（原标题：CBN Special丨Stuck in the rat race: What China’s EV price war is all about?）

Chinese EV makers are starting 2024 with yet another round of bitter price war. 

The competition among automakers in China that started in early 2023 has shown no signs of abating. Particularly in the new-energy vehicle sector, both traditional and emerging players keep cutting prices or launching limited-time promotions, tactics that analysts anticipate will persist throughout the year.

Auto giant BYD fired the first shot in this round of the price war after the Spring Festival holidays, introducing new versions of two models that are 20,000 yuan cheaper than the previous versions. US-based Tesla followed suit by launching limited-time discounts of up to 34,600 yuan for buyers.

BYD, the crown jewel among Chinese carmakers, cut the price of its cheapest car, the Seagull, by 5%. That follows the launch of BYD's Yuan Plus crossover—known as the Atto 3 in overseas markets—with a starting price of 119,800 yuan, 12% lower than its predecessor.

The Shenzhen-based company has priced another model under the 100,000 yuan threshold on Wednesday. The updated fully electric e2 model will start at 89,800 yuan, 12.6% less than the previous price of 102,800 yuan.

Price cuts over the past three weeks pushed the basic editions of the four models – the e2, Qin Plus DM-i plug-in hybrid, Dolphin and Chaser 05 – below 100,000 yuan. 

The Warren Buffett-backed BYD isn't the only company resorting to discounts. XPeng Motors, one of the smart EV startups, announced that all models of its G6 series will be discounted by 20,000 yuan until March 31, with prices starting at 189,900 yuan after the discount.

Huawei-backed AITO then launched limited-time promotions for its M5 series. Nine carmakers, including Geely, SAIC Volkswagen, Rising Auto and Chery, have announced price reductions or limited-time promotions.

Tesla, which triggered last year's fierce price wars in China, has also rolled out incentives for March. The US carmaker is offering customers an insurance subsidy if they buy the company's existing inventory of Model 3 and Model Y cars.

The recent price war in the passenger vehicle market is fundamentally driven by the replacement of old technologies with new ones, and the transition from traditional fuel vehicles to NEVs,  said Cui Dongshu, secretary-general of the China Passenger Car Association(CPCA).

"As a new market order emerges, intense competition between old and new manufacturers ensues, and this process is expected to persist for several years until a new industry landscape takes shape," Cui said.

In the rapid growth expected in the coming years, 2024 is expected to be a pivotal year for NEV producers to establish a solid footing in the market, Cui said.

China's NEV industry started early and has developed rapidly. With more than 100 manufacturers in the market, the competition is fierce. Top players are leveraging price wars to squeeze out smaller firms with limited innovation and funding, according to Zhang Xiang, director of the Digital Automotive International Cooperation Research Center of the World Digital Economy Forum.

The price war will persist throughout the year, Zhang said, noting that 2024 will be very significant for the players as governments at all levels roll out policies to promote vehicle consumption.

China’s vehicle sales fell sharply in February. Retail sales of passenger cars in China declined to 1.1 million units, down 21% from a year earlier and 46% from January, according to the CPCA. 

The association attributed the sharp decline to lower demand ahead of the Lunar New Year and some consumers bringing forward purchases to the start of the year. Consumers are also holding back after the latest round of price cuts as competition stiffens in China’s market, the CPCA said.

Retail sales of new-energy cars, which include electric vehicles and plug-in hybrids, fell 12% to 388,000 units. Exports of NEVs edged 0.1% higher to 79,000 units but fell 20% from the previous month. 

Deliveries of EVs in China have slowed at the start of this year compared to the final quarter of last year, with drops hitting brands like Nio, Li Auto, Xpeng and BYD.

Front-runner BYD's deliveries in February slumped nearly 40% month on month to 122,311 units, the lowest since May 2022. The company delivered 3.02 million units in 2023, a year-on-year increase of 62.3%.

