Automakers continue to battle for dominance in China’s electric SUV market

Automakers have been engaged in a price war for electric vehicles, with the current focus being a shift to SUV-styled electric vehicles. Electric SUVs have become the largest market segment, currently dominated by Tesla and BYD.

Automakers battle for dominance in China’s SUV market

EV makers operating in China have copied the strategy used by Tesla to lower prices for electric SUVs. This trend is set to become more apparent abroad amid a notable increase in exports of China-made electric SUVs.

The founder of Sino Auto Insights, Tu Le, commented on the development saying that there would be a significant increase in Chinese exports because of the ultra-competitive market in the country. Over the past decade, there has been a significant increase in the SUV market in China. Electric SUVs represent nearly 40% of all the cars sold, with 400 models coming from different fuel types.

Nearly as many SUVs manufactured in China were sold last year as other car models in Europe. The number of China-made SUVs sold in 2022 surpassed 11 million. The popularity of electric SUVs can be attributed to Tesla delivering a locally-manufactured Model Y two years ago in China, making the country the fastest-growing segment globally.

During the Shanghai Auto Show held in April, local and foreign brands were among the new models on display. Moreover, some of the most popular automakers, such as Volkswagen, BMW, and Toyota, plan to release new electric SUVs to increase their sales in China.

Some China-based EV startups like Nio and Xpeng have released six SUV models. State-owned automakers focused on EVs are also focused on SUVs. Before China started manufacturing Model Ys in China, the average annual sales for the unit reached 3,000 units.

War on discounts

Xpeng and Leapmotor, among other automakers, have offered discounts to keep up with the competition. BYD offered a $1000 discount on the Song Plus SUV. Automakers not offering discounts have opted for lower-than-expected starting prices for the new models, with longer driving ranges and autonomous driving features.

Legacy brands targeting the broader market with small SUVs face a significant challenge. Ford has priced its small SUVs below $40,000, with its chief executive, Jim Farley, acknowledging the high market competition for SUV-styled EVs. Ford plans to restructure its operations in China and transform one of its joint ventures into an export hub for low-priced commercial electric and combustion vehicles.

General Motors reported a decline in China profits in the recent quarter. The automaker needs success for its new EV models to grow its market share in China amid the intense competition.

Tesla and Renault have been exporting SUVs made in China to the European market on a large scale. Tesla will start exporting Model Y crossovers made in its Shanghai plant to Canada, marking its first shipping to North America. Automakers based in China plan to increase electric SUV sales in Europe.