In a bold move signaling the fierce competition in China's automotive market, SAIC Motor Corp.'s Maxus brand has joined forces with leading manufacturer BYD Co. to demand a 10% price reduction from their suppliers. This initiative underscores the enduring price war gripping the auto industry, which is set to persist into the next year and beyond.

Maxus, which boasts a diverse lineup of electric and gasoline vehicles, has communicated to its suppliers that these cost savings are essential for the brand's survival amid increasingly challenging market conditions. A report from the China Securities Journal highlights Maxus’s strategic push to streamline its expenses, aiming for a 10% cut in component costs. This trend is not isolated; it reflects a broader industry pattern that is jeopardizing smaller automakers struggling to compete with the giants like BYD and Geely Automotive Holdings Ltd.

Interestingly, BYD, despite enjoying robust profit margins, is also pursuing similar cost reductions from its suppliers. This move is seen as a strategy to reinforce its financial foundation and maintain dominance in a market where price sensitivity is critical. A BYD executive clarified that while their demand for a 10% reduction is standard practice in the industry, it is not a mandatory imposition on suppliers but rather a negotiating tactic.

The aggressive pricing strategies come during a challenging time for SAIC, which has witnessed a significant drop in sales. The company’s figures have plummeted, leading to a staggering 21% decline, bringing its total sales to 3.1 million units for the year—an unsettling milestone as it has been outsold by rival BYD for the first time, with BYD achieving 3.2 million units sold. Not to mention, Maxus has also experienced a 14% year-on-year decrease, selling approximately 155,000 vehicles in the same period.

As the automotive landscape in China continues to evolve, the ripple effects of this price war will likely force smaller players to reevaluate their business strategies while the major brands go head-to-head in a bid for market supremacy. With such aggressive price-cutting measures in place, consumers may ultimately benefit from lower prices, but the future may be uncertain for many in the industry.

Stay tuned as we follow the developments in this fast-paced automotive battleground!