The electric vehicle (EV) price war in China is intensifying as top players Nio and Li Auto join market leaders BYD and Tesla in extending substantial buying incentives into early 2025. As the world’s largest auto market grapples with slowed growth, these moves are aimed at boosting sales and retaining market share in a fiercely competitive landscape.
Nio and Li Auto Unveil New Incentives
Li Auto has rolled out cash subsidies of 15,000 yuan ($2,055) per vehicle purchase alongside a three-year zero-interest financing scheme, marking an aggressive bid to attract buyers. Similarly, Nio has launched a zero-interest loan plan for its Nio– and Onvo-branded EVs, further sweetening the deal for consumers in the highly contested segment.
These promotions come as manufacturers seek to bridge the gap before the new government subsidy schemes take effect, ensuring continued momentum in sales.
Government Subsidies and Fiscal Stimulus
The Chinese government has played a pivotal role in driving EV adoption, with over 5.2 million cars benefiting from subsidy programs as of mid-December 2024. Local authorities, such as those in Nanjing, have also announced the continuation of subsidies, offering up to 4,000 yuan per car.
In a broader move to stimulate the faltering economy, Beijing plans to issue 3 trillion yuan in special treasury bonds to fund fiscal initiatives, including EV-related subsidies.
BYD and Tesla: Market Leaders Respond
Local EV champion BYD, which could have outsold Ford and Honda globally in 2024, has been a key player in the ongoing price war. The company is offering discounts of up to 11.5% on select hybrid and electric models, a strategy aimed at maintaining its dominance in the domestic market.
Tesla, which ignited the price competition last year, is extending its 10,000 yuan discount on outstanding loans for its best-selling Model Y until the end of January. The Model Y has been a cornerstone of Tesla’s success in China, making the continued discount critical for retaining its market position.
NEV Sales Surge Amidst Price Cuts
Sales of new energy vehicles (NEVs), which include EVs and plug-in hybrids, exceeded 10 million units in 2024, fueled by government-backed trade-in programs offering up to 20,000 yuan per vehicle. However, the price war’s impact on profitability is evident, with autos-related retail sales contracting by 0.7% year-on-year during the first 11 months, contrasting with a 3.5% increase in China’s total retail sales.
The Stakes of the Price War
China’s EV market, the largest globally, has become a critical battleground for automakers. As competition escalates, the price war highlights the thin margins in the sector and the reliance on subsidies to sustain growth. The prolonged battle could pressure automakers’ profitability while forcing smaller players to consolidate or exit the market.