BYD Sparks Price War In China, Slashes New Car Prices By Up To 34%

Last Updated on: 27th May 2025, 01:53 pm

BYD is the tail that wags the dog in the Chinese new car market. It sells more “new energy vehicles” — which in China means plug-in hybrids and battery-electrics — than any other company. It is also pursuing an aggressive export strategy in many major markets around the world. When BYD sneezes, everyone else catches a cold.

This week, BYD announced sweeping price cuts of up to 34%, a move that has sent shock waves through the domestic industry and sent stock valuations — including its own — tumbling. On May 23, 2025, BYD announced it was reducing prices on 22 electric and plug-in hybrid models through the end of June. The starting price for the BYD Seagull was rolled back 20% to 55,800 yuan ($7,780). The dual motor Han PHEV was cut by 34% to 102,800 yuan ($15,000), according to CNBC.

“We expect BYD’s vehicle margin would be under pressure in the short term as I think this move by them is driven by the need to hit their sales targets,” Victor Sun, senior equity analyst at Morningstar, said, as quoted by CNBC. He added that he expects the company to “offset the impact via larger sales scale and battery cost staying low” regardless of whether its sales campaign is extended beyond the end of June.

Bloomberg analyst Tim Hsiao said the new pricing plan may spark a “prolonged price war,” that could have  ripple effects that extend into into the second half of this year. Other brands will have to either increase their own discounts or concede market share, said Bloomberg Intelligence analyst Joanna Chen.

What Is The BYD Game Plan?

At issue is whether the push for “new energy vehicles” by the Chinese government is beginning to lose steam. In April, the Xingyuan compact hatchback from Geely became the top-selling model in the country, overtaking the BYD Seagull. Smartphone maker Xiaomi also is continuing its into the auto sector, despite a serious setback earlier this year when a family was killed riding in one of its cars. Nevertheless, Ford CEO Jim Farley drove a Xiaomi sedan for 6 months in and around Detroit and told everyone within earshot the car was so good, he didn’t want to stop driving it.

The price war may devastate German manufacturers such as Volkswagen, Mercedes, and BMW, all of whom have  have suffered declining sales in China partly because they refused to cut the prices of the models they sell in China to the same extent as their Chinese rivals. As they say in Sales Training 101, the three most important words in sales are the price, the price, and the price. Adding to those woes, Chinese drivers prefer Chinese brands that better suit their tastes. Tesla has also seen a decline in sales in China, with deliveries of cars manufactured at its assembly plant in Shanghai down for a seventh consecutive month in April. All in all, 2025 has not been a good year for Western manufacturers.

Morningstar’s Victor Sun told CNBC, “Retail discount levels stayed at high levels in the first quarter of 2025. With the expected prolonged price war, we believe the sector’s profitability will remain under some strain in the near term,” In a research note on May 26, auto analysts at Citi said they are not concerned that BYD’s price cuts would result in fewer sales for its competitors. Instead, they expect “robust sales growth” for “new energy vehicle” companies if prices remain below 200,000 yuan ($28,000) as “competition remains relatively mild.

The Zero Mileage Used Car

One area of concern for Chinese officials is the sale of so-called “zero mileage” used cars. Bloomberg’s Linda Lew explains that some manufacturers may be padding their sales numbers by reporting cars as sold that are in fact being distributed to finance companies and used car dealers. They are, in fact, new cars but appear in the used car market as cars with no miles on their odometers. The manufacturers record them as sales even though they are not purchased by end users.

On Sunday, May 25, China’s Ministry of Commerce summoned some of the country’s biggest automakers to a meeting on May 27 to discuss the practice. Attendance was not optional. The meeting also included industry organizations such as the China Automobile Dealers Association and online car distribution channels, according to a memo shared by Li Yanwei, an official at the dealers’ association, on Weibo.

Whether the tactic is legal or not in China, we cannot say. But it may be masking a slowdown in NEV sales in  China and that is very much of a concern to Chinese officials.”‘Zero-mileage” cars came to public attention last week when Great Wall chairman Wei Jianjun warned of an unhealthy outlook for China’s car industry as the result of a price war that has now been ongoing in China for several years. Many see it as a race to the bottom, but others see it as the intended result of pure capitalism, as competition will weed out the weaker companies and benefit the survivors.

Playing The Long Game

Some readers may recall at the end of 2023, prices for lithium used to make batteries for electric cars had risen into the stratosphere. Then CATL, the largest battery maker in the world, suddenly announced it was slashing the prices of its batteries in anticipation of a significant decrease in the price of lithium. Within a few months, the price of lithium did indeed plummet and CATL got the yearly award for marketplace prescience.

China is still a place of great mystery. How BYD came up with the plan to dramatically reduce prices may never be known, but in the long run, BYD may turn out to be crazy like a fox after it drives some of its competitors out of business.

BYD has over 100,000 engineers on its payroll, which has allowed it to make several major announcements lately. First, it said it had developed an EV battery that could be recharged from 10 to 80% in 5 minutes. Second, it released its God’s Eye automatic driver assistance technology and made the most basic version of it standard equipment on all model priced at more than 100,000 yuan ($13,900). Some of the recently discounted models include cars equipped with the basic version of the God’s Eye ADAS suite.

The squeeze play is on in China and there is no way of telling who will win and who will lose. We have to assume before making this move, BYD thought its business strategy through and this is more than a “hold my beer” moment by founder and chairman Wang Chuanfu. A question that has been rocketing around the mahjongg tables at CleanTechnica global headquarters is, how will this price war affect Tesla in the Chinese market? If you have an opinion on that subject, please share it with us in the comments section.