To increase profits, Chinese manufacturers sell some electric vehicle models for double the price than on the domestic market. Despite transportation, they managed to rationalize costs at all stages of the production process.
Many people are worried about the invasion of cheaper Chinese vehicles due to their manufacturers reducing prices. However, according to a new report, many Chinese brands are doing the opposite, as they are increasing the prices of exported vehicles to maximize profits abroad.
The strategy is led by BYD, which faces stiffer competition in the domestic market. Many Chinese manufacturers are currently involved in a price war in their country, with the government subsidizing the adoption of electric vehicles from foreign and domestic brands. This naturally reduces profits.
BYD’s solution is to maximize profits in export models. In some cases, the brand sells its models for almost triple the price than in China. And, even so, it still manages to have more competitive proposals than its Western competitors.
Favorable price positioning
The report indicates that Chinese brands are betting on a price positioning slightly below European brands and, in addition, offering more standard equipment and technology in a clear approach to premium proposals.
Despite additional costs, such as transport, Chinese brands are making thousands of additional euros in profit on the sale of each tram. This has a direct relationship with cost rationalization at all stages of the production process, from batteries to the extraction of raw materials.
According to consultancy Benchmark Mineral Intelligence, battery production costs are 18% higher in China than anywhere else. A company like BYD, which manufactures its own batteries, can negotiate additional discounts throughout the supply chain. Furthermore, Chinese car manufacturers benefit from land at prices subsidized by the Government, as well as cheaper energy and lower labor costs than those practiced in Europe.
Up to three times more expensive in Germany
According to news from Reuters, in some export markets, the BYD Atto 3 had a price between 81% and 174% higher than that charged in China. Dolphin prices are higher by between 39% and 178%. In Germany, for example, Doplhin costs around 35,000 euros, while in China it is available for around 15,500 euros.
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Seal’s price difference varies between 30% and 136%. Compared to Tesla, the Model 3 made in China costs only 37% more in Germany than in the Chinese market.
Many European car manufacturers may be more concerned about the advantages that Chinese manufacturers have, which allow them to lower prices and enter their own sales war. But it also means that Chinese brands have room to accommodate any additional tariffs that the European Union may impose on imported vehicles.
