Weak sales bring back the threat of a price war in China's EV market

Sales of several major Chinese electric vehicle manufacturers fell in July compared to the previous month. This has increased fears that companies will again start aggressively cutting prices to support demand.

Xpeng delivered 38,027 cars to customers in July. This is 5.2% less than in June, although 3.6% more compared to July last year.

Nio's deliveries dropped 11.5% for the month to 35,934 units. At the same time, the figure remained 71% higher year-on-year. Li Auto sold 30,468 cars - 1.4% less than in June and 0.9% less than the year before.

The weak results of the three premium brands have increased concerns about a new round of price competition. Manufacturers may increase discounts, offer cheaper trim levels or other incentives to attract buyers amid slowing domestic demand.

Meanwhile, the situation on the Chinese market remains uneven. Leapmotor delivered over 101,000 cars in July - 8.5% more than in June. BYD's sales rose to 419,211 units, with a significant portion of the growth coming from exports.

Chinese authorities are trying to curb excessive competition in the auto industry. In July, the Ministry of Industry urged manufacturers to forgo "irrational competition," avoid using false advertising, and not sacrifice quality and safety for the sake of rapidly increasing sales.

Further discounting could make electric vehicles more affordable for buyers, but at the same time reduce manufacturers' profits and increase pressure on weaker companies. The market is already oversaturated with brands and models, so a prolonged price war could accelerate industry consolidation.

Based on material from: South China Morning Post, Investor's Business Daily, Reuters