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

Foreign automakers have been offering substantial discounts on petrol-powered vehicles in China's competitive market, driven by a decline in consumer demand. In the past month, prominent global brands such as Volkswagen and Toyota reduced the price of their internal combustion engine cars by an average of 23.4 percent, according to the China Passenger Car Association (CPCA).

This is a slight dip from July's average of 23.7 percent. The association reported that despite the price cuts, sales have seen a minimal uptick due to the vehicles being initially priced low. Comparatively, the average discount in 2023 stood at around 13 percent. Analysts attribute the sharp decline in sales to China's rapid shift towards electric vehicles (EVs) over the last ten years, which has eroded international brands' market share in the world's biggest auto market.

The surge in EV sales, reaching a record 65.2 percent in the past month, contrasts sharply with a 23.6 percent year-over-year drop in overall car sales. As EV penetration continues to rise, foreign brands are under pressure to further slash petrol vehicle prices to attract buyers. Currently, international marques hold a 34.4 percent share of China's auto market, a 5.4 percentage point decrease from the same period last year.

Many global automakers primarily sell petrol-powered cars in China. Industry expert Steve Shi of Juchen Auto Trade, a China-based car service firm, predicts that rising EV adoption will compel foreign brands to further reduce petrol vehicle prices to entice customers. He also warns that weak consumer demand and growing interest in EVs could lead to some international petrol brands exiting the Chinese market in the near future.

At the end of June, global consultancy AlixPartners forecasted a potential price war in China's auto market amid weak sales in the second half of the year. Currently, only BYD, Stellantis-backed Leapmotor, and premium EV assembler Nio, all Chinese companies, are profitable with their EV-only models in the first half of the year.

Historically, foreign brands dominated the Chinese automotive market, holding a 63 percent share in 2015, as per CPCA data.