Shanghai Auto Show: Honda, Toyota, Nissan and VW unveil EVs as price war dominates discussions amid bleak sales outlook
- Chinese carmakers will continue to offer discounts well into the second half of the year as the debilitating price war shows no signs of slowing down, executives say
- Overall car sales in March rose by 0.3 per cent, the weakest for the month since 2020, according to the China Passenger Car Association
Chinese carmakers, who have been embroiled in an intense price war that has hurt sales and profitability, will continue to offer discounts well into the second half amid weak demand, industry observers said.
The price cuts, spearheaded by Tesla, will eventually lead to the closure of a large number of underachieving small players in the next five years because of the cutthroat competition in the world’s largest automotive market, they added.
At the Shanghai Auto Show that started on Tuesday, the topic was widely discussed as industry insiders vented their disappointment over the latest sales numbers, saying the outlook for the market this year is bleak.
“The price war did not effectively buoy the market,” said Gao Shen, an independent analyst in Shanghai. “Industry executives are worried that they will have to further cut prices to woo customers.”
Overall sales of both petrol and battery-powered vehicles in China rose by 0.3 per cent year on year to 1.59 million units in March, the smallest increase for the month since 2020, according to the China Passenger Car Association.
“It will take another two months before the market stabilises,” said Jack Chen, strategic development director with Jetour, an EV subsidiary of Chery Automobile.
“Pricing has become so important to automotive companies now because consumers are reluctant to make purchase decisions.”
The price war was sparked in late October when Tesla offered discounts of up to 9.4 per cent on its Model 3 and Model Y vehicles.
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The US carmaker further slashed prices by as much as 13.5 per cent in January to buoy sales as Chinese drivers drifted down market towards cheaper cars made by companies like BYD and Leapmotor.
Prices of Tesla’s Shanghai-made vehicles hit their lowest levels since the company began operations at the end of 2019 following the two price reductions.
Xpeng, Aito, an electric-car brand backed by telecommunications equipment maker Huawei Technologies, and BYD followed suit. Global brands such as Volkswagen and BMW also joined the fray, heavily cutting prices to retain market share.
Some local governments also took steps to spur spending on big-ticket items such as cars by offering subsidies. Authorities in Hubei province offered discounts of as much as 90,000 yuan (US$13,084) on cars made by Dongfeng Honda Automobile in March, according to promotional leaflets at dealers.
William Li, co-founder and CEO of Nio, a builder of premium electric cars, said his company would keep prices of its products flat.
“We certainly lose sales by keeping the prices unchanged, but it will be just a short-term loss,” he told reporters at a media briefing on Monday. “The company’s image as a maker of high-quality cars will be tainted by offering huge discounts.”
He reiterated that Nio would aim to break even in the fourth quarter of 2023, after posting losses for more than eight years since setting up in late 2014.
Xpeng Motors’ founder He Xiaopeng told a press conference on Sunday that only eight Chinese EV makers would remain by 2027, because smaller players will not be able to survive fierce competition in the fast-growing industry.
Meanwhile, Honda plans to phase out petrol cars by 2027, offering only EVs in China by 2035. Honda introduced three EV models at the show – the e:NS2, the e:N SUV to be rolled out in 2024 and a concept car, the e:N GT, to be launched in 2025.
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Nissan unveiled two EV concepts aimed at Chinese drivers: the Max-Out convertible sports car and the Arizon SUV.
Toyota unveiled two new models in its battery-electric bZ range aimed at the China market. A crossover produced with BYD and an SUV made with Guangzhou Automobile Group will hit the market in 2024, Bloomberg reported, quoting chief technology officer Hiroki Nakashima.
Volkswagen unveiled its first fully electric sedan, the ID.7, a spacious vehicle aimed at competing with Tesla’s Model 3. Highlighted features include assisted parking, a 15-inch screen, voice-activated controls and lane-changing ability, with a range of up to 700 kilometres (430 miles) on a single charge.
Wang Ke, an analyst with consulting firm Analysys, said the new EV models to hit the market in the coming months will generate strong sales due to their design and performance.
“Competition will intensify due to the increased popularity of EVs,” he said. “As a result, some weak brands may face the possibility of exiting the market.”
