Big Yard-Sale Discounts: BYD Triggers Price War

Bertel Schmitt
by Bertel Schmitt
big yard sale discounts byd triggers price war

Why does Warren Buffett have a headache? For quite a while, China’s BYD had been nothing but a miracle. Now, the Buffett-backed wunderkind turns outcast. To move their cars, BYD slashes prices down to the bone.

The battery-maker turned EV-manufacturer was lauded for their e6 plugin that claimed a miraculous 250 miles on a single charge. The e6 never really saw the light of day. Instead, much to the amazement of the industry, BYD’s conventionally powered F3 topped China’s sales charts. A one hit wonder doesn’t make a large car factory. With 519,805 units sold in 2010, BYD ended 2010 in the #7 position as far as Chinese car companies go.

In 2010, BYD’s luck started to turn. While the Chinese car market powered ahead and rose 32.37 percent in 2010, BYD was lagging more and more behind and had to down-revise their sales targets.

In the tougher climate of January 2011, BYD’s sales cratered. Their sales were 15 percent below January 2010, Reuters reports. That while the overall market grew 13.81 percent. BYD’s sole domain, passenger vehicles, even grew 16.17 percent.

BYD had to do something, and do they did. Chinacartimes reports that BYD slashed prices across the board by up to 20 percent. All of their cars received a very closed cropped haircut. Even their bestselling F3 “will see its price cut by 3000rmb to 10,000rmb,” says CCT. That’s $456 to $1,521, and it’s a huge discount on a car that usually goes for between 60,000 and 90,000 RMB ( $9,100 to $13,600), depending on trim and extras. BYDs sold mostly on price, and a company that moves just half a million units a year operates with razor thin margins. After discounts, they must sell at least some of their cars at a loss.

China Daily expects a price war among domestic lower-priced car manufacturers. They reckon that home-grown low-end manufacturers will be at each other’s throats. However, “the sales outlook on the mainland may not be as bad for foreign carmakers such as General Motors Co and Volkswagen AG as they will be for the likes of BYD and Geely,” the government-owned paper notes.

These developments don’t seem to be unwelcome in government circles. Foreign carmakers such as GM and VW are involved in joint ventures with government-owned SOEs (state owned enterprises), whereas the homegrowns are mostly privately owned. Nobody really knows how many car manufacturers are there in China (the guesses range from 60 to 120), but there definitely are too many. Beijing wants to prune the jungle down to 8 to 10 carmakers, and has tried its hand in command consolidation for more than a year. So far, with little effect. Now, the supposedly communist government lets market forces do the dirty work.

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2 of 4 comments
  • Doctor olds Doctor olds on Feb 20, 2011

    ...high school science project, that is.

  • Blowfish Blowfish on Feb 20, 2011

    this will show Warren its going to be the first & last time to deal with Middle Kingdom. when things didnt go well one must need to do desperate measures to survive. but their F3 DM is trying to come here, will there be hope? To get Federalized u do need a few extra bucks to hire lawyer to argue on your behalf in some country IE Folks like Hosni which give u a package deal for 1 princely sum, soon as the account from Confederate of Helvetica aka Swiss says Kosher , your car can come off the container ship.

  • Jdt65724922 How can a Chrysler E-Class ride better than a Chrysler Fifth Avenue?
  • Lorenzo This series is epic, but I now fear you'll never get to the gigantic Falcon/Dart/Nova comparison.
  • Chris P Bacon Ford and GM have decided that if you can't beat 'em, join 'em. Odds are Chrysler/Cerberus/FCA/Stellantis is next to join in. If any of the companies like Electrify America had been even close to Tesla in reliability, we wouldn't be here.
  • Inside Looking Out China will decide which EV charging protocol will become world wide standard.
  • Chris P Bacon I see no reference to Sweden or South Carolina. I hate to assume, but is this thing built in China? I can't help but wonder if EVs would be more affordable to the masses if they weren't all stuffed full of horsepower most drivers will never use. How much could the price be reduced if it had, say, 200hp. Combined with the instant torque of an EV, that really is plenty of power for the daily commuter, which is what this vehicle really is.