More than a hundred models cut prices in a single month. How to break the low - profit involution in the new energy vehicle market?
In recent years, the new energy vehicle market has almost become a red ocean, with various competitive price wars emerging one after another. Recently, the media reported that more than a hundred new energy vehicle models cut prices in a single month. How can the low - margin involution of the new energy vehicle industry be resolved?
I. More than a Hundred Models Cut Prices in a Single Month
According to a report by The Paper, as some car companies launched significant price - cut campaigns, it once again triggered concerns in the automotive industry about a new round of "price war". "Anti - involution" has become a high - frequency keyword in the recent statements of the industry and enterprises.
"In 2025, two things have most affected the sensitive nerves of the entire industry. One is the industry involution mainly manifested in the form of price wars, and the other is the reshaping of the industrial pattern brought about by mergers and acquisitions... In May, more than a hundred models cut prices, with the maximum price reduction exceeding 50,000 yuan. Bottomless price wars and blind technological leaps will squeeze the profit margins of enterprises and affect the quality of products and services." At the 2025 China Auto Chongqing Forum held from June 6th to 7th, Wang Xia, the President of the Automotive Industry Committee of the China Council for the Promotion of International Trade and the President of the Automotive Industry Chamber of the China Chamber of International Commerce, emphasized the current "chaotic competition" in the automotive industry at the beginning of his speech.
On May 23rd, BYD announced a major time - limited promotion campaign, with 22 intelligent driving models participating, and the maximum discount reaching 53,000 yuan. In the following short week, nearly ten car brands announced price cuts, including Geely Galaxy, Chery, SAIC Roewe, Leapmotor, IM Motors, SAIC - GM, GAC Aion, etc.
The price war has also had a significant impact on the capital market. On the second trading day after BYD announced the price cut, all Hong Kong - listed automotive stocks fell, with BYD Co., Ltd. dropping 8%.
On May 31st, the China Association of Automobile Manufacturers issued an "Initiative on Maintaining a Fair Competition Order and Promoting the Healthy Development of the Industry", clearly opposing the disorderly "price war" among car companies. The Ministry of Industry and Information Technology also clearly stated that there are no winners in the "price war" and there is no future for it. It will strengthen the rectification of the "involution - style" competition in the automotive industry.
II. How Can the Low - Margin Involution of New Energy Vehicles Be Resolved?
Currently, with the rapid development of new energy vehicles, the entire industry seems to have fallen into a vicious circle. A large number of car companies are cutting prices, and the profit level is constantly decreasing. How can this involution dilemma be resolved?
First of all, the competitive advantages of new energy vehicles are approaching those of traditional fuel vehicles. In the early years, due to the immature technology of new energy vehicles, they faced many problems, resulting in the overall competitive advantages of new energy vehicles not being significant. Taking battery technology as an example, the early batteries had low energy density, limited cruising range, and slow charging speed. At that time, it was normal for it to take seven or eight hours to fully charge a vehicle, but the cruising range was not good, which seriously affected the consumer experience. At the same time, the high battery cost largely pushed up the overall price of new energy vehicles. At that time, the price of an ordinary new energy vehicle with a cruising range of about 200 kilometers was often tens of thousands of yuan higher than that of a fuel vehicle of the same level, resulting in the serious lack of market competitiveness of new energy vehicles. They could only develop with twists and turns relying on national subsidies.
With the passage of time and a large amount of R & D investment, significant progress has been made in new energy vehicle technology. Battery technology has continuously broken through, and the energy density has been greatly improved. Now, the cruising range of some high - end new energy vehicles has exceeded 700 kilometers, which can basically meet the daily travel and medium - and short - distance travel needs of consumers. The charging speed has also been greatly improved. Some models support fast - charging technology, and they can charge the battery to 80% in about half an hour. More importantly, technological progress has brought about a decrease in costs. People familiar with economics know that there are the classic economies of scale and the decreasing marginal cost of technology in economics. Mass production and continuous technological innovation have significantly reduced the unit cost of batteries. The maturity of technology and the reduction of costs have made the price reduction of new energy vehicles an inevitable trend and laid the foundation for their market popularization.
