BYD pressures suppliers to cut prices amid China’s electric war, promising to intensify competition in the sector by 2025
BYD, Tesla’s biggest rival in China, has demanded its suppliers cut prices by 10% as the world’s biggest auto market prepares for a new showdown in a relentless price war.
O fabricante de automóveis pediu aos seus fornecedores que enviassem suas propostas até 15 de dezembro e começassem a marcar os preços para o próximo ano, escreveu o vice-presidente executivo He Zhiqi em um e-mail circulado nas redes sociais nesta quarta-feira (27 ).
“In 2025, the EV market… will enter a grand final battle and elimination tournament,” he said. “To increase the competitiveness of BYD cars… you and your teams must take this seriously and effectively explore the space for cost reduction.”
The request from the Warren Buffett-backed automaker sparked outrage among the country’s auto parts makers, who already face extremely tight profit margins and prolonged payment cycles.
“The growth of China’s auto industry cannot come at the expense of the survival of local workers and suppliers,” responded one supplier. “We cannot accept your company’s request and are not willing to participate in this type of cooperation that violates business ethics and human nature.”
In the first nine months of 2024, the average time it took BYD to pay off its accounts payable, most of which were attributed to suppliers, was 144 days, longer than the 124 days the previous year, according to company records.
“It is a common industry practice to negotiate prices with suppliers annually,” said Li Yunfei, general manager of branding and public relations at BYD, in a social media post on Wednesday. “The price reduction targets we propose to our suppliers are not mandatory, but negotiable.”
A prolonged price war, started by Tesla in late 2022, has put pressure on automotive groups’ profits and generated a wave of consolidation in the sector. Analysts predict that a new round of price cuts will occur earlier than usual, in the first quarter of 2025.
“Price competition [no mercado automotivo da China] it is inevitable in early 2025,” said Paul Gong, automotive analyst at UBS, adding that large automakers cannot afford to maintain idle production capacity, which was recently increased to meet growing demand.
Earlier this week, Tesla announced a 10,000 RMB ($1,379) discount on its Model Y SUV, the best-selling in China, marking the starting price down by approximately 4% to 239,900 RMB.
“Although demand for EVs is strong, continued overproduction will still cause unbearable pain for everyone in the industry,” said an executive at a Chinese auto parts maker, who asked not to be named.
“China-made EVs may have the chance to replicate the success of Japanese brands and sweep the world, but the process will eliminate many players.”
With information from the Financial Times*
Source: https://www.ocafezinho.com/2024/11/27/guerra-de-eletricos-vai-forcar-byd-a-pressionar-fornecedores-por-precos-baixos/
