China’s electric vehicle price war has edged up a notch, with Xpeng Motors and Huawei-backed Aito now following Tesla in slashing prices on their lineups, responding to intensifying competition as Tesla’s China-made vehicles gain market share.

Why it matters: These latest price cuts could force more EV makers to follow suit, hitting profit margins that have already been squeezed by the recent sharp rise of battery raw material costs.

  • The next two months may see more price drop campaigns thanks to new product offerings and a decline in lithium carbonate prices, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), on Jan. 10.

Details: According to a “new pricing scheme for the Chinese New Year” released by Xpeng on Tuesday, the starting price of its P7 sedan dropped RMB 30,000 or around 15% to RMB 209,900 from RMB 239,900 ($30,942 to $35,365). Xpeng’s newly-launched G9 crossovers were excluded from the cuts.

  • The EV maker also cut the price of the top-spec long-range model of its G3i crossover by RMB 25,000 to RMB 176,900, while the starting price of its mainstream P5 sedan dropped by 12.8% to RMB 156,900.
  • The actual transaction prices of the G3i and P5 remain largely unchanged as the respective cuts on the sticker prices are in line with an RMB 20,000 discount that the company offered from October to December, Morgan Stanley told investors in a report.
  • However, the price reduction for the P7 comes as sales costs increase by between RMB 10,000 and RMB 16,000. Xpeng’s gross margin in the current quarter will “likely hit a trough” due to the price adjustments, wrote the analysts.
  • On Jan. 13, Aito, a Chinese EV brand backed by technology giant Huawei, also cut prices for its M7 and M5 sports utility vehicles by nearly 10%, bringing the two vehicles’ prices to RMB 289,800 and RMB 259,800.
  • The price cuts will likely squeeze vehicle margins per unit. Still, selling at volume may help Aito increase gross margins and grow its business, according to an investor relations representative at Seres, which makes Aito-branded vehicles with Huawei.

Context: Despite a backlash from many existing car owners, Tesla has achieved instant results on sales and regained growth momentum after it drastically cut prices on its China-made vehicles earlier this month.

  • Order volumes at some of Tesla’s showrooms in lower-tier Chinese cities have surged by as much as 500% from a month earlier, according to a Monday report by Chinese media outlet Yicai. The Beijing News also reported that the company saw an increase of 300,000 new orders in three days following the cuts.
  • Some competitors have so far refused to join the fray. On Monday, an executive at Zeekr said that Geely’s premium EV brand would stick to its current price for its 001 crossovers. Meanwhile, BYD and GAC’s EV unit Aion raised prices across their vehicle lineups at the beginning of this year, citing Beijing’s phasing out of EV incentives among other reasons.
  • Tesla handed over nearly 440,000 China-made vehicles to local customers in 2022, representing a below average increase of 37% from a year ago. The company’s share in the Chinese EV market fell by 8.3% year-on-year to 6.6% in December, according to figures from the CPCA.

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