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Chinese EV makers’ price wars in overseas markets will sew doubts over quality: Bain

Bain advises Chinese assemblers to focus on premium models when building their global image, rather than trying to lure budget-conscious consumers

Chinese EV makers’ price wars in overseas markets will sew doubts over quality: Bain

Price competition among Chinese electric vehicle (EV) makers abroad is not sustainable since consumers will start to doubt the quality and reliability of the cars if they are frequently discounted, according to Bain & Co.

The global consultancy advises Chinese assemblers, which already enjoy a cost advantage over their international rivals, to focus on premium and expensive models when building their global image, rather than selling cheaper cars to lure budget-conscious consumers.

"Chinese companies have the potential to redefine electric cars so that they can convince global customers of their products' competitiveness in performance and technology," Helen Liu, a Bain partner, told reporters at a media briefing on Wednesday. "The pricing advantage will eventually run out of steam. It is product quality, technology and brand awareness that hold the key to Chinese carmakers' success."

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Her statement coincided with the European Union's decision to slap additional tariffs of up to 38 per cent on Chinese-made EVs in the wake of a nine-month anti-subsidy investigation.

In its latest report about Chinese companies' globalisation drive and overseas investment strategy, Bain suggests EV assemblers set up production facilities in the regions where they aim to grab market share if they want to sidestep damage from the punitive tariffs on their cars.

It warned them, however, that localising production carries risks arising from geopolitical tensions and regulatory compliance.

China is the world's largest automotive and EV market, with electric car sales accounting for 60 per cent of the global total.

Last September, UBS predicted Chinese-made cars, benefiting from a faster pace of electrification, would control a third of the global market by 2030, up from 17 per cent in 2022.

In a teardown report, the Swiss bank found that the pure-electric Seal sedan built by Shenzhen-based BYD, the world's largest EV maker, had a production advantage over Tesla's Model 3 assembled in China.

The cost of building a Seal, a rival to the Model 3, was 15 per cent lower, the report said. In Europe, the Seal had a sustainable 25 per cent cost advantage over rivals, even factoring in -growing trade barriers such as tariffs, it showed.

BYD, backed by Warren Buffett's Berkshire Hathaway, mainly makes cheaper pure-electric cars and plug-in hybrid vehicles, priced from 100,000 yuan (US$13,786) to 200,000 yuan. The company's blade battery packs are popular with consumers and other EV assemblers because the cells are arranged in a more efficient array to increase energy density and enhance resistance to overheating.

Leading Chinese manufacturers of premium EVs, including Nio, Xpeng and Li Auto, assemble cars with intelligent features such as autonomous driving technology and voice-activated control systems.

A price war among Chinese EV assemblers has been spreading to overseas markets as more than a dozen players look abroad to bolster sales and chase higher profits to offset losses at home.

The carmakers are locked in a fierce price competition in overseas markets like Southeast Asia amid heightened worries about overcapacity on the mainland.

In Thailand, established carmakers like BYD and Great Wall Motor, and EV start-ups such as Hozon New Energy Automobile are offering discounts in a bid to take on Japanese rivals whose petrol vehicles dominate the market.

Last month, Deloitte said in a report that BYD had a 33 per cent share of the EV market in the Association of Southeast Asian Nations (Asean) countries, trailed by Neta-branded electric cars whose sales accounted for 14 per cent of the regional total.

Bain's Liu said Chinese electric-car makers should play the long game when it comes to expanding abroad and try to create reputable brands rather than chasing short-term gains in sales.

"They are advised to compete in the premium segment and attract wealthy customers," she added. "Offering discounts to woo price-sensitive buyers is not sustainable."

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