Chinese carmakers gaining a foothold in New Zealand are headlining a vicious price war in their home market that is causing alarm in Beijing.
China’s communist party bosses have warned 16 brands that they risk further destabilising a domestic market already oversaturated with companies fighting to win over drivers.
A recent Reuters report said analysts believe competition is set to become more intense, with a potentially significant impact on export markets. China is the biggest exporter of vehicles in the world.
Brands drawing Beijing’s ire include big names SAIC, GWM, Geely, Chery, and BYD. Each sells a mix of nameplates in New Zealand. For instance, SAIC has MG; GWM has Haval and utes; Geely has Volvo, Polestar, Lotus; Chery has Jaecoo, Omoda; and BYD has BYD.
SAIC, GWM, and BYD collectively registered almost 6000 new internal combustion, battery-electric (EV) and hybrid vehicles in New Zealand in the six months till the end of June this year, for a combined 9.0% of the market. BYD is the main supplier of EVs to New Zealand government agencies.
Fuelling the discount war in China is the rapid growth of EVs in the country. Sales have exploded from 100,000 in 2015 to 6.4 million in 2024, mostly off the back of massive government support in the form of generous subsidies.
Matthias Schmidt, an independent European automotive analyst, told Reuters: “There’s been a Darwinian battle, where the larger manufacturers in China are heavily discounting, and really pushing prices downwards in a brutal fashion.
“They’re looking to destroy their domestic peers and also Western manufacturers, trying to get them to exit the Chinese market.”
(A ‘Darwinian battle’ is a situation in which only the fittest persons or organisations prosper).
The discounting is often led by BYD, the biggest-selling EV brand in China. “That is partly because it has more on the line,” the news agency said. “BYD owns much of its supply chain, a model that requires huge amounts of capital. This means the company is relying on high sales volumes to keep the wheels turning.”
One of the the concerns from Beijing is that carmakers are funding the discounting by squeezing suppliers, paying them later and later, in some cases delaying payment by up to 200 days.
As a result, Beijing has imposed new rules that require brands to pay up in 60 days. But concerns are that the rules may plunge some car companies into deeper trouble.
Those that set up car-making arms purely to qualify for government handouts are especially at risk, stuck with no-name vehicles they can’t sell. Many such companies are backed by local governments reluctant to let them collapse.
“There are far more EV companies in China than can possibly survive in a competitive market,” the International Energy Agency (IEA) has warned.
It highlighted that one company alone, Nio, recorded net losses of $NZ5 billion in 2023. In 2020 Nio was rescued from collapse through a $NZ1.6 billion bailout by state-owned investors. Nio has tested one of its EV models in New Zealand.
Reuters reports that global financial agency AlixPartners has estimated that the number of EV brands will plummet from more than 130 last year to just 19 profitable companies by the end of this decade.