China's Electric Car Price War Is Unreasonable: Price Drops, Manufacturers Are Under Pressure

JAKARTA With all its achievements, no country in the world can compete with the progress of China's electric car manufacturers. However, due to many of these players, China's own automotive market is currently reportedly not doing well.

According to a report from CNBC, continued CarBuzz, August 8, the country's average price of new cars has fallen by 19 percent. This decline, triggered by fierce price wars, raises big questions about the sustainability of automotive manufacturers' businesses there.

The price decline is uneven. Depending on the type of powertrain, prices could fall between 18 percent and 27 percent. For example, popular models such as BYD Seagull (sold below 10,000 US dollars there) and Great Wall Ora 3 are now sold at a price of about 20 percent below the normal retail price, as reported by The Guardian.

Although most blame price wars, there are other contributing factors. Some automotive manufacturers are reportedly using unusual practices to meet sales targets.

Fictitious Sales Listing: Several companies recorded sales before the car was actually sent to customers.

Dumping to other markets: New cars are purchased and registered locally, then quickly resold to dealers or exporters for sale in other markets as used vehicles.

These practices show the great pressure manufacturers face to keep sales figures high amid brutal competition.

Global Change And Challenge Expectations

Although the situation looks gloomy, there are signs that changes are being pursued. Xpeng CEO He Xiaopeng has publicly expressed concern that some companies may not last this year, until the Chairman of Great Wall Motor even likened the situation to the major property crisis that hit China recently.

The Chinese government is also aware of this issue and is reportedly working on regulations to control prices.

However, the biggest challenge remains a massive production capacity. With the excess production, producers must look for a new export market. Unfortunately, this effort is hampered by major barriers in key markets such as the United States that impose massive tariffs on Chinese cars. Then, local European manufacturers are starting to worry about their market share being eroded and encourage similar protection.

In addition, there are indications that this price war is starting to take its toll. CNBC reports that several major manufacturers, including BYD, Li Auto, and Nio, recorded a decline in sales in July. BYD's own sales fell nearly 10 percent or more than 36,000 units, a significant signal that the market may have hit a saturation point.