Byd and Great Wall, it's price war: Evergrande risk for the Chinese car?

The shadow of an Evergrande-style crisis, a new bubble, looms over the automotive sector in China. Wei Jianjun, president of Great Wall Motor, has raised the alarm: the fierce price war relaunched at the beginning of the week by the giant Byd, with cuts of up to 34% on price lists, is forcing competitors to act accordingly, eroding margins and undermining the sustainability of manufacturers and suppliers. So much so as to evoke a scenario similar to the collapse of the real estate giant that is still weighing on the balance of the Chinese economy and consumption. The industry leader described the accusations as 'alarmist' and claimed financial strength superior to that of many Western competitors.

The tension between the number one and number eight in the sales volume ranking does not start today. Back in 2023, Great Wall had already denounced the Shenzhen group for alleged emissions irregularities in some hybrid models. Today, the confrontation shifts to the terrain of sustainability and financial equilibrium: Byd, with almost a fifth of the entire market in its hands at home and international expansion in full acceleration, has chosen to re-launch the competition with a new wave of discounts on more than 20 models (announced on Monday 26 May), taking the Seagull citycar to 55,800 yuan (around 6,900 euros). The strategy aims to defend and increase market share, even at the cost of sacrificing profitability (today the operating margin is close to 6%) in the short term. The president of the group based in Baoding (Hebei) accused the entire industry of chasing volume at any cost, squeezing margins and also jeopardising the supply chain: 'Some products have gone from 220 thousand yuan (EUR 27,500) to 120 thousand yuan (EUR 15 thousand) in recent years. Which industrial products can halve the prices and still maintain the same quality?".

Byd's move triggered a chain reaction among competitors: Geely, Leapmotor and others responded with similar incentives. The result was a general slump in stocks on the stock exchange on Monday, but the entire eighth week closed in the red for the major Chinese players. The Hang Seng Shanghai-Shenzhen-Hong Kong Automobile Index, which has gained 33% in the past year, remains at highs but has lost 400 points in the past ten days, a sign of growing concern among investors.

The pressure on margins is evident. According to available data, industry profits in the first four months of 2025 are down 5.1% year-on-year. However, the market shows no signs of collapse: overall sales are expected to grow between 4 and 5 per cent for the year, reaching 33 million units, with new energy cars (Nev, battery electrics plus plug-in hybrids) up 24 per cent and a share approaching 50 per cent of total registrations. Anticipations for May (source Deutsche Bank via CnevPost) confirm sustained growth for players such as BYD (+10%), Li Auto (+28%), Leapmotor (+150%), Nio (+13%) and Xpeng (+215%), year-on-year, demonstrating a still lively demand, also supported by innovation and electrification policies. In addition, Nio (+13%) and Tesla only +5.5% over April and -15% since May 2024.

The fear of a domino effect at Evergrande stems from the enormous fragmentation of the sector: out of 169 active manufacturers, more than half have less than 0.1% market share. Production overcapacity is estimated at 50%: factories could churn out twice as many cars as the domestic market can absorb. In this context, price cuts risk pushing weaker players, especially start-ups and smaller brands, out of the market, while large groups - Byd stands out - focus on economies of scale and internationalisation to withstand competitive pressure.