Foreign carmakers offer steep discounts on petrol-powered cars in cutthroat Chinese market

Foreign automakers are aggressively discounting petrol-powered vehicles in the Chinese market, where demand is weakening and consumer interest in electric cars is rising. Volkswagen and Toyota recently slashed prices by an average of 23.4 per cent on their internal combustion engine cars, according to China Passenger Car Association (CPCA) data.

This follows a July average discount of 23.7 per cent. The CPCA explained that strong promotions have kept sales relatively stable despite the discounts. Overall, auto sales in China fell by 23.6 per cent year-on-year last month. EVs now make up 65.2 per cent of vehicle sales on the mainland, a record high, while petrol vehicles account for only 34.4 per cent of sales.

International brands hold a 34.4 per cent share of the Chinese market, down 5.4 percentage points from the same period last year. Experts say the surge in EV adoption is forcing foreign automakers to further cut prices of their petrol cars to stay competitive. Steve Shi, a manager at car service firm Juchen Auto Trade, predicts weak consumer demand and growing EV popularity will pressure foreign brands to lower prices even more.

The consultancy AlixPartners forecasts a price war in China’s auto market later this year as weak sales put pressure on foreign brands. Only BYD, Stellantis-backed Leapmotor, and Nio among the nearly 30 fully electric Chinese brands are currently profitable.