China’s auto market is entering the Lunar Year of the Dragon with a renewed wave of price wars, signaling an intense battle for market share in 2024. Cui Dongshu, the secretary-general of the China Passenger Car Association (CPCA), predicts that the price war in China’s passenger car market will remain fierce throughout the year, driven by several factors.
One key factor is the rapid growth of China’s new energy vehicle (NEV) market. In 2023, NEV sales in China reached 8.88 million units, surpassing the total passenger car sales in 2009. This exponential growth has made 2024 a crucial year for NEV manufacturers to establish themselves in the market. As a result, competition is expected to be intense, with automakers vying for a share of the rapidly expanding NEV market.
Additionally, the traditional internal combustion engine vehicle market is also facing challenges. NEVs, priced similarly to traditional fuel vehicles, are putting pressure on manufacturers to remain competitive. While NEV production costs have decreased due to lower lithium carbonate prices and reduced battery costs, traditional fuel vehicles are increasingly relying on competitive pricing strategies to attract customers.
The recent price war in China’s passenger car market has been particularly intense. According to Cui, year-end promotional efforts in 2023 saw a 6 percentage point increase over the previous year, indicating a shift in market dynamics. Typically, passenger car prices stabilize between August and the end of the year. However, in 2023, the price war intensified in the second half of the year, with strong promotions leading up to the end of the year.
Cui attributes the recent price war to the transition from old technologies to new ones, with NEVs gradually replacing traditional fuel vehicles. This transition is reshaping the automotive market, leading to intense competition among manufacturers. As a result, Cui expects the price war in China’s passenger car market to continue as manufacturers prioritize market share in the evolving automotive landscape.
In response to the changing market dynamics, several automakers, including BYD, SAIC-GM-Wuling, and Neta Auto, have introduced lower-priced variants to compete with traditional fuel cars. This move is expected to further intensify the competition in China’s passenger car market as manufacturers seek to capitalize on the growing demand for NEVs and establish a strong presence in the market.
