China continues to dominate the global market, with Chinese OEMs (original equipment manufacturers, companies that design and produce vehicles under their own brands) accounting for 30% of the worldwide passenger vehicle market and 70% of the global EV market. This dominance is expected to continue, driven by supportive government policies, declining battery costs and rising consumer adoption.
Price war concerns and market (over)reaction
While BYD’s announcement of price cuts triggered a sector-wide selloff, we estimate that the actual impact on average selling prices (ASPs) is likely to be no more than RMB 5,000, representing a low to mid-single digit percentage discount. Competitors like Geely and Leapmotor have also responded with price discounts, though similar to BYD, these are expected to be only RMB1,000 ($178.83) to RMB3,000 per vehicle.
The price war concerns are not unfounded. In 2023, Tesla’s price reductions for its Model 3 and Model Y vehicles sparked a wave of price cuts across the industry. While these benefited consumers in the short term, they raised concerns about the sustainability of businesses. As the market evolves, we expect to see a mix of pricing strategies, with leading manufacturers focusing on product differentiation and value-added features, while others compete on price.
Long-term market dynamics and consolidation trends
We believe that the market will continue to consolidate in favour of leading manufacturers such as BYD and Geely. Internationally, Chinese OEMs increased their market share in the global passenger vehicle market, supported by their dominance in the new energy vehicle (NEV) sector. BYD’s vertical integration strategy, which includes in-house production of batteries, motors and electronic controls, provides significant cost and efficiency advantages. This strategy enabled BYD to stay ahead of the competition and broaden its product lineup to cater to diverse customer needs.
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The European EV market is experiencing a resurgence in growth as carmakers adapt to tightening emissions regulations. According to the European Automobile Manufacturers’ Association, sales of battery EVs rose by 26.4% in the first four months of 2025 compared to the previous year. Here, BYD appears well-positioned to tap into the rising demand for EVs, having outsold Tesla for the first time in April 2025. Its factory in Hungary is also on track to begin production by the end of 2025, with its facility in Turkey further supporting capacity growth.
Another leading player, Geely, has been steadily increasing its market share, setting ambitious targets for 2025. Its focus on electrification and partnership with Volvo has strengthened its market position, while its acquisition of a stake in Daimler, Mercedes-Benz’s parent company, has provided access to advanced technologies and global markets.
Market penetration and sales trends
The Chinese EV market has experienced a boom in recent years, with sales increasing from 182,600 units in 2020 to 4.25 million units in 2024, reflecting a compound annual growth rate (CAGR) of 121%. The market penetration of EVs in China also surged, climbing from 6% in 2020 to 45% in 2024. This upward trend is expected to continue, with EVs projected to account for over 50% of new vehicle sales in China by 2025.
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In terms of sales trends, BYD has emerged as the market leader in the Chinese EV segment, securing a market share of 35% in 2024. Geely has been gaining traction as well, with a market share of 7% in 2024. Meanwhile, Tesla, which once held the top position in the Chinese EV segment, has seen its market share decline to 5% in April 2025 due to limited product offerings and ongoing US-China tensions.
Advancements and innovation
China’s EV market is undergoing rapid transformation, driven by technological advancements and innovation poised to revolutionise the automotive industry. Companies such as BYD and Geely are investing heavily in research and development, focusing on battery technology to develop more efficient and cost-effective batteries, autonomous driving, including advanced driver-assistance systems (ADAS) and fully autonomous vehicles, as well as software integration. These investments are expected to yield significant returns, enabling companies to improve the range, efficiency and safety of their cars.
An “Evergrande” moment for the auto industry?
In late May, Great Wall Motor Chairman Wei Jianjun drew parallels between the automobile industry’s challenges and those faced by the debt-laden property developer Evergrande, implicitly suggesting comparisons between BYD and Evergrande.
We view this as a reflection of the intense domestic rivalry among competitors rather than a material cause for concern, given that BYD’s financial metrics appear to be consistent with those of Chinese and global automobile OEMs. Moreover, we believe that the scale of China’s real estate industry dwarfs that of the automobile industry, which does not carry the same systemic risks as the former.
Key risks and catalysts
We identify several key risks and catalysts to watch. A potential risk area is the ongoing price war, which could compress industry margins and heighten investor pessimism if volume growth does not recover. Potential government measures to address “involution”, or excessive and unhealthy domestic competition, may potentially impact the pricing strategy of EV manufacturers. International tariff policies also pose a risk, particularly for export-oriented businesses like Chinese EV manufacturers.
Additionally, regulators may crack down on "zero-mileage” used car sales, where new cars are registered as sold and then resold in the second-hand market. The upcoming 2Q2025 earnings season will provide critical insights into the overall health and financial impact of current pricing strategies.
While near-term concerns remain, the Chinese EV sector presents attractive long-term prospects, driven by robust underlying growth dynamics and consolidation trends favouring leading companies. The leading Chinese EV manufacturers are well-positioned to benefit from growing demand, driven by supportive government policies, declining battery costs and increasing consumer adoption. As the market evolves, we expect to see a blend of pricing strategies, with some manufacturers emphasising premium products while others compete on price.
Ultimately, the winners in the Chinese EV market will be those that can balance pricing power with investments in technology, innovation and customer experience.
Louis Chua is the equity research analyst, Asia, at Julius Baer
