BYD’s Aggressive Price War Triggers Industry Backlash and Regulatory Warnings

In a move that sparked widespread controversy within the Chinese automotive industry, BYD launched a new round of aggressive price cuts on May 23, 2025, affecting 22 models of its electric and hybrid vehicles. Some models saw discounts reaching up to 53,000 yuan (approximately $7,300). This campaign included key models from the Dynasty and Ocean series, with the price of the Seagull equipped with advanced driver assistance systems starting at 55,800 yuan (about $7,700), while the Seal 07 DM-i dropped to 102,800 yuan (approximately $14,400) after company and government subsidies.

This marks the third such campaign since late March, as BYD seeks to clear inventory and defend its market share in the increasingly saturated and fiercely competitive electric vehicle market. The move triggered a strong reaction across the sector, with major companies like Geely, Chery, and SAIC-GM responding with their own discounts and limited-time offers to maintain competitiveness. For example, Geely reduced the price of the Geome Xingyuan to 59,800 yuan ($8,400) 30849 UAE , while Chery introduced the Tiggo 3X at 34,900 yuan ($4,900)17995 UAE as part of a 10 billion yuan support campaign. Buick also adjusted prices for its Envision and LaCrosse models to attract buyers.

Industry and Regulatory Concerns

The escalating price war raised clear concerns from the China Association of Automobile Manufacturers (CAAM) and the Ministry of Industry and Information Technology (MIIT), issuing official warnings against “chaotic price wars” that threaten to erode profit margins, which have already declined from 4.3% in 2024 to 3.9% in Q1 2025. State media warned of a repeat of the motorcycle industry collapse in Southeast Asia, caused by unsustainable pricing.

Pressure on Suppliers and Dealers

The repercussions of the price war extended beyond manufacturers to suppliers and dealers. BYD demanded 20-30% price reductions from suppliers, forcing many to accept slim profit margins in exchange for higher volume orders. Meanwhile, a dealer in Jinan city faced financial collapse due to inventory buildup and cash flow problems, resulting in delayed vehicle deliveries to customers.

Industry Criticism

Criticism was widespread, with Great Wall Motors’ chairman describing the situation as the “Evergrande of the auto sector,” alluding to risks from overreliance on debt and supplier pressure. Chery’s CEO stated the company was “forced” to join the discounting. Geely emphasized the need to compete on value rather than price alone. Others warned that cost-cutting might lead to quality declines, such as replacing safety systems with cheaper alternatives.

BYD’s Motivations and Future Plans

BYD aims to sell 5.5 million vehicles in 2025 but managed only 1.38 million units in the first four months, explaining the resort to steep discounts. The company benefits from strong vertical integration and lower raw material costs, especially lithium, giving it a competitive edge to reduce costs while maintaining a gross margin near 20%.

Despite significant market value losses (stock down over 10%, losing 100 billion yuan in market cap), some analysts believe BYD remains financially strong due to high profits and heavy R&D investments.

Consumers: Benefits and Risks

For consumers, these discounts mean access to vehicles equipped with intelligent driving systems and advanced luxury features for under 100,000 yuan ($14,000). However, industry experts caution that cost-cutting may compromise component quality, such as braking or safety systems.

Market Outlook: Toward Quality Competition

Regulators expect the price war to lead to market consolidation around 5-7 major brands, with future competition shifting from price to technological innovation and global expansion. Companies like BYD and Geely plan to combine innovation with aggressive pricing to pressure foreign brands and joint ventures, while some Japanese models have already begun significant price cuts to keep pace.

BYD’s price war reflects deep tensions between market expansion and technological progress in China’s auto industry. With regulatory intervention to curb destructive competition, the coming phase is expected to focus on technological excellence and innovation, moving away from price battles that could threaten the sector’s long-term sustainability.