Tesla's sales in China fell 19% year-on-year in February. Tesla sold 60,365 China-made vehicles last month, the lowest amount the company has sold in China since December 2022.

Fitch Ratings warned last November that EV sales growth could slow to 20% in China this year, from 37% recorded in 2023, due to economic uncertainties and intensifying competition.

China has the world's largest EV market. The sector is highly competitive due to the number of brands that operate in the country. Some EV makers have turned to price wars to increase sales.  But discounts may have an unintended effect on consumers, who are now holding off on purchases in hope of getting a further discount.

Then there's the possibility that after years of strong growth and investment, the Chinese EV market may now be producing more cars than could be sold domestically. Chinese carmakers are now looking overseas for growth opportunities, yet a flood of cheap Chinese EVs could trigger retaliation in markets like the US and Europe. China, too, is warning of overcapacity in the domestic EV sector.

Chinese government has acknowledged overcapacity and underused factories, and is pushing automakers to expand overseas. Analysts say that trend could lead to oversupply at home and abroad.

Automakers in China are projected to add capacity for five million cars between 2023 and 2025, most of which are EVs, according to an estimate by Bernstein Research. EV sales in China are expected to grow by around 3.7 million during this period, it said.

Bernstein expects China’s EV market to see continued demand growth of about 25% year-on-year while becoming increasingly competitive amid “ongoing pricing pressure.”

A subsidies-driven boom in past years helped China sell more EVs than Europe and the US combined. The sales surge created a wave of investment into homegrown automakers that have become the envy of the global industry.

But the central government withdrew EV-purchase subsidies for consumers at the start of last year, sending growth down to 21% for 2023 from 74% a year earlier. In comparison, EV sales in 2023 grew 47% in the US and 37% in Europe, according to industry analysts.

The slowdown has fueled a fierce price war in China embroiling dozens of EV startups and foreign players such as Tesla. Many Chinese EV makers burned through cash to chase a share of the growing market. Many are yet to turn a profit despite rising sales, leaving some at risk of going bust or needing injections of capital.

Chinese EV makers that enjoyed years of explosive growth now face a slowdown in domestic demand, spurring them to push overseas and challenge global auto giants already struggling with a transition to battery-powered cars.

BYD, which has ousted Tesla as the top global EV seller, has ambitious plans to increase sales overseas in the coming years, including buying ships to transport cars to Europe. 

Its first foreign factory making passenger EVs began delivering cars this year, from Uzbekistan, and a second in Thailand starts deliveries in July. It plans to open two more factories in Brazil and Hungary in the coming years, and is weighing setting up a plant in Mexico from which it would consider exporting to the US.  

Last year, more than one million domestically made EVs were shipped from China as it became the world’s biggest auto exporter, to countries such as Australia and Thailand. That total included vehicles from Tesla and Polestar as well as Chinese-owned brands including BYD, MG and Nio.

In January, NEV exports performed strongly, particularly in Southeast Asian and European markets, which reflected the strength of China's industry chain and produced growth in both the domestic market and exports, according to the CPCA.

During the tone-setting Central Economic Work Conference held in Beijing in December 2023, Chinese leaders stressed that consumption of products, including NEVs and electronic products, should be stimulated.

At China’s highly anticipated “Two Sessions” meeting last week, Beijing said its efforts to boost the new energy sector by various measures — including the reduction or exemption of purchase tax for EVs, supporting construction and other infrastructure measures —contributed to a 37.9% increase in sales of NEVs in 2023.

China’s commerce ministry this month also encouraged its EV makers to expand overseas, such as by tying up with foreign partners for research, logistics and supply chains. Chinese auto suppliers will get credit from banks to support the push. 

Executive Editor: Sonia YU

Editor: LI Yanxia

Host: Stephanie LI

Writer: Stephanie LI 

Sound Editor: Stephanie LI

Graphic Designer: ZHENG Wenjing, LIAO Yuanni

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