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Car prices are on the rise around the world. Yet despite this inflationary wave, one carmaker is moving in the opposite direction. BYD has cut prices on 22 of its electric and hybrid models, bringing the price of its popular Seagull electric vehicle below that of a high-end road bike.
At first glance, it may seem like a desperate attempt to boost sales in a slowing market. But that reading misses the bigger picture.
The Seagull, already a global outlier for its low price, has dropped further to just Rmb55,800 ($7,780) in China. The most dramatic cut was for the Seal dual motor hybrid, which fell by Rmb53,000 to Rmb102,800.
These price cuts come as the EV industry enters a new phase. While total sales remain high, growth is slowing. In China, dealerships held 3.5mn unsold EVs as of April, the highest level since December 2023.
Most carmakers would respond cautiously to a slowdown, cutting production and incentives. The reason BYD can afford to take the offensive is its unique cost structure rooted in vertical integration. It makes its own batteries, designs its chips and tightly controls operations.
That cost advantage means that when rivals cut prices, it is at the expense of fragile margins. When BYD cuts prices, it buys market share and future pricing power. Despite multiple rounds of price cuts in recent years, some as steep as 30 per cent, gross margins have continued to rise since 2021, reflecting its margin buffer.
This ability to undercut rivals without sacrificing profitability marks a broader shift in the EV value proposition. Legacy automakers have priced EVs as premium products, citing technology costs and brand value. BYD’s approach challenges that assumption, leaving rivals fewer ways to justify higher prices.
Some critics argue that its aggressive pricing may not be sustainable. A concern is that ultra-low prices could trigger a race to the bottom, squeezing profits across the industry. As it expands globally, higher regulatory, labour and logistics costs could also push the limits of its efficiency.
But for now, BYD’s financials remain strong. Gross margin of nearly 20 per cent in the first quarter outpaced Tesla’s 16 per cent and most local rivals still operating at a loss. BYD shares are up 80 per cent in the past year, reflecting expectations that its pricing strategy could reshape the global EV market, even after a 10 per cent drop following price cuts.
Its latest round of price cuts is forcing its competitors into a corner: either match the discounts and absorb financial strain, or maintain pricing and lose volume. For weaker rivals, consolidation may become unavoidable.
There is little precedent for this level of aggressive pricing in the auto industry. But there are clear parallels with the smartphone wars of the 2010s. After 2013, smartphone hardware became commoditised and consumer expectations shifted from novelty to value. The market moved from innovation-driven growth, with more than 50 companies competing globally, to scale-driven consolidation. Brands such as LG, Sony Ericsson, Nokia, Motorola and BlackBerry, which once defined major product segments, faded quickly as margins collapsed. Only vertically integrated makers with global scale — Apple and Samsung — retained pricing power and market control.
Carmakers are coming under similar pressure: in Europe, where they are adapting to the economics of electrification, BYD’s price shock adds urgency. Last month, it surpassed Tesla in regional EV sales for the first time, with Tesla’s volume down 49 per cent, while BYD’s rose 169 per cent. In Singapore, it became the top-selling brand, outselling Toyota despite its models being priced on par.
This rapid expansion underscores how BYD is saturating the EV market across all segments, from entry level to premium, suggesting that even a premium only strategy will no longer be a haven for global automakers.
Global legacy carmakers, many of which have operated on the sidelines of China’s price wars, face an uncomfortable reality. Even outside China, they must justify significantly higher prices for comparable models in key markets such as Europe, south-east Asia and Latin America.
As a result, EV competition is becoming a game of margins that few are positioned to win. More than any single innovation, BYD’s greatest disruption has been resetting the baseline for what an EV should cost.
