Aito, an electric vehicle brand backed by Huawei, has quietly cut the prices of its electric crossovers by RMB 8,000 (around $1,100), in what appears to be an immediate reaction by a Chinese firm to Tesla’s major price cuts aimed at boosting demand.

Why it matters: The move is the latest sign that a new price war has broken out in the world’s biggest auto market. Tesla on Monday offered a significant price reduction on its popular EVs, which analysts predict could force other automakers to follow suit.

  • There could be further headwinds coming for young Chinese EV makers, including Nio, Xpeng Motors, and Li Auto, which have already faced slowing growth amid rising competition, Chinese media outlet Caixin reported on Monday, citing analysts.
  • Sales of high-end models from BYD and traditional auto majors are also likely to be impacted. This would further erode profit margins for cash-burning carmakers, which have been struggling with the soaring cost of critical components, among other supply chain issues.

Details: The price cut, which Aito has not officially announced, affects its two all-electric sports utility vehicles, the M7 and the M5, Chinese media outlet The Paper reported on Tuesday. Customers who have already paid a pre-order deposit have been told to pay the remainder of the requested sum with a reduction of RMB 8,000, the report said.

  • Aito currently has two models on sale: the M7 and M5 plug-in hybrid, with starting prices of RMB 319,800 and 259,800 respectively, as well as the all-electric version of the M5, priced from RMB 288,600. These amounts put them in the same price range as the Tesla Model 3 and Model Y in China.
  • A spokesperson from Huawei did not respond when asked for comment by TechNode on Wednesday.

Context: Last December, Richard Yu, chief executive of Huawei’s consumer business group, announced the launch of the M5, Aito’s first car model equipped with Huawei’s HarmonyOS operating system and manufactured by Chinese automaker Seres.

  • Since mid-2021, the Chinese telecommunications giant has been selling vehicles via its nationwide retail network for its partner, which reported monthly deliveries of more than 10,000 Aito-branded vehicles for the first time in August, just five months after delivery began in March.
  • Nio, Xpeng, and Li Auto have reported slowing sales growth from July to September amid continuous supply chain turmoil while facing increased competition from bigger rivals, including Tesla and BYD.
  • Xpeng’s market capitalization has tumbled more than 80% to $6.84 billion, while that of Nio had dropped below $18 billion as of Tuesday, compared with a historic high of more than $56 billion in November 2020.
  • China’s sales of new energy vehicles, including all-electrics and plug-in hybrids, more than doubled annually to nearly 4.6 million units for the first nine months of this year. And yet, industry experts project sales to slow into 2023 when the competition will be more intense as Beijing phases out subsidies for EV purchases entirely.

READ MORE: Chinese EV makers may face a price war in 2022: UBS

Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen