chery Automobile joined the commitment, while Tesla was the only foreign brand involved.
EV Price Wars
The price wars in the Chinese EV market began last year when Tesla started reducing prices, with other major brands following suit earlier this year as sales slowed down.
The weaker demand was partly influenced by the lingering effects of the Covid-19 pandemic and the anticipation of further price reductions. This led to an inventory buildup and created concerns within the government, which is actively promoting EV adoption in rural areas as part of efforts to stimulate the auto industry and overall consumption.
In response to the situation, the Ministry of Industry and Information Technology instructed the China Association of Automobile Manufacturers to convene the signing ceremony, emphasizing the need for stability and risk avoidance in the industry.
The agreement encompasses four key points, including adherence to industry regulations to maintain fair competition and avoid disruptive pricing practices, the use of responsible marketing and publicity methods, prioritizing product quality and customer satisfaction, and fulfilling social responsibilities.
Tesla and BYD were among the companies at the forefront of the price war, with Tesla's models manufactured in Shanghai being up to 14% cheaper compared to the previous year.
The significant price reductions led to customer dissatisfaction, with some Tesla owners expressing their grievances at stores and distribution centers.
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Price War Subsiding?
However, prior to the signing ceremony, there were already indications that the price war was subsiding, according to Bloomberg.
As sales started to rebound, companies adopted a less aggressive approach to price reductions, and in certain instances, prices were even adjusted upwards. Tesla's deliveries from its Shanghai plant in June showed a nearly 20% year-on-year increase, while Chinese automakers like BYD and Li Auto also witnessed a surge in shipments.
Government authorities are predicting a 30% growth in new-energy vehicle sales in June 2023 compared to the corresponding period in 2022.
According to Cui Dongshu, Secretary General of the China Passenger Car Association, the agreement comes at a time when the price war has already reached a point of pause. The agreement sets the stage for greater stability and cooperation among EV automakers in China's highly competitive market.
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