Secondly, the rapid development of the new energy vehicle industry has brought about continuous diversified competition. The new energy vehicle industry in China has developed at a high speed in recent years. With strong policy support, many enterprises have flocked to the new energy vehicle field, including traditional car companies, new car - making forces, and technology companies entering the industry across sectors. All parties in the industry have taken turns to compete in the market. These enterprises, with their respective advantages and resources, have launched fierce competition in the market.
On the one hand, traditional car companies, relying on their profound foundation in the automotive manufacturing field, perfect sales channels, and after - sales service systems, are actively deploying new energy vehicle businesses. They have mature production processes, supply - chain management capabilities, and brand influence. They can quickly launch new energy vehicle products and use their existing channel advantages for market promotion. Well - known companies such as Geely and GAC Aion are outstanding examples in this regard. On the other hand, new car - making forces have emerged in the new energy vehicle market with their innovative thinking, flexible operation models, and keen insight into new technologies. These enterprises usually focus on the R & D and production of electric vehicles, pay attention to the user experience and the application of intelligent technologies, and attract consumers by creating differentiated products. NIO's battery - swapping model, Li Auto's large refrigerators and large color TVs, and BYD's large - scale product strategy are all well - known examples.
Facing a large number of car - making enterprises entering the market, not to mention the fact that Internet giants like Xiaomi have also entered the car - making field, it has further intensified the market competition and triggered price wars. In fact, behind the price war is the extreme desire of enterprises for market share. In the stage of the rapid growth of the new energy vehicle market, the enterprise that can occupy a larger market share will be in a more favorable position in future competition. Especially at the critical period when the current industrial life cycle is shifting from the growth stage to the maturity stage, the current market share is likely to represent the future development ecological niche. Therefore, enterprises are willing to sacrifice part of their profits by cutting prices to increase sales volume and market share.
Thirdly, the healthy competition in the new energy vehicle industry has started to turn into a vicious circle. As the saying goes, too much is as bad as too little. The excessive involution of new energy vehicles is gradually making it lose its positive role in optimizing the industry through competition and instead falling into a vicious circle. For car companies, the profit margins have been severely compressed. In order to maintain competitiveness in the price war, many car companies have to reduce prices. However, when the cost cannot be significantly reduced synchronously, the profit decreases accordingly. The net profit margins of some car companies have even dropped to single - digits. Even a slight mismanagement of profits may lead to losses. Some well - known new car - making forces have always been in a state of serious losses and can only rely on continuous investment to survive. In the long run, it has a negative impact on the long - term R & D investment, technological innovation, and product quality improvement of enterprises.
At the same time, excessive involution has also led to chaos in the market order. When facing frequent price cuts and various promotional means, consumers have become more hesitant and their psychology of waiting and holding money has intensified. They expect the price to drop further, resulting in the fact that the effective market demand has not been substantially increased due to price cuts. Instead, the trading activity in the entire market has been suppressed. This is the common "buying on the upswing and not on the downswing" phenomenon in the Chinese capital market, which has now repeated itself in the car market. As a result, many small and medium - sized car companies are under great pressure in this fierce competition, with tight capital chains and even on the verge of bankruptcy, which poses a threat to the stable development of the entire new energy vehicle industry chain.
Fourthly, price wars are unsustainable. Innovation and service are the future. In the long run, new energy vehicle companies must transform from price competition to value competition to break the low - margin involution dilemma. Enterprises should focus on product innovation, continuously invest in R & D resources, and enhance the core competitiveness of products. For example, in terms of battery technology, they should continue to explore battery solutions with higher energy density, greater safety, and lower cost, such as the R & D and application of solid - state battery technology. In addition to the product itself, service is also an important factor in building an enterprise's moat. New energy vehicle enterprises should establish a perfect after - sales service system, including fast - response maintenance services and a convenient charging service network.
Only in this way can new energy vehicle companies achieve orderly competition in the fierce market competition. We should understand that price wars are only a temporary measure. An industry relying only on low prices cannot last long. Only a business model with sustainable profitability can have long - term vitality in the market.
This article is from the WeChat public account "Jianghan Vision Observation". The author is Jianghan Vision Observation. It is published by 36Kr with authorization.