BYD Price Wars Could Change EV Business Completely

Recently, China’s major electric vehicle (EV) companies have entered a price war. This, combined with late payments to suppliers, suggested that part of the sector might be financially fragile. According to the FT, expensive electric vehicles (EVs) are starting to pressure sales of small gas-powered cars in Europe. China’s EV price war could spill into many global markets.

The EV price war outside China has been inevitable for some time. China’s EV companies have the advantage of low labor and production costs. They can produce an EV for a fraction of the cost of making most gas-powered vehicles, particularly outside Europe. China has begun to expand its presence in South America, Africa, and parts of Southeast Asia. These have been good markets for US, EU, and Japanese legacy car companies. BYD will change that by distributing inexpensive vehicles. Many nations do not have tariff barriers to keep China’s electric cars out.

The place where there will not be price wars within the EV industry or where inexpensive EVs compete with more expensive gas-powered cars in the US. The tariff barriers for Chinese companies are too high.

One argument against allowing Chinese EV companies to compete with Ford and GM in their home markets is that these Chinese companies have been established with the support of the central government. This gives them an advantage in terms of the cost of goods sold. Despite this, low prices and high quality will eventually become compelling to American consumers, regardless of where the cars are built or who supports their manufacturing.

BYD’s price will affect EV profits in China. The EU may be different. BYD will be competing with legacy car companies that cannot afford to bring down prices to match those of BYD. BYD could make more money outside of China than in.

Eventually, this entire issue will be addressed in the US. Price wars within China may put some Chinese car companies out of business. Those that survive are a threat to legacy car companies almost everywhere.