China’s new energy vehicle (NEV) leader, BYD, has urged its suppliers to cut prices by 10% starting January 2025 to maintain its competitive advantage in an increasingly crowded market. This move, revealed through an internal email, reflects the company’s focus on cost reductions to support its ambitious sales targets. BYD expects to sell over 4.2 million vehicles in 2023, marking a significant milestone in its growth. The company attributes its success to technological innovation, scale advantages, and a low-cost supply chain, but anticipates stronger competition in 2025, prompting the need for continued cost control across its supply chain.
BYD has asked its suppliers to submit proposals for cost savings by mid-December, with an emphasis on bulk purchasing to secure better prices. Li Yunfei, BYD’s General Manager of branding and public relations, explained that price negotiations are a regular part of business, driven by the company’s large-scale purchasing needs. While he did not confirm the 10% price reduction request, Li emphasized that such discussions are part of their standard operations and are not mandatory for every supplier, depending on their specific circumstances.
The company’s strong sales performance has helped boost its leverage over suppliers. BYD sold more than 3.25 million units from January to October 2023, with monthly sales reaching a record 502,657 units in October. These results increase BYD’s bargaining power, as suppliers are often compelled to comply with pricing demands due to the volume of business. However, this reliance on a single automaker can be risky for suppliers, who may need to diversify their customer base to reduce their dependence on BYD.
BYD’s pricing pressures are part of a broader trend in the NEV sector, where competitors like SAIC Maxus are also pushing for lower costs. The company is expanding its production capacity to keep pace with rising demand, having added over 200,000 units to its monthly output between August and October. This increase in production aligns with BYD’s push for more cost-effective strategies and greater market share, as the competition for dominance in China’s NEV market intensifies.
As BYD continues to grow, its actions highlight the importance of balancing sales growth with cost efficiency. The request for price reductions underscores the company’s strategy to remain competitive while dealing with the pressures of a fast-changing market. BYD’s approach may set a precedent for other companies in the NEV sector, where cost control and innovation are likely to be key factors in securing future success.