Tesla and Chinese rivals signal truce in brutal EV price war

SHANGHAI: Tesla Inc. and China’s top automakers pledged to maintain fair competition and avoid "abnormal pricing” in the world’s biggest EV market, signalling a possible end to a price war that’s rattled the industry this year.

Executives from 16 companies took part in a signing ceremony at the China Auto Forum here today, acknowledging and committing to four points laid out in the pledge.

They included BYD Co., Nio Inc., Xpeng Inc., Geely and Chery Automobile Co., while Tesla was the only foreign brand.

The Austin, Texas-based electric-vehicle maker started cutting prices in China late last year, prompting other major brands to join in with steep discounts in the earlier part of 2023 as sales slowed.

Weak demand in China partly stemmed from the legacy of Covid, and also from expectations that car prices would continue falling.

The resulting inventory build-up paved the way for discounts and exacerbated concerns in government, which is in the midst of a campaign to promote EV adoption in rural areas, among other measures to lift the auto industry and wider consumption.

The Ministry of Industry and Information Technology directed the China Association of Automobile Manufacturers to bring the 16 companies together to sign the pact, Communist Party official Miao Wei said at today’s event.

The companies also vowed to help stabilise growth and avoid risk.

Battle stations

Among EV makers, Elon Musk’s Tesla and BYD, China’s biggest car brand, were at the forefront of the price war in the cut-throat market.

As early as March, some models made at Tesla’s Shanghai plant were 14% cheaper than in 2022.

The reductions angered customers - Tesla owners complained at stores and distribution centres, with some even ransacking a so-called Experience Center.

There were already signs that the trend was easing prior to today’s signing.

Cuts had become less aggressive and in some cases prices were revised upward as sales regained momentum.

Deliveries from Tesla’s Shanghai plant in June climbed almost 20% from a year earlier, and shipments from Chinese automakers such as BYD and Li Auto Inc. also jumped.

Authorities expect last month’s new-energy vehicle sales to have risen 30% from June 2022.

"The agreement comes at a time when the price war is already at the point of pause,” China Passenger Car Association secretary-general Cui Dongshu said.

The other firms involved today were: FAW Group Group Co., BAIC Group, JAC Motors, Dongfeng Motor Co., GAC Group, SAIC Motor Corp., Sinotruk, Great Wall Motor Co., Chongqing Changan Automobile Co. and Chery Automobile Co.

"The market probably had already expected the end of the price war, as we do see pretty solid EV demand in recent months,” Bloomberg Intelligence analyst Joanna Chen said.

"Automakers will rely more on new models to lift sales.”