Sunday, July 14, 2024
HomeBusinessJapanese automakers struggle in EV price war; Oversupply leads to price...

Japanese automakers struggle in EV price war; Oversupply leads to price reductions


The Yomiuri Shimbun
Xiaomi Chief Executive Officer Lei Jun will praise the company’s SU7 EV model at the 2024 Beijing International Automotive Exhibition on Thursday.

BEIJING – Companies participating in the 2024 Beijing International Automotive Exhibition emphasize discounts and cheap prices. Japanese automakers are battling a price war that has intensified due to overproduction of electric and other vehicles and the real estate recession in China.

Price reductions at launch

As the world’s most important auto show opened Thursday, Honda Motor Co. launched. its new EV model – the e:NP2 – in China. At the exhibition site, a senior official from a joint venture announced that the vehicle cost 189,800 yuan (about ¥4.1 million). The official then said there would be a 30,000 yuan discount for the time being, drawing applause from the audience of several hundred people. Lowering the price of a new model at the same time as its launch is unusual even in China.

Compared to the previous model launched two years ago, the new model has a 7% greater range and is equipped with better information technology features. Still, the company lowered its price. An official explained: “Setting the price was quite difficult, but the company has no choice but to start offering a discount to attract customers’ attention.”

Lei Jun, the CEO of major smartphone company Xiaomi, which recently entered the EV market, proudly announced on Thursday that the company has received more than 75,000 orders. Xiaomi’s first EV model – the SU7 – launched in late March and costs 215,900 yuan (about 4.7 million yen). Although it is said that the company will lose money on every unit it sells, it is expected to prioritize expanding its market share over profits for now.

US EV manufacturer Tesla and China’s largest EV company BYD further reduced the prices of their vehicles to compete with such companies.


Beijing auto show NP2
The Yomiuri Shimbun
Honda Motor Co.: NP2 electric vehicle.

Demand decreases, supply increases

This year’s exhibition is the first since 2020, as it was canceled during the COVID-19 pandemic. This year’s event will see 278 new energy vehicles, including electric vehicles, on display, a 70% increase from the 160 on display four years ago. According to Chinese media, the Chinese EV market is in fierce competition at low prices and the magnitude of price cuts in the first quarter of 2024 reached the same level as in the whole of 2022.

Behind this situation lies the increasing imbalance between production and sales. Car production in China reached 30.16 million units in 2023, an increase of 11.6% from the previous year.

On the other hand, the real estate recession has lasted a long time and government subsidies for new energy vehicles will end at the end of 2022. Demand for cars in China peaked at 29.12 million units in 2017 and reached 25.98 million units in 2023. The oversupply makes it difficult to sell vehicles without deep discounts.

China’s car exports in 2023 reached 4.91 million units, making the country the world’s largest car exporter, overtaking Japan. This may be because China exports cars that were not sold domestically.

Making up for lost time

During the three years of the COVID-19 pandemic, Japanese automakers fell far behind in vehicle electrification and use of information technology, both of which were making rapid progress in China. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. all saw year-over-year sales declines in China, ranging from 1.7% to 16.1%. These companies are struggling to make up for the slowdown and are taking measures such as expanding the supply of new energy vehicles and signing business partnerships with major technology companies such as Tencent and Baidu.

Masahiro Moro, president of Mazda Motor Corp., showed a cautious attitude towards joining the price war, saying: “The entry of many start-up manufacturers [into the EV market] has led to a price drop. However, I believe that prices will reach sustainable levels in the medium term.”

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments

Translate »