BYD Co has approached its suppliers with a request for price cuts for the upcoming year, indicating that the Chinese electric vehicle maker is preparing for intensified price competition in the world’s largest automotive market.

An email purportedly from the Shenzhen-based company circulated on social media on Wednesday, requesting a 10% price reduction from an unnamed supplier starting in January.

“Annual negotiations with suppliers are standard practice in the automotive sector,” remarked Li Yunfei, BYD’s director of public relations and branding, in a Weibo post addressing the email on Wednesday. “We set price reduction targets for suppliers. These requests are not mandatory but rather open for negotiation.”

The email indicates that the EV manufacturer is bracing for further price reductions in the coming year. The ongoing price competition in China’s automotive market, which has persisted for at least two years, has led to significant consolidation and driven smaller firms to the brink.

Western automakers such as Volkswagen AG and Stellantis NV have partnered with Chinese brands like Xpeng Inc. and Zhejiang Leapmotor Technology Co to leverage their electric vehicle knowledge, while luxury EV manufacturers like HiPhi and Shanghai-based WM Motor are currently facing bankruptcy proceedings.

BYD has largely weathered the turmoil successfully, if not emerging even stronger. Earlier this year, the company initiated a new wave of industry-wide price reductions, successfully increasing market share and exerting pressure on weaker rivals.

Currently, the company is achieving unprecedented levels of revenue and profit. In the latest quarter, BYD’s revenue exceeded that of Tesla Inc. for the first time, with its gross margin climbing to 21.9%, the highest level in a year.

BYD has established itself as China’s top car brand, having sold approximately 3.2 million plug-in hybrid and electric vehicles this year, including a record half a million cars in October. It is on track to sell at least 4 million units by the year’s end.

© 2024 Bloomberg

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