BYD's Han electric car, pictured here at the 2021 Shanghai Auto Show, is one of the most popular new energy vehicles in China.
Evelyn Cheng | CNBC
BEIJING — Tesla cut prices for its electric cars in China by more than BYD did for its flagship Han sedan, according to analysis Wednesday from US firm JL Warren Capital.
Tesla cut the price of its Model 3 by 6% compared to December last year, and cut the price of the Model Y by 11% over the same period, JL Warren Capital CEO and head of research Junheng Li said in the report.
BYD's Han saw only a 5% price drop during that time, she said.
The Han, the company's premium electric sedan, sells in a similar price range to Tesla's cars – above 200,000 yuan ($28,000). Most other BYD cars cost much less.
The report showed that BYD increased its sales promotions throughout the year, saving 10% or 17% off the price of some mass-market models. “Double-digit discounts are a common promotion at [original equipment manufacturers] to boost sell-through and achieve the sales target,” said Li.
Start-up of high-end electric cars Nio has also cut prices this year, despite initially trying to avoid becoming embroiled in an industry price war.
“Unlike in the EU or the US, residual values do not appear to play a major role in Chinese consumers' purchasing decisions,” HSBC analysts said in a Dec. 4 report on the auto industry. “That may be why price competition in China is so fierce compared to the EU/US.”
Thanks in part to government support, the penetration of new energy vehicles, including battery- and hybrid-powered cars, has increased to over a third of new passenger cars sold in China.
Li expects penetration to be around 40% next year, while EV sales will grow 20%, a slowdown from 2023's 35% increase.
For this year, the industry's largest automakers already had an “overly ambitious target” of 93% sales growth, Li said. She pointed out that of China's 13 major EV manufacturers, only Tesla and Li Auto will meet their respective sales targets for this year.
That signals that competition in China, the world's largest auto market, is about to intensify, which could lead to industry waste.
“New models stimulate demand for EVs, but this comes at the cost of intensification [the] Price war as the market is flooded with inventory of 'outdated' models,” Li said, noting that the development cycle of new cars in China has been reduced to one or two years, compared with about three years earlier.