As profit margins get squeezed, temperatures are rising in the world’s biggest car market.
A tense exchange between two major Chinese electric vehicle (EV) manufacturers in recent days highlights the pressures they face as a price war in the industry intensifies.
It all started on Saturday, when Yu Chengdong, the chairman of Huawei’s smart car unit, implied that rival EV maker BYD is racing ahead because of low prices rather than the quality of its cars.
“Currently, BYD is … number one in the rat race, because it has extremely low costs,” he said at a public forum in Shenzhen.
BYD, a carmaker Elon Musk once laughed at, overtook his Tesla (TSLA) at the end of last year as the biggest seller of electric vehicles on the planet. (Tesla regained its position in the first quarter of this year, but they’re neck and neck.)
“We are not good at competing with ultra-low prices. Rather, we are good at competing with value, intelligence, luxury, comfort, safety, high quality, excellent and comfortable user experience,” Yu added.
While top executives from the EV industry often post on social media about a range of topics, including technology and advertising, they rarely name rival companies, especially when criticizing them.
In recent months, a price war has escalated in China’s hyper-competitive EV industry, with manufacturers battling for consumer attention with deep discounts or newer, cheaper models.
The industry suffered a blow in May when US President Joe Biden quadrupled tariffs on electric vehicles from China to 100%, effectively sealing off one of the world’s biggest passenger car markets. It also faces potential extra import duties from the European Union as soon as next week.
Yu’s comments about BYD have gone viral on Chinese social media and provoked a sharp retort from the EV giant.
“Personally I have great respect for Huawei. But I feel that if Mr Yu can make fewer comparisons, either at press conferences or public forums, more people will like him, and Huawei’s brand would also gain points,” Li Yunfei, general manager of branding and public relations at BYD, said in a video post on Weibo on Thursday.
Li pointed out that Huawei is also trying to “compete with low prices,” as the company has made significant price cuts in the past year.
“We welcome other brands to show their cars at our booth and compete with ours on the same stage,” he added.
On the same day, Wang Chuanfu, founder and chairman of BYD, said at the company’s annual shareholder meeting that its core strength lies in “technology and innovation.”
BYD will invest 100 billion yuan ($13.8 billion) in developing smart EVs in the future, focusing on generative artificial intelligence and large model technologies, Wang added.
View this interactive content on CNN.comEarlier this week, BYD was among a group of nine automakers to receive a green light from the Chinese government for public trials of advanced auto driving.
Competition in the world’s largest EV market has become cutthroat. The country has more than 200 EV manufacturers who are grappling with huge oversupply and slowing consumer demand.
A brutal price war kicked in last year, with even market leaders like BYD and Tesla rushing to cut prices to retain or expand their market positions.
While deep price cuts by manufacturers and government subsidies for car buyers have boosted the volume of sales, overall profitability has fallen.
Wang said earlier this year that a “brutal elimination round” is coming for the industry, urging companies to form economies of scale and brand advantages “as soon as possible.